Phantom Stock Plan and "Service Recipient Stock"

[Guest ccl]

Pretty general question -- Can the value of stock in a phantom stock plan be based on the performance of a brother/sister corporation as well as the corporation the employee works for? Put another way, can a company provide that the benefit under a phantom stock plan be based on shares of a brother/sister corp.?

Do the "service recipeint stock" rules in 409A apply to phantom stock plans?

Thanks!

[jpod]

The answer to your 3rd Q is "no." I think that also answers your first 2 Qs.

[Guest SteveConley]

In calculating the benefits due under a NQDC plan, all 409A cares about is that you have a formula that is "nondiscretionary" and "objectively determinable" at the time the plan is put in place. I would argue that this means you could base benefit amounts on the prevailing price of yak's milk in central China as of the date of Separation from Service, as long as that formula would be objective and nondiscretionary; not sure if anyone would want benefit payments based on such a formula, but I don't think it's prohibited by the terms of the statute or the Regs.