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Date:   Thu, 02 Jun 2005
From:   Bob

I hold vested ISOs. The option plan states that the option expires 3 months after termination if I leave the company. In addition, the option does not expire for 3 years if I retire from the company. The rules for retirement are not spelled out in the plan.

If I leave the company, are there rules that determine whether the departure is a "retirement" as opposed to simply a termination. I am 47 years old, so I am not at classical retirement age.

Thanks and regards,
Bob

Answer

Date:   June 10, 2005

Hello Bob,

There is nothing in the tax laws relating to employee stock options relating to retirement.

Your company's definition of retirement should be spelled out in its personnel manual and, possibly, its retirement plan.

Please be aware that, three months after your retirement, your incentive stock options will be converted to non-qualified stock options.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.