Why are Royal Caribbean's deferred compensation plans being amended?

The amendments are a direct result of recent changes in U.S. tax laws that prevent many company employees from continuing to defer income to non-qualified deferred compensation plans after January 1, 2009.

How does this impact Richard D. Fain, the CEO?

Mr. Fain's employment and trust agreements have been amended. Previously, stock distributions intended for his benefit were paid into a trust. Now, these distributions will be paid directly to him, and the trust's assets will be distributed to him on January 12, 2009, making them taxable events for him.

Will Mr. Fain receive additional compensation due to these changes?

The filing indicates a change in the *timing* and *form* of distributions, not necessarily an increase in total compensation. The distributed shares will be taxable to Mr. Fain upon receipt. He may sell some of these shares to cover the tax liability, suggesting he is receiving what he is entitled to, but in a different manner.

What is the significance of the trust termination for Mr. Fain?

The termination of the trust and distribution of its assets to Mr. Fain on January 12, 2009, is a key event. This means the assets will be directly under his control but also immediately subject to taxation, which he will need to manage, potentially by selling some of the distributed company stock.

RCL 8-K: Leadership Changes

Summary

Royal Caribbean Cruises Ltd. (RCL) filed an 8-K report on December 23, 2008, primarily to disclose amendments to certain non-qualified deferred compensation plans due to recent changes in U.S. tax laws. These changes, effective January 1, 2009, restrict the ability of many company employees to continue deferring income under these plans. The most significant change disclosed relates to the employment agreement and trust agreement for Richard D. Fain, the Chairman and CEO. Under the amendments, quarterly distributions of company stock to Mr. Fain's benefit trust will now be paid directly to him. Furthermore, the assets currently held in the trust will be distributed to Mr. Fain on January 12, 2009, making these distributions taxable upon receipt. Mr. Fain may use some of the distributed shares to cover these tax obligations.

Key Highlights

1RCL is amending several non-qualified deferred compensation plans due to new U.S. tax laws impacting income deferral after January 1, 2009.
2Affected plans include the Non Qualified Deferred Compensation Plan, Shipboard Seniority Retirement Plan, and the Richard D. Fain Trust Agreement.
3Chairman and CEO Richard D. Fain's employment agreement is amended regarding stock distributions.
4Quarterly distributions of company common stock for Mr. Fain's benefit trust will now be paid directly to Mr. Fain.
5The trust holding assets for Mr. Fain will be terminated, with all assets distributed to him on January 12, 2009.
6Distributions to Mr. Fain will be taxable upon receipt, and he may sell shares to cover tax liabilities.
7Exhibits include amendments to Mr. Fain's employment agreement and the related trust agreement.

ROYAL CARIBBEAN CRUISES LTD 8-K Report, Executive Changes (Dec 23, 2008)

Summary

Key Highlights

Frequently Asked Questions