How to Use Your Deferred Compensation Plan to Create a Personalized Restricted Stock Wealth Management Plan (RS WMP)

The Challenge:
ABC Corporation had an existing Deferred Compensation Plan (DCP) that permitted the deferral of cash compensation (salary and bonus) and restricted stock units (RSUs). However, less than 20 percent of those eligible were actually participating in the plan, and no one was deferring RSUs.

The 48-year-old CFO had been receiving significant RSU grants each year, which vested over a three-year period. She complained to the SVP of HR about the tax hit upon vesting, but stated her key concern about the inflexibility of the DCP:

“If I were to defer my RSUs, I wouldn’t want them locked up until retirement—that’s fifteen-plus years away for me. And I wouldn’t want to lose control over the RSUs and the ability to sell at least a portion of them to meet some of my shorter-term financial objectives—which would be the case if I deferred them.”


Did you know that by using your Deferred Compensation Plan’s short-term deferral account and the redeferral option, you can transform your annual RSU grants into a vigorous wealth-building strategy?


Diversification of RSUs:
The requirement that deferred RSUs be paid out as restricted stock upon distribution is typically driven by financial considerations, as allowing for the settlement of RSUs as cash affects the accounting treatment of deferred RSUs. Paying RSUs out as restricted stock allows the company to use favorable fixed accounting for the RSU liability, eliminating any potentially volatile impact on the P&L. Without the ability to diversify RSUs while in a DCP account, many executives have been reluctant to defer for fear of having to hold company stock through a negative event.

However, EBS has worked with plan sponsors to implement a methodology that permits diversification while still addressing financial concerns about DCP accounting. With diversification of RSUs as a plan feature, executives are more interested in and comfortable with taking advantage of the tax benefits of deferral because they retain the ability to sell RSUs that are held in their DCP account.


We show you how one concerned CFO did it in this RSU case study, “How to Use Your Deferred Compensation Plan to Create a Personalized Restricted Stock Wealth Management Plan (RS WMP).” Check out the list of benefits conferred to you as a result of this one strategic action.

For more on this topic you can read another case study that we wrote, “Deferring Restricted Stock Units in Your Company’s Deferred Compensation Plan”:  download here.  The case study also introduces the Restricted Stock Modeler created by EBS.  Find out the pros and cons of deferring or not deferring your RSUs and how your action impacts your financial situation at retirement.

Consider the value of taking full advantage of your DCP as an effective wealth-building tool. Your DCP holds more flexibility, control, and tax benefits than you may have imagined. Find out why by downloading this case study.