401(k) not fully vested at time of acquisition
Probably not. If you were at a small company and asked such a question, you'd get advice and links to erisa or other case law, etc.  it's safe to say that a Fortune 500 company such as IBM is going to have their facts in order, and not going to run afoul of the rules in these cases (vesting rules and takeover of other company).  I was in a company that cancelled its pension program. Those of us with the required years got the option of a lump sum payout, those with less than 5 years had no vested value and got nothing. One month longer employment, in the case of a particular coworker, would have given him a lump sum worth nearly 6 months pay. Unfortunately, the money that is not vested is not yours.  It belongs to your employer.  They have promised to give it to you after you have been with the company for a certain length of time, but if you aren't still with the company after that time, no matter what the reason, the money never becomes yours. Sorry to hear about this.  It would have been nice if your company had waived the vesting requirement like this guy's employer did, but I don't think they are required to do so, unfortunately. If it's a lot of money, you could ask an attorney, but as @JoeTaxpayer said, AT&T and IBM probably know what they are doing.
Now assume these shares are vested, held for at least 1 year, and are   then sold for $5 each. Everything I've read implies that the grantee   now owes long-term capital gains taxes on the difference, which would   be 10k * ($5 - $1). No. That's exactly what the SO is NQ for. Read more on the differences between ISO and NQSO here. Now assume these shares are vested, held for at least 1 year, and are   then sold for $5 each. Everything I've read implies that the grantee   now owes long-term capital gains taxes on the difference, which would   be 10k * ($5 - $1). At this point you no longer have NQSO, you have RSU. If you filed 83(b) when  you exercised, then you pay capital gains tax when they vest. If you didn't - its ordinary income to you. NQSO is a red herring here since once exercised they no longer exist. If you didn't file 83(b), then when the stock vests the difference between the FMV at vest and the money you spent on it when exercising (if any) is considered wages and taxed as ordinary income (+FICA etc). From that point the RSU becomes a regular stock investment and the capital gains clock starts ticking. An employer can decide that the employee funds are automatically vested. The new company could have had a more aggressive vesting schedule and grandfathered in all the employees of the company they acquired. This could have been part of the purchase negoaitaions.   I would be surprised if they did it for employees that left years ago, especially if they were beyond the return period. I wouldn't keep money in a plan with a former employer just in case it happens. Check the plan documents to see all the verbiage regarding vesting here is a paragraph from one: You will receive one year of vesting service for each calendar year   during which you complete 850 or more hours of service. Once you have   five years of service, your account is fully vested and any future   Company contributions made to your account will be immediately vested.   Full vesting also occurs at age 59½, total disability or death while   employed by the Company. If you leave the Company prior to 100%   vesting, any unvested portion of your Plan account will be forfeited. With respect to the 401(k). Before taking a hardship withdrawal, one must first deplete the ability to take any 401(k) loans available. This is a regulation. The 401(k) loan limit is the lesser of $50k, 50% your vested balance, or $50k minus the highest loan balance within the last year. Here's the good news: it is not a taxable event; you can pay back over a maximum of 5 years; interest is low (usually 4.25% or so). The bad news: if you terminate employment then the loan balance must be repaid or else it becomes taxable income plus a 10% penalty. I suggest you consider eliminating the credit card debt via this option. Pay back as aggressively as possible and if/when you terminate you can take the 10% penalty - it will be far less of an impact than 25k accruing approximately 25% annually. Vesting As you may know a stock option is the right to acquire a given amount of stock at a given price.  Actually acquiring the stock is referred to as exercising the option.  Your company is offering you options over 200,000 shares but not all of those options can be exercised immediately. Initially you will only be able to acquire 25,000 shares; the other 175,000 have conditions attached, the condition in this case presumably being that you are still employed by the company at the specified time in the future.  When the conditions attached to a stock option are satisfied that option is said to have vested - this simply means that the holder of the option can now exercise that option at any time they choose and thereby acquire the relevant shares. Dividends Arguably the primary purpose of most private companies is to make money for their owners (i.e. the shareholders) by selling goods and/or services at a profit.  How does that money actually get to the shareholders?  There are a few possible ways of which paying a dividend is one.  Periodically (potentially annually but possibly more or less frequently or irregularly) the management of a company may look at how it is doing and decide that it can afford to pay so many cents per share as a dividend.  