Summary
The Charles Schwab Corporation (SCHW) filed an 8-K on December 10, 2004, to report significant changes to its deferred compensation plans, effective January 1, 2005. These amendments are primarily in response to the American Jobs Creation Act of 2004. The company is ceasing new deferrals under its existing plans for compensation earned after December 31, 2004, and introducing new, compliant plans. These new plans will continue to allow certain officers and directors to defer compensation and director fees, with terms adjusted to meet new regulatory requirements.
Key Highlights
- 1Schwab is amending its deferred compensation plans to comply with the American Jobs Creation Act of 2004.
- 2New deferred compensation plans (Deferred Compensation Plan II and Directors' Deferred Compensation Plan II) are being adopted, effective January 1, 2005.
- 3Deferrals under the existing plans will cease for compensation earned after December 31, 2004.
- 4The new plans allow certain officers to defer cash compensation, with assumed earnings based on participant-directed investments.
- 5Directors can defer director fees, with options to convert deferrals into restricted stock units or nonqualified stock options.
- 6All deferrals under these plans are unfunded and subject to the claims of creditors.
Frequently Asked Questions
The primary reason for these amendments and the adoption of new plans is to ensure compliance with the provisions of the American Jobs Creation Act of 2004, which introduced new regulations concerning nonqualified deferred compensation.
These changes primarily affect certain officers of The Charles Schwab Corporation who participate in deferred compensation plans, and directors of the company and U.S. Trust Corporation who can defer director fees.
The new plans, The Charles Schwab Corporation Deferred Compensation Plan II and The Charles Schwab Corporation Directors' Deferred Compensation Plan II, become effective for compensation earned on and after January 1, 2005.
No, all deferrals and assumed earnings under these plans are unfunded and are subject to the claims of the company's creditors. This means participants bear the risk of the company's financial solvency.