8-K: Regal Rexnord Amends Supplemental Retirement Plan to Include Stock Award Deferrals

Regal Rexnord Corporation has amended its Supplemental Retirement Plan to allow eligible employees to defer restricted stock units and performance unit awards, effective April 22, 2024.

Summary

• Regal Rexnord Corporation has updated its Amended and Restated Supplemental Retirement Plan (SRP), effective April 22, 2024, with final approval on October 24, 2024.
• The amendment allows eligible employees to defer their restricted stock units and performance unit awards.
• No company matching contributions will be made on these deferred stock awards.
• The plan is designed to provide supplemental retirement benefits to a select group of management and highly compensated employees, as well as non-employee directors.
• The plan is intended to be unfunded for tax purposes and compliant with Code Section 409A.
• The plan includes both cash and stock accounts, with various investment options for the cash accounts.
• Participants can make deferral elections during an annual enrollment period, with specific rules for cancellation and changes.
• Company contributions are also part of the plan, with fixed and discretionary options, but no matching contributions for deferred stock awards.
• Vesting rules apply to company contributions, with full vesting typically after three years of service.
• Benefits are generally paid as a lump sum after separation from service, but installment options are available.
• The plan also includes provisions for in-service distributions, unforeseeable emergency distributions, and beneficiary designations.
• The plan is administered by the Compensation Committee of the Board, with full discretionary authority.
• The plan also includes details on how the Altra Savings Advantage Plan (SAP) accounts were transferred into this plan on January 1, 2024.

Sentiment

Score: 7

Explanation: The document outlines a positive change to employee benefits, which is generally well-received. The plan is complex, but the overall sentiment is positive as it provides more flexibility for employees.

Positives

• The plan now offers more flexibility for employees to manage their retirement savings by deferring stock awards.
• The plan is designed to be compliant with Code Section 409A, providing tax advantages.
• The plan offers various investment options for cash accounts, allowing participants to tailor their investments.
• Installment payment options provide flexibility for receiving benefits after separation from service.
• The plan includes provisions for unforeseeable emergencies, providing a safety net for participants.
• The plan is administered by the Compensation Committee, ensuring proper oversight.

Negatives

• No company matching contributions are made on deferred stock awards, which could be a drawback for some employees.
• The plan is unfunded, meaning benefits are an unsecured claim against the company's general assets.
• The plan has specific rules for deferral elections, cancellations, and changes, which may be complex for some participants.
• Vesting for company contributions is not immediate, requiring three years of service for full vesting.
• The plan has specific rules for distributions, which may not be suitable for all participants.

Risks

• The plan is unfunded, meaning benefits are an unsecured claim against the company's general assets, which could be a risk in case of company financial difficulties.
• Changes in tax laws or regulations could impact the tax advantages of the plan.
• The plan's complexity could lead to misunderstandings or errors in administration.
• The lack of matching contributions on deferred stock awards could reduce the overall benefit for some participants.
• The plan's reliance on the company's discretion for certain contributions and decisions could create uncertainty for participants.

Future Outlook

The document does not contain specific forward-looking statements or guidance beyond the implementation of the amended plan. The plan is designed to provide ongoing supplemental retirement benefits to eligible employees and non-employee directors.

Management Comments

• The Compensation and Human Resources Committee of the Board of Directors approved the further amendment and restatement of the Company's Amended and Restated Supplemental Retirement Plan.
• The Company has established this Supplemental Retirement Plan to provide supplemental retirement benefits to a select group of management and highly compensated employees, and to non-employee directors, of the Company.

Industry Context

The amendment to the supplemental retirement plan is in line with industry trends of offering deferred compensation options to attract and retain key talent. Many companies offer similar plans to provide additional retirement benefits beyond standard 401(k) plans, particularly for executives and highly compensated employees.

Comparison to Industry Standards

• Many large public companies offer supplemental retirement plans to their executives and highly compensated employees, similar to Regal Rexnord's plan.
• Deferred compensation plans are a common tool for attracting and retaining top talent, with many companies offering similar options for deferring stock awards.
• The vesting schedules and distribution options are generally consistent with industry standards for these types of plans.
• Companies like General Electric, Honeywell, and 3M also offer similar supplemental retirement plans, often with a mix of cash and stock-based deferral options.
• The specific contribution percentages and vesting schedules may vary, but the overall structure of Regal Rexnord's plan is comparable to those of its peers.

Stakeholder Impact

• Eligible employees will benefit from the added flexibility to defer stock awards and manage their retirement savings.
• Non-employee directors will also benefit from the ability to defer their cash fees and stock awards.
• Shareholders may see a positive impact from the company's ability to attract and retain key talent through these benefits.
• The company will need to manage the administrative aspects of the plan effectively to ensure smooth operation.

Next Steps

• Eligible employees will need to make deferral elections during the annual enrollment period.
• The company will administer the plan according to the updated terms.
• The Compensation Committee will continue to oversee the plan's administration.

Key Dates

Keywords

Supplemental Retirement Plan, Deferred Compensation, Stock Awards, Retirement Benefits, Employee Benefits, Executive Compensation, Non-Employee Directors, Vesting, Distributions, 409A, Regal Rexnord