Every shareholder would then receive that number of cents multiplied by the number of shares held. So for example in 4 years or so, after all your stock options have vested and assuming you have exercised them you will own 200,000 shares in your company.  If the board declares a dividend of 10 cents per share you would receive $20,000.  Depending on where you are and your exact circumstances you may or may not have to pay tax on this. Those are the basic concepts - as you might expect there are all kinds of variations and complications that can occur, but that's hopefully enough to get you started. I would check to see what the fee schedule is on your previous employer's 401k. Depending on how it was setup, the quarterly/annual maintenance fee may be lower/higher than your current employer. Another reason to rollover/not-rollover is that selection of funds available is better than the other plan. And of course always consider rolling over your old plan into a standard custodial rollover IRA where the management company gives you a selection of investment options. At least look at the fees and expense ratios of your prior employer's plan and see if anything reaches a threshold of what you consider actionable and worth your time. Note: removed reference to self directed IRA as vehicle is more complicated account type allowing for more than just stocks, bonds, and mutual funds. Not for your typical retail investor. The question is for your HR department, or administrator of the plan. How long must you hold the employee shares before you are permitted to sell? Loyalty to your company is one thing, but after a time, you will be too heavily invested in one company, and you need to diversify out. One can cite any number they wish, 5%, 10%. All I know is that when Enron blew up, it only added insult to injury that not only did these people lose their job, they lost a huge chunk of their savings as well. Pre-Enron many companies forced the 401K match to be in company shares. That is no longer allowed becasue of changes in the law. Therefore most employees have only a small minority of their retirement savings in company shares. I know the ESOP and 401K aren't the same, but in my company every year the number of participants in the company stock purchase program decreases. The small number of participants and the small portion of their new retirement funds being in company shares would mean this spike in volume would be very small.  The ESOP plan for my employer takes money each paycheck, then purchases the shares once a quarter. This delay would allow them to manage the purchases better. I know with a previous employer most ESOP participants only held the shares for the minimum time, thus providing a steady steam of shares being sold. I trust the 401(k) was a traditional, pre tax account. There was no tax paid, and any withdrawals would be taxable. The account could go to zero, and there's no write off, sorry. I have to ask - were there any withdrawals along the way? What was it invested in that lost 90% of its value?  Edit - I'm sorry the OP came and went. It would be great to have closure on some of these issues. Here, I'm thinking as Duff said, malpractice, or perhaps a 401(k) that was 100% in company stock. Seems we'll never know. "I understand the answers addressing the question as asked. Yes, inheriting a 401(k) can be a convoluted process.  In general, it's best to transfer the account to an IRA after separation from the company to avoid the issues both of my esteemed colleagues have referenced.  Given the issue of ""allowed by not required"" the flexibility is greater once the account has been transferred to an IRA. With few exceptions, there's little reason to leave the account with the 401(k) after leaving that company.  (Note - I understand the original question as worded can mean the account holder passes while still working for the company. In that case, this wouldn't be an option.)" When you adjust your investments the following will happen: Initial condition: Modified condition: This means that after this change you will note that the amount of federal tax you pay each month via withholding will go up. You are now contributing less pre-tax, so your taxable income has increased. If you make no other changes, then in April you will either have increased your refund by 6 months x the additional $25 a month, or decreased the amount you owe by the same amount. There is no change in the total 401K balance at the end of the year, other than accounting for how much is held pre-tax vs. Roth post-tax. Keep in mind that employer contributions must be pre-tax. The company could never guess what your tax situation is. They withhold money for taxes based on the form you fill out, but they have no idea of your family's tax situation. If you fail to have enough withheld, you pay the penalty — not the company. *The tax savings are complex because it depends on marital status, your other pre-tax amounts for medical, and how much income your spouse makes, plus your other income and deductions. "A little terminology: Grant: you get a ""gift"" with strings attached. ""Grant"" refers to the plan (legal contract) under which you get the stock options. Vesting: these are the strings attached to the grant. As long as you're employed by the company, your options will vest every quarter, proportionally. You'll