Section 16.10 Stage I—Vested Versus Unvested Benefits

• Library: Family Law Deskbook and 2014 Supp

1. (§16.10) Stage I—Vested Versus Unvested Benefits

When the employee/participant has no right to receive any benefits, presently or in the future, the Supreme Court, in Kuchta v. Kuchta, 636 S.W.2d 663 (Mo. banc 1982), describes the employee/participant’s status as Stage I. In addition, Stage I would also encompass the situation in which the employee terminates employment and is entitled only to receive a refund of employee contributions and possibly accrued investment income
(if either or both) on those contributions, thereby forfeiting any employer contributions made to the plan for the benefit of the employee or the employee’s spouse. For example, a qualified plan is required to adhere to detailed standards that define the extent the employee/participant has a nonforfeitable right at any specific time to contributions and benefits derived from contributions made by the employer/sponsor. Benefits derived from the employee’s own contributions must be 100% “vested” or nonforfeitable at all times I.R.C. § 411(a). The phrase “vested” is interchangeable with the portion of the accrued benefit or account that is nonforfeitable if employment is terminated. With respect to contributions made by the employer for the benefit of its employees made before normal retirement age of the participant, qualified plans must meet one of two minimum vesting standards governing forfeitability:

1. A five-year “cliff” vesting schedule that requires full vesting after five years of employment service

2. A three-year to seven-year “graded” vesting schedule that requires 20% vesting after three years of employment...