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    Resource Center

    Equity Plan Comparison

     

    Qualified Plan With Stock Account

    Restricted Stock Plan

    Phantom Stock Plan

    Description

    Tax qualified profit sharing plan with company stock accounts.

    Company stock is granted to employee, subject to forfeiture, unless vesting conditions are satisfied.

    A plan that grants units of phantom stock which are valued based on the company's common stock.

    Type Of interest

    Plan's trust holds title to stock, not participants.

    Conveys ownership interest in company.

    Conveys percentage of value of the company.

    No incidences of ownership.

    May include stock conversion feature.

    Trust requirement?

    Yes

    ERISA plan.

    No

    Book account sufficient.

    No

    Book account sufficient.

    Distributions payable in

    Cash only.

    Stock only.

    Cash or stock.

    Who Is Eligible To Participate?

    All employees.

    May exclude owners from stock allocations.

    Immediate participation possible.

    All employees.

    May exclude owners.

    Immediate participation possible.

     

    All employees.

    May exclude owners.

    Immediate participation possible.

     

    Cost To Employee?

    Tax liability only.

    Tax liability only.

    Tax liability only.

    When Is Employee Taxed?

     

    At time employee retires or receives distribution.

    May roll distribution to an IRA as a non-taxable event.

     

    At time stock vests (i.e., when it is no longer forfeitable), or when it becomes transferable.

    But if participant makes an IRC 83(b) election, the time of taxation is accelerated to the year of grant.

    At time of payment.

    Annual Benefit Accrual Requirements

    1,000 hours of service and employed on last day of the year.

    May be more restrictive.

    For example, 1,700 hours and employed on last day of the year.

    May be more restrictive.

    For example 1,700 hours and employed on last day of the year.

    Benefit Levels

    Stock allocated annually according to plan formula

    Different allocation tiers possible

    Subject to anti-discrimination rules.

    Discretionary

    Discretionary

    Funding

    Discretionary annual contributions.

    Discretionary

    Single grant covering multiple years or annual grants.

    Discretionary

    Single grant covering multiple years or annual grants.

    Vesting

    7 year graded schedule possible.

    All participants subject to same schedule.

    10 year vesting schedule possible.

    May also vest upon achievement of performance goals.

    May use multiple vesting schedules.

    10 year vesting schedule possible.

    May also vest upon achievement of performance goals.

    May use multiple vesting schedules.

    Payment triggers

    Termination/retirement.

    At death.

    Change of control.

    Termination/retirement.

    At death.

    Change of control.

    Prior to or at termination/retirement.

    At death.

    Change of control.

    When Can Company Take Deduction?

    Immediate deduction for contributions to plan.

     

    Delayed deduction.

    Can deduct amount of income recognized by employee at the time the employee recognizes income (i.e., year stock vests or restriction on transfer lapse).

    But if participant makes an IRC 83(b) election, the time of deduction is accelerated to the year of grant.

    Delayed deduction

    Company deducts amount of income recognized by employee at the time the employee recognizes income (i.e., year payment is made).

     

    Reporting and Administration Requirements?

    All ERISA/tax reporting requirements apply.

    Sponsorship costs of administration and appraisal (approximately $10,000 to $15,000).

    Not an ERISA plan.

    Minimal mandatory compliance requirements.

    Low sponsorship costs.

    Not an ERISA plan.

    Minimal mandatory compliance requirements.

    Low sponsorship costs.