Deferral of stock into nonqualified plan

[Guest Lori Basilico]

I read an article which discussed the ability of participants to defer the receipt of stock issued upon the exercise of non-qualified stock options into a non-qualified deferred compensation plan. Can this still be done? Also, can a participant defer the receipt of restricted stock received as a bonus into a deferred compensation plan?

[Guest wmacdonald]

Yes you can. This concept has increased in prevalance over the last few years. You can defer the gain with no charged to earnings, as long as you hold the shares in stock. I have a presentation on my web site that I recently did at the World at Work Conference that explains the concept in detail (chart etc). Also, we have a Executive Topics on the site that goes into detail. Yes you can also defer restricted shares, and can diversify the stock into other assets, without a charge to earnings. Info on site is http://www.crgworld.com.

[QDROphile]

The scheme is not without controversy. You need expert advice about the foundation for the scheme to see if you can tolerate the uncertainties. No comment on accounting treatment.

[Kirk Maldonado]

I could have sworn that there is an EITF stating that if you diversify the stock deferrals (into other assets), there is a charge to earnings. How do you get around that problem?

[Guest wmacdonald]

You are right on the charge to earnings, as it relates to stock options. What I mentioned was no charge to earnings on the deferral of restricted shares. The reason for that, is the company has already charged them off. There of course would be accounting for the investment you make, after cashing in the shares.