8-K: Horizon Bancorp Adopts New Deferred Compensation Plan, Replacing Existing SERP

Horizon Bancorp has adopted a new Nonqualified Deferred Compensation Plan, effective January 1, 2025, replacing its existing Supplemental Executive Retirement Plan (SERP).

Summary

• Horizon Bancorp has established a new Nonqualified Deferred Compensation Plan, effective January 1, 2025, which replaces the existing Supplemental Executive Retirement Plan (SERP).
• The new plan allows eligible management and highly compensated employees to defer up to 90% of their base salary and 90% of their performance-based bonus.
• The Compensation Committee may also elect to match participant deferrals each year.
• Participant accounts will be credited with investment returns based on selected investment funds, but Horizon common shares will not be an investment option.
• Distributions will occur upon separation from service, death, or disability, with options for in-service distributions and lump sums in cases of unforeseeable emergencies.
• The existing SERP will no longer accept new participants, but existing accounts will continue to be credited and paid out according to the original terms.
• The plan is designed to provide supplemental retirement benefits to compensate for limitations in the company's tax-qualified retirement plan.

Sentiment

Score: 7

Explanation: The document is a routine corporate action, indicating a positive step in employee benefits management. The plan is well-structured and aligns with industry standards, suggesting a stable and forward-thinking approach.

Positives

• The new plan provides a modern framework for deferred compensation, potentially attracting and retaining key talent.
• The plan offers flexibility with deferral percentages and investment options.
• The plan allows for in-service distributions and lump sums for unforeseeable emergencies, providing financial flexibility for participants.
• The continuation of the existing SERP ensures that current participants' benefits are not disrupted.

Negatives

• A change in control is not a qualifying distribution event, which may be seen as a negative by some participants.
• The plan is complex and requires careful management by the Compensation Committee.

Risks

• The plan's success depends on the Compensation Committee's ability to effectively administer it.
• Changes in tax laws could impact the plan's effectiveness.
• The plan's complexity could lead to misunderstandings or disputes among participants.
• The plan is subject to the risks and uncertainties of the financial markets.

Future Outlook

The company has included a standard forward-looking statement disclaimer, indicating that future results may differ from expectations due to various risks and uncertainties.

Management Comments

• The Board of Directors adopted the Horizon Bancorp Nonqualified Deferred Compensation Plan.
• The plan is intended to provide eligible participants with supplemental retirement benefits.
• The plan will be administered by the Compensation Committee of the Board.

Industry Context

The adoption of a nonqualified deferred compensation plan is a common practice among financial institutions to attract and retain key executives and highly compensated employees. This plan is designed to supplement tax-qualified retirement plans and provide additional retirement benefits.

Comparison to Industry Standards

• Many financial institutions offer nonqualified deferred compensation plans to their executives and highly compensated employees.
• The deferral percentages of up to 90% of base salary and performance-based bonus are within the typical range for such plans.
• The exclusion of company stock as an investment option is a common practice to avoid potential conflicts of interest.
• The distribution triggers of separation from service, death, or disability are standard in deferred compensation plans.
• The lack of a change in control as a qualifying distribution event is not uncommon, but some plans do include it.

Corporate Governance

Stakeholder Impact

• Shareholders: The plan is designed to attract and retain key talent, which can positively impact the company's performance.
• Employees: Eligible employees will benefit from the new deferred compensation plan, providing additional retirement savings opportunities.
• Management: The plan provides a structured approach to executive compensation and retirement planning.

Next Steps

• The Compensation Committee will administer the new Deferred Compensation Plan.
• Eligible employees will be able to make deferral elections for the 2025 plan year.
• The existing SERP will continue to operate for current participants.

Key Dates

Keywords

Deferred Compensation, Retirement Plan, Executive Compensation, SERP, Nonqualified Plan, Horizon Bancorp, Employee Benefits, Compensation Committee