162(m) - Performance-based comp

[Guest JTL]

For comp attributable to stock options to be perf-based comp, the regs provide that the "plan under which the option..is granted states the maximum number of shares... to ANY employee."

Your experience re: there being simply an aggregate/max limit for ANY (meaning not any one employee can exceed this max limit) versus the per employee limit? Trying to deal w/ a plan where only max is specified, but not employee limit -- client likely to come under IRS audit.

[Steelerfan]

In my experience most plans list the maximum # shares available for awards and an individual limit per annual award for each eligible officer, even if the officer is not in the top 4. I would think failure to have a per person limit would be fatal, but haven't seen the issue myself.

[Guest JTL]

Appreciate very much the reply. Hoping for more flexibility -- as "ANY" employee does not specifically say "PER employee." Anyone else?

[Steelerfan]

Appreciate very much the reply. Hoping for more flexibility -- as "ANY" employee does not specifically say "PER employee." Anyone else?

Sorry me again: From CCH: "The performance goal requirement is met if: (1) the grant or award is made by the compensation committee; (2) the plan includes a per-employee limitation on the number of shares for which options or stock appreciation rights may be granted during a specified period; and (3) the amount of the compensation to be received is based solely on the increase in value of the stock after the date of the grant or award "(Reg. §1.162-27(e)(2)(vi)).

The legislative history also supports this interpretation. Good luck!

[Guest carltberry]

I agree with the Steelerfan, although I am not myself a Steelers fan.