Non-discretionary Bonus pay

[tomwcarlson]

What is the name of your state?
I currently work in California. I have a signed and dated non-discretionary bonus plan that is based on overall company performance and also specific sales performance of products I am responsible for. It's based on calendar year 2006 performance

I've decided to leave my current company and relocate to Illinois. My last day is in mid-September. My question is concerning this bonus plan. Since my bonus plan is non-discretionary and I have a detailed, signed plan, am I owed a partial bonus based on this plan, pro-rated for the time worked. If yes, then how is the pro-rating figured?

 

[pattytx]

In California, yes you are. It would be based on the percentage to which you contributed or some other factor that would be related to your service during the bonus period. However, without seeing the details of the plan, we can't give you any calculation formula that you could hang your hat on.

 

[tomwcarlson]

Thanks. Since I will be living in Illinois when the bonus is dispersed, (typically in March), what do you recommend I do in advance to ensure that I can collect my bonus without incident? I'm thinking about giving my company forwarding information where they can send the check, and telling them so. Is this a good idea?

Also, since I will be in Illinois at the time the bonuses are paid and they will be considered 2007 income, can I ask them to tax me at the Illinois state rate instead of the CA rate? Otherwise, I will have to complete CA and IL state tax forms for 2007, even though I will have not worked or lived at any time in CA in the year 2007.

Finally, my current company matches 50% of 401K contributions, including this type of bonus pay. My actual 401K account will probably still be active. Is my current company required to contribute some of my bonus to the 401K plan and are they obligated to make matching contributions?

 

[pattytx]

1. I wouldn't even go that far. "Here is my forwarding address in Illinois. Please send my bonus check to this address." There is nothing you can do ahead of time to guarantee payment.

2. Well, you can ask, but the employer would be in violation of California income tax withholding requirements if they did so. You earned it in California, California law says it is California income. It's irrelevant that you are living in another state at the time it is paid.

3. The employer is required to contribute the employer portion as the plan document states.

 

[tomwcarlson]

Well, I just viewed my bonus statement/contract, and it does explicitly say that I must be employed with my company through the end of the year for this bonus plan to be applicable. I'm guessing that I am out of luck and cannot collect a percentage of this bonus.

Can you confirm my interpretation?

 

[pattytx]

No, that's not what I'm saying, nor what California law says. Commissions that have been substantially earned cannot be withheld simply because you are not an employee at the time of payment. See here, specifically, Section 34
http://www.dir.ca.gov/dlse/DLSEManual/dlse_enfcmanual.pdf

 

[tomwcarlson]

Thanks for the reference. Section 35 of this reference is perhaps more appropriate for my situation based on how bonus and commission are defined. Section 35.1 defines bonuses and section 35.2 talks about payment of a bonus with voluntary termination.

Reviewing how my bonus is calculated partially on total company sales and profitability, as well as the sales and profit of a particular product that I manage, I tend to think that this variable compensation that I have is more closely defined as a bonus and not a commission. Are you able to define it differently?