Proxy Disclosure Requirements for SEC-Registered Plans


The Federal Securities and Exchange Commission (SEC) requires public companies to disclose management compensation information. Public companies are considered "public" because they offer their securities (usually stock) for sale to the general public, and are required to register these securities with the SEC.

Stockholders in a public company are eligible to vote on corporate matters, usually during a company's annual meeting. Because it is not practical for all stockholders to be present at a corporation's annual meeting, the company distributes proxies to shareholders so that they can designate a member of management to vote on their behalf. The SEC requires that proxy statements are distributed to all shareholders in a public company, so that they will have access to key information about the company before they decide how to vote.

Proxy statements contain biographical information about a company's Board of Directors, proposals from management or stockholders to be voted on during the meeting, and specific information about the top five executive officers' total compensation during the past three fiscal years. While the CEO's compensation information must be disclosed regardless of his salary level, the remaining four executive officers must have total compensation of $100,000 or more in the past fiscal year to be included in the disclosure. The compensation information is provided using a specific format required by the SEC, the Summary Compensation Table. While the SEC is quite particular about the format and scope of this disclosure, the company does not have to file the proxy statement directly with the SEC .

The disclosure and table format requirements are outlined in Regulation S-K of the Securities and Exchange Act of 1934.

NQDP's and Proxy Disclosure

If a public company has a NQDP in place, then deferred income and "above-market" plan earnings pertaining to the five top executive officers must be included in the Summary Compensation Table. Basically, the deferred portions of the executive's salary and bonus, listed in columns (c) and (d) on the Summary Compensation Table, must be included on the table. Above-market earnings from the NQDP should be listed in column (e).

Determining 'Above Market' Plan Earnings

Earnings on deferred or long-term compensation are above-market only if the maximum gain the executive would be eligible to receive exceeds 120% of the applicable federal long-term rate as prescribed under section 1274(d) of the Internal Revenue Code. This rate is posted semi-annually in the Internal Revenue Bulletin, available online at www.irs.gov.


XYZ Corporation's fiscal year, which corresponds to its plan year, ends on December, 31. The CEO of XYZ Corporation, Jane Smith, deferred $20,000 of her bonus into the company's NQDP on the first day of fiscal year 2000, increasing her total account balance to $100,000. XYZ's NQDP credits earnings to participant accounts at the end of each fiscal year by tracking the Lipper Mid Cap Funds Average, which for 2000 was 39.5%. On that date 120% of the applicable long-term Federal rate (6.4%) is 7.68%.

The total earnings credited to Jane Smith's account were $39,500, as compared to $7,680 assuming the permissible rate of 7.68%. Therefore, XYZ Corporation reflects $31,820 ($39,500 - $7,680) of excess earnings on the Summary Compensation Table in column (e), because this is the "above market" portion. Here is how this information would appear on the Summary Compensation Table:


Name and Principal Position






Other Annual Compensation




All other compensation





Restricted Stock  Awards

Securities      Underlying         options/       Stock Appreciation Rights

Long     Term Incentive Plan payouts











Jane Smith, CEO














$  50,000








$  9,876

































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