become an owner of 4687 or 4688 options every quarter. Each such vest event means you'd be getting an opportunity to buy the corresponding amount of stocks at the strike price (and not the current market price which may be higher). Buying is called exercising. Exercising a nonqualified option is a taxable event, and you'll be taxed on the value of the ""gift"" you got. The value is determined by the difference between the strike price (the price at which you have the option to buy the stock) and the actual fair market value of the stock at the time of vest (based on valuations). Options that are vested are yours (depending on the grant contract, read it carefully, leaving the company may lead to forfeiture). Options that are not vested will disappear once you leave the company. Exercised options become stocks, and are yours. Qualified vs Nonqualifed - refers to the tax treatment. Nonqualified options don't have any special treatment, qualified do. 3.02M stocks issued refers to the value of the options. Consider the total valuation of the company being $302M. With $302M value and 3.02M stocks issued, each stock is worth ~$100. Now, in a year, a new investor comes in, and another 3.02M stocks are issued (if, for example, the new investor wants a 50% stake). In this case, there will be 6.04M stocks issued, for 302M value - each stock is worth $50 now. That is called dilution. Your grant is in nominal options, so in case of dilution, the value of your options will go down. Additional points: If the company is not yet public, selling the stocks may be difficult, and you may own pieces of paper that no-one else wants to buy. You will still pay taxes based on the valuations and you may end up paying for these pieces of paper out of your own pocket. In California, it is illegal to not pay salary to regular employees. Unless you're a senior executive of the company (which I doubt), you should be paid at least $9/hour per the CA minimum wages law." There are two dates that matter for vesting in this situation: If you left the company on 12/31/16, you would be entitled to none of the company contributions. If you left on 1/1/17, you would be entitled to all $20k. This is sometimes known as a cliff vesting schedule. Some companies do a stair step - 20% after year 1, 40% after year 2, etc. This is known as graded vesting. But, that is not the case based on the language here. I can make that election to pay taxes now (even though they aren't vested) based on the dollar value at the time they are granted? That is correct. You must file the election with the IRS within 30 days after the grant (and then attach a copy to that year's tax return). would I not pay any taxes on the gains because I already claimed them as income? No, you claim income based on the grant value, the gains after that are your taxable capital gains. The difference is that if you don't use 83(b) election - that would not be capital gains, but rather ordinary salary income. what happens if I quit / get terminated after paying taxes on un-vested shares? Do I lose those taxes, or do I get it back in a refund next year? Or would it be a deduction next year? You lose these taxes. That's the risk you're taking. Generally 83(b) election is not very useful for RSUs of established public companies. You take a large risk of forfeited taxes to save the difference between capital gains and ordinary gains, which is not all that much. It is very useful when you're in a startup with valuations growing rapidly but stocks not yet publicly trading, which means that if you pay tax on vest you'll pay much more and won't have stocks to sell to cover for that, while the amounts you put at risk are relatively small. They gave advanced notice, so when the date is solidified, no one can say they didn't know anything.  It's not as if the money is in limbo until then, it's still at fidelity. I am certain there will come time in '17 when you get a 30-60 day notice that the move will happen.  There are rules that employers must deposit the money within X days of withholding from your check. But I don't believe there's anything against warning you too far in advance that a change in provider is planned. "IF the price of the property (1) increases A LOT, you will just break even, on the huge expenses of home owning. IF the price of the property (2) increases A HUGE AMOUNT, you will make lots of money, due to the leverage. IF the price of the property (3) stays even, you will LOSE a tremendous amount of money. It's much like owning a car - constant expenses. That's all there is to it. It's well worth bearing in mind that property prices for your area / your property need to be constantly increasing for you to merely break even. Note that over long periods of time prices tend to go up (most anywhere - but not everywhere). Many people basically base their thinking on that. It will be OK ""in the long run"". Which is fair enough. I believe one huge factor is that it is enforced saving. That is the number one advantage for most. Note too that in most/all jurisdictions, there are tremendous tax advantages, even if it turns out to be situation (1) (i.e. a waste of time, you only break-even). Note finally that there are, indeed, tremendous social/financial advantages to having the equity: it gets incredibly easy to get other loans (for business or the like) once you own a house; this is undeniably an advantage (perhaps press your husband on that one)."