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Course Details

Course Information
  • smart_display Format

    Live Online with Live Q&A

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    ERISA

Date & Time
  • event Date

    Tuesday, June 10, 2025

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00

This CLE webinar will provide executive compensation counsel with guidance on the use of private company phantom plans to incentivize and retain current employees. The panel will outline the mechanics of these compensatory arrangements, discuss strategic considerations and how to reconcile the competing interests of senior management and shareholders, and highlight the tax implications counsel must be aware of when structuring phantom plans.

Faculty

Evgueni Gokhmark
Employment Law - Evgueni Gokhmark
Skadden Arps Slate Meagher & Flom Llp - London

Mr. Gokhmark’s practice focuses on providing executive compensation and employee benefits advice to public and private companies in the context of mergers and acquisitions, IPOs and other corporate events. He represents companies, boards of directors, independent and compensation committees, executive management teams and members of management on executive compensation matters that arise in the ordinary course of business and in connection with extraordinary events, including leadership transitions.

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Michael A. Wiseman
Partner
Skadden Arps Slate Meagher & Flom LLP

Mr. Wiseman counsels companies, boards of directors, independent and compensation committees, executive management teams and members of management on executive compensation matters that arise in the ordinary course of business and with respect to extraordinary events, including leadership transitions. He also regularly provides tax planning advice with respect to Internal Revenue Code Sections 409A and 162(m), as well as the excise tax on “golden parachute” payments under Sections 280G and 4999 and related sections. In addition, Mr. Wiseman assists clients with the design and implementation of equity- and cash-based incentive plans and awards, profit and capital interest participation in partnership and LLC arrangements, and executive and nonexecutive employment, severance, retention and change-in-control programs and agreements. He also frequently advises clients regarding SEC rules governing compensation- and benefits-related disclosures, equity-related registration requirements, and exemptions and compliance with related rules under NYSE and Nasdaq listing standards.

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Description

Private company phantom incentive plans--also referred to as phantom stock or phantom bonus plans--are a type of instrument used to incentivize current employees by committing to make a payout on a later date or a change in control. Unlike typical equity instruments, which may be settled in shares that may vote and may (under some circumstances) be subject to taxation at capital gains rates, phantom plans are compensatory contracts that allow senior managers to share in the value they build in a company.

 

Structuring these arrangements raises many strategic questions. Should the phantom plan track company stock or another metric? Should the awards participate in any escrow or earnout? Should people be forced to be present at the change in control in order to receive a payout? Should the awards be forfeited under certain conditions? What should happen to the forfeited amounts? How can the plan be amended?

 

A phantom incentive plan is usually a tense negotiation of competing interests to encourage retention for senior management and maximize value for shareholders. This presentation will highlight the considerations that affect plan design and discuss common trends.

 

To further complicate matters, phantom plans are subject to a unique and complicated set of tax rules. This discussion will highlight common constraints on phantom plans in the U.S. tax regime, including Section 409A (regulating deferred compensation arrangements) and 280G (regulating golden parachute payments).

 

Listen as our experienced panel discusses the use of private company phantom plans to incentivize and retain current employees. The panel will outline the mechanics of these plans, discuss strategic considerations and how to reconcile the competing interests of senior management and shareholders, and highlight the tax implications counsel must be aware of when structuring phantom plans.

Outline

I. What is a Phantom Plan?

 

II. Why do Private Companies Adopt Phantom Plans?

 

III. Tax, Legal and Regulatory Considerations

A. Tax Treatment of Phantom Awards

B. Implications of Section 409A

C. Section 280G

 

IV. Plan & Award Mechanics

A. Form of Award

B. Adoption/Implementation of Plan

C. Grant & Vesting Mechanics

D. Payments Mechanics

Benefits

The panel will review these and other key issues:

 

  • Consequences of a Section 409A violation and tips on bypassing or complying with 409A
  • Phantom plan alternatives, including phantom units tied to share value and percentage of net consideration
  • Options for cleansing parachute payments subject to Section 280G