10-K: Alexander & Baldwin Updates Deferred Compensation Plan for Key Employees

Alexander & Baldwin has amended and restated its deferred compensation plan to provide tax planning opportunities and supplemental funds for key employees upon retirement or death.

Summary

• Alexander & Baldwin has amended and restated its deferred compensation plan, effective January 1, 2024, to replace the 2019 plan.
• The plan aims to attract and retain key employees by offering tax planning opportunities and supplemental funds for retirement or death.
• The plan is designed to comply with Code Section 409A and ERISA regulations for unfunded plans for select management or highly compensated employees.
• Eligible employees can make voluntary deferral elections to their accounts.
• Frozen accounts from the Excess Benefits Plan were transferred to the nonqualified defined contribution plan and are tracked separately.
• Transferred accounts will be paid out at the same time and in the same form as set forth in the Excess Benefits Plan.
• The plan allows for deferral of up to 80% of base salary and 100% of annual incentive bonuses.
• Employer discretionary and matching contributions may be made at the employer's discretion.
• Participants can choose from hypothetical investment options for their accounts.
• Distributions can be made upon separation from service, at a specified date, or in case of death or disability.
• Financial hardship distributions are available in cases of unforeseeable emergencies.
• Small benefits under $15,000 will be paid as a lump sum within 90 days of separation from service.
• Payments to specified employees may be delayed by six months following separation from service.
• The plan is administered by the Retirement Committee, which has the authority to interpret and administer the plan.
• The plan can be amended or terminated by the company, but not after a change in control for two years unless approved by a majority of participants.
• The plan is unfunded, and participants are unsecured general creditors of the employer.

Sentiment

Score: 7

Explanation: The document is a legal plan document, so the sentiment is neutral. However, the plan itself is a positive benefit for key employees, hence the score of 7.

Positives

• The plan provides tax planning opportunities for key employees.
• It offers supplemental funds for retirement or death.
• The plan aims to attract and retain employees of exceptional ability.
• Participants have flexibility in choosing investment options.
• The plan allows for distributions in various forms, including lump sums and installments.
• Financial hardship distributions are available in cases of unforeseeable emergencies.

Negatives

• The plan is unfunded, meaning participants are unsecured general creditors of the employer.
• Payments to specified employees may be delayed by six months following separation from service.
• Employer discretionary and matching contributions are not guaranteed.

Risks

• The plan is unfunded, meaning participants are general creditors of the employer and rely solely on the general credit of the employer for payment of deferred fees.
• Changes in tax laws could affect the tax treatment of the plan.
• The company may amend or terminate the plan, potentially affecting future benefits.
• The plan's compliance with Code Section 409A is not guaranteed, and non-compliance could result in penalties.
• The company may change the hypothetical investment options at any time.

Future Outlook

The plan is intended to provide current tax planning opportunities and supplemental funds upon retirement or death for certain key employees. The plan will continue to be administered and interpreted to comply with Code Section 409A.

Management Comments

• The plan is intended to aid in attracting and retaining employees of exceptional ability by providing them with these benefits.
• The Retirement Committee will determine whether or not a Participant has incurred a Disability based on such evidence as it deems necessary or appropriate.

Industry Context

Deferred compensation plans are a common tool used by companies to attract and retain key executives and highly compensated employees. These plans often provide tax advantages and supplemental retirement income.

Comparison to Industry Standards

• The plan's deferral limits (80% of base salary, 100% of bonus) are within the typical range for nonqualified deferred compensation plans.
• The availability of hypothetical investment options is a common feature of these plans, allowing participants to align their deferrals with their risk tolerance.
• The six-month delay for specified employees is a standard provision to comply with Code Section 409A.
• The plan's unfunded nature is also typical for nonqualified deferred compensation plans, where benefits are paid from the employer's general assets.

Stakeholder Impact

• Shareholders may benefit from the company's ability to attract and retain key talent.
• Employees eligible for the plan will have access to tax-advantaged savings and supplemental retirement income.
• The company will have a tool to manage compensation and incentivize performance.

Next Steps

• Eligible employees will need to make deferral elections to participate in the plan.
• The Retirement Committee will administer the plan and make determinations regarding eligibility and distributions.
• The company will continue to monitor and ensure compliance with Code Section 409A and ERISA.

Key Dates

Keywords

deferred compensation, executive benefits, nonqualified plan, retirement planning, tax planning, key employees, 409A, ERISA, unfunded plan, discretionary contributions, matching contributions, separation from service, investment options, distributions, financial hardship