Utah Phantom Stock Plan of Hercules, Inc.
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How to fill out Phantom Stock Plan Of Hercules, Inc.?
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FAQ
The basic idea behind phantom stock is simple: reward a key employee with the financial benefits of stock ownership without giving them actual shares of company stock.
While not stock in the company, phantom stock is worth money just like real stock? its value rises and falls with the company's actual stock (or what the company is valued at, if it's not a publicly traded company). Employees are paid out profits at the end of a pre-determined length of time.
Phantom stock is a contract between an employer and an employee that grants the employee the right to receive a payment based on the value of the employer's stock. When granting phantom stock, the employer does not grant the employee any shares of the employer's stock.
Since the benefits of phantom stocks can only be contingent upon the company's performance or predetermined benchmarks, employees with phantom stocks will not get the cash payout if the company does not meet the benchmark. Phantom stocks cannot be freely traded or transferred.
Summary. A phantom stock plan refers to a type of deferred employee compensation plan where plan participants benefit from the upside of a company's share price without actually receiving company shares. In a phantom stock plan, upon redemption of phantom stock, the plan participant receives cash compensation.
As described, phantom shares are usually redeemed in cash?the payment being treated like a bonus. However, should the plan agreement allow it, the payment obligation may be satisfied by distributing actual stock to the employees. A phantom stock plan must be supported by more than a verbal commitment.
Providing phantom stock allows the company to reward employees for their hard work without worrying about those big problems. Phantom shares are typically used to encourage senior leadership to produce better results for the company.
Payments from phantom stock plans are subject to typical income taxes, not capital gains taxes. In turn, companies can deduct phantom plan payouts the year the employee reports the income. Employers must ensure their plans follow federal laws in section 409A of the Internal Revenue Code (IRC).