What is the main purpose of the amendments to the Annual Incentive Plan (AIP) and Equity Incentive Plan (EIP)?

The primary purposes of the amendments are to reflect the company's name change to L3Harris Technologies, Inc., remove provisions related to the repealed Section 162(m) of the Internal Revenue Code while maintaining award limits, and ensure compliance with Section 409A of the Code regarding deferred compensation. The core terms and award structures remain largely the same.

Has L3Harris changed its executive compensation structure significantly with these plan amendments?

The amendments to the AIP and EIP are largely administrative and technical in nature, focusing on regulatory compliance and name changes. However, a specific compensatory arrangement for Todd W. Gautier was disclosed, providing him with a significant annual credit to his retirement savings plan to mitigate the impact of prior pension plan changes. This is a notable individual compensation adjustment.

What impact do the changes related to Section 162(m) and Section 409A have on my investment?

The changes related to Section 162(m) and Section 409A are primarily technical adjustments to align the incentive plans with current tax laws. For investors, these changes are generally neutral and aimed at ensuring the deductibility of compensation and avoiding adverse tax consequences for participants, which can indirectly benefit the company by maintaining executive compensation structures.

What is the new definition of 'retirement' in the Amended AIP?

The Amended AIP now defines 'retirement' as an employee retiring after reaching age 60 with at least 5 years of full-time service with the Company, subject to specific notice and other conditions outlined in the plan document.

LHX 8-K: Leadership Changes

Summary

L3Harris Technologies, Inc. (LHX) filed an 8-K on August 31, 2020, primarily detailing amendments to its Annual Incentive Plan (AIP) and Equity Incentive Plan (EIP), effective August 28, 2020. These amendments are largely administrative, reflecting the company's name change post-merger and aligning the plans with current tax regulations, specifically the repeal of the performance-based exception under Section 162(m) of the Internal Revenue Code and ensuring compliance with Section 409A. While the core mechanics and award limits remain substantially similar, the company has clarified its commitment to ensuring these plans and future awards comply with tax code requirements. Additionally, the filing disclosed a specific compensatory arrangement for Todd W. Gautier, President of Aviation Systems. This arrangement, effective from 2020 through the year he turns 65, provides an annual credit of $257,000 to his Excess Retirement Savings Plan account to offset the impact of pension plan changes following the L3Harris merger. This credit is vested and will be distributed in a lump sum upon separation from service or earlier in the event of a Change of Control. Investors should note these updates primarily concern plan governance and executive compensation adjustments.

Key Highlights

1L3Harris Technologies amended its Annual Incentive Plan (AIP) and Equity Incentive Plan (EIP), effective August 28, 2020.
2Amendments address company name change to L3Harris Technologies, Inc. following the L3Harris merger.
3Plans updated to remove provisions related to the repealed Section 162(m) performance-based exception, while retaining maximum award/share limits.
4Company committed to ensuring AIP and EIP awards comply with or are exempt from Section 409A tax regulations.
5Definition of 'retirement' added to the Amended AIP, requiring age 60 and 5+ years of service.
6A specific compensatory arrangement was approved for Todd W. Gautier, President of Aviation Systems, providing $257,000 annually to his retirement savings plan.
7Mr. Gautier's compensatory arrangement is designed to offset pension plan changes and vests fully, with payout upon separation or change of control.

L3HARRIS TECHNOLOGIES, INC. /DE/ 8-K Report, Executive Changes (Sep 1, 2020)

Summary

Key Highlights

Frequently Asked Questions