Deferred Compensation: A New York Divorce Case Study
The marriage of Nancy (“Nancy”) and Wilfred (“Wilfred”) DeJesus began in October of 1979. Two children were born before Nancy initiated a divorce in July of 1994. Issues regarding deferred compensation and whether it was subject to equitable division arose shortly thereafter. Despite mediation efforts, financial experts had to be called in.
The issue of deferred compensation arises quite often in a multitude of jurisdictions. Each case prompts the same question: What part of deferred compensation is considered marital property, if any at all?
Wilfred began employment with Astoria Financial Group (“Astoria”) in 1979, shortly after the two parties married. Wilfred was consistently promoted at Astoria and reached the position of first assistant vice president in 1993. Nancy worked until 1986, at which time the parties to agreed she would devote her time to the household and raising the children. In 1993, Wilfred was granted the incentive stock option plan (“ISOP”) and the recognition and retention plan (“RRP”) — collectively the “stock plans”. The ISOP granted Wilfred a total of 3,053 options to purchase Astoria stock at $25 per share over a three-year vesting schedule from January 1997 through January 1999. The RRP granted Wilfred a total of 2,036 restricted stock units subject to the same vesting schedule as the ISOP.
The court eventually ruled that the stock plans were marital property and subject to equitable division. The court stated the stock plans “…do not mature immediately and may never mature, depending on whether the defendant continues in employment, they are tangible benefits which were bestowed on defendant during the marriage.”
Wilfred appealed the court’s ruling, arguing that his interest in each stock plan would not vest until several years after the divorce and that the marital portion of each stock plan should have been divided using the time rule. The time rule uses a ratio of the date Wilfred was granted the stock until the date divorce proceedings began, divided by the total time from the date of the grant until the date Wilfred’s interest in each plan vests.
Despite Wilfred’s appeal, the Appellate Division affirmed the initial decision and noted that both stock plans constituted deferred compensation for employment during the term of the marriage and were entirely marital property.
Here at Marcum LLP, this case is frequently referenced in our New York dissolution cases and will continue to be the basis for our clients’ position on deferred compensation. Marcum LLP values deferred compensation arrangements nationally and across various jurisdictions. We have professionals located across the country to analyze deferred compensation (the laws and regulations tend to vary across state borders). Deferred compensation can seem like a “gray area” to non-financial laypeople. Marcum LLP dives deep into the numbers, plan agreements, amendments, and any other source document we can review. Each deferred compensation plan is different, which poses the final question: Do you understand all of your significant other’s deferred compensation?