The Advisors' Blog

– Broc Romanek

Recently, a member asked this in our “Q&A Forum” (#1268):

Does the adoption by the board of a severance plan that is applicable to all employees, including all NEOs, trigger an 8-K filing requirement?

John gave this answer:

Yes, unless the plan meets the requirements of Instruction 3 to Item 5.02. That instruction requires not only that compensation under the plan be available generally to all salaried employees, but also requires the plan not to “discriminate in scope, terms or operation, in favor of executive officers or directors of the registrant.”

The Corp Fin Staff has construed this requirement narrowly, and it wouldn’t cover a plan in which executives were eligible for more extensive severance arrangements than other plan participants. As noted in the discussion on page 206 of the 8-K Chapter of the Treatise on this site, our view is that Instruction 3 principally contemplates broad-based health plans and other types of welfare benefits where the benefits are going to be the same across the spectrum of all salaried employees.