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Phantom Stock

August 24, 2011

John Jastremski Presents:

 

Phantom Stock

 

Definition 

Phantom stock arrangements are based on a hypothetical investment in company stock. More specifically, phantom stock is the right to receive a cash or property bonus at a specified date in the future based upon the performance of phantom (rather than real) shares of a corporation’s common stock over a specified period of time.

Prerequisites 

  • Corporation needs incentive to retain key employees
  • Current owners are unwilling to dilute ownership
  • Parties want compensation linked to company’s growth

Key Strengths 

  • Provides tax deferral for the employee
  • Provides tax deduction for the employer
  • Helps business to attract, motivate, and retain key employees
  • Avoids cumbersome Employee Retirement Income Security Act (ERISA) requirements
  • Keeps ownership of business from being diluted
  • Minimizes use of corporate funds for payment of compensation

Key Tradeoffs 

  • Corporation’s deduction is deferred
  • Phantom stock does not provide all of the rights associated with stock ownership

Variations from State to State 

  • There is some variation in state treatment of stock plans. (Applicable blue-sky requirements should always be consulted any time an issuer issues equity securities to its employees.)

How Is It Implemented? 

  • Adopt a plan
  • Fund the plan
  • Award units to employees

 

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

 

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com,  access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

 

John Jastremski is a Representative with FSC Securities and may be reached at http://www.theretirementgroup.com.

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