Phantom Stock Award

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Phantom Stock Award

A type of incentive grant in which the recipient is not issued actual shares of stock on the grant date but receives an account credited with a certain number of hypothetical shares. The value of the account increases over time based on the appreciation of the stock price and the crediting of phantom dividends. Payout may be settled in cash or stock.

Phantom Stock Award

A plan to compensate senior management of a publicly-traded company in which the company grants an employee a "hypothetical" stock. That is, the company gives the employee the benefits of owning stock in the company without actually giving him/her stock. The phantom stock increases or decreases in price and pays dividends as if it were real. Eventually, the phantom stock is settled and cash is distributed to the employee. See also: Stock option.
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Although these may take the form of SERPs which are time based, many companies have also adopted some form of performance based LTI, most commonly referred to as phantom stock plans.
Beyond those exceptions, section 409A applies broadly to salary reduction plans, supplemental employee retirement plans (SERPs), parachute payments, phantom stock plans, severance plans, insurance commissions, discounted stock options, certain SARs, non-excluded fringe benefits, etc.
The shift today within private firms has been in the direction of phantom stock plans that are capital event--driven.
But offering multiple retirement plans -- and in some cases; phantom stock plans -- shows they're rising to the challenge.
These plans are often described as full value phantom stock plans.
The only specific forms of compensation for which the institutions expressed strong sentiments were incentive and non-qualified stock options and cash bonuses (in favor), and phantom stock plans and stock appreciation rights plans (disfavor).
Corporate-owned life insurance can be one of the most cost-effective and tax-advantaged methods of funding nonqualified benefit plans including supplemental executive retirement plans (SERPs), 401(k) overlay plans, supplemental executive life insurance plans and phantom stock plans.
Phantom stock plans have the same accounting effects as SARs.
The value of compensation will reach to other areas of the business community, specifically privately owned, for-profit firms, and to a lesser extent, to Not-For-Profits (NFPs) These organizations have to compete within the same marketplace for qualified executives, and therefore they must provide a variety of programs that offer comparable levels of total compensation in order to successfully recruit those individuals, which include new creative variations of long-term incentives, Supplemental Executive Retirement Programs (SERPs), and Phantom Stock Plans.
Wynn explains that these may include bonus agreements and arrangements, severance agreements or provisions in other documents, executive employment agreements, salary and bonus deferral arrangements, stock options, stock appreciation rights and phantom stock plans.
For example, employers providing 401(k), employee stock purchase plans, qualified and non-qualified employee stock options, phantom stock plans, or other equity-based compensation plans routinely provide an explanation of the tax consequences of various transactions to affected employees.
In addition to stock options, stock grants and phantom stock plans, many employers offer company stock as an investment option under their deferred compensation plans.