Express Scripts 2012 Annual Report Download - page 85

Express Scripts 2012 Annual Report 83
10. Employee benefit plans and stock-based compensation plans
Retirement savings plans. We sponsor retirement savings plans under Section 401(k) of the Internal
Revenue Code for substantially all of our full-time employees. Under the plan historically sponsored by ESI (the
“ESI 401(k) Plan”), employees may elect to enter into a salary deferral agreement under which a maximum of 25%
of their salary may be contributed to the plan. Additionally, upon consummation of the Merger, the Company
assumed sponsorship of Medco’s 401(k) plan (the “Medco 401(k) Plan”), under which employees may elect to
contribute up to 50% of their salary. Contributions under both plans are subject to aggregate limits required under
the Internal Revenue Code. For participants in the ESI 401 (k) Plan, the Company matches 200% of the first 1% and
100% of the next 3% of the employees’ compensation contributed to the plan for substantially all employees under
the plan after one year of service. For participants in the Medco 401(k) Plan, the Company matches 100% of the first
6% of the employees’ compensation contributed to the plan for substantially all employees under the plan. Effective
January 1, 2013, the ESI 401(k) Plan and the Medco 401(k) Plan terminated and were replaced by a new plan
applicable to all full-time and part-time employees of the Company (the “Express Scripts 401(k) Plan”), under
which eligible employees may elect to contribute up to 50% of their salary. Under the Express Scripts 401(k) Plan,
the Company will match 100% of the first 6% of the employees’ compensation contributed to the plan for
substantially all employees after one year of service. For the years ended December 31, 2012, 2011 and 2010, we
had contribution expense of approximately $67.6 million, $25.7 million and $26.8 million, respectively. The
increase for the year ended December 31, 2012 is the result of contributions to the Medco 401(k) Plan from the date
of the Merger.
Employee stock purchase plan. We offer an employee stock purchase plan that qualifies under Section
423 of the Internal Revenue Code and permits all employees, excluding certain management level employees, to
purchase shares of our common stock. Participating employees may contribute up to 10% of their salary to purchase
common stock at the end of each monthly participation period at a purchase price equal to 95% of the fair market
value of our common stock on the last business day of the participation period. During 2012, 2011 and 2010,
approximately 229,000, 200,000 and 217,000 shares of our common stock were issued under the plan, respectively.
Our common stock reserved for future employee purchases under the plan is approximately 2.2 million shares at
December 31, 2012.
Deferred compensation plan. We maintain a non-qualified deferred compensation plan (the “Executive
Deferred Compensation Plan”) that provides benefits payable to eligible key employees at retirement, termination or
death. Benefit payments are funded by a combination of contributions from participants and us. Participants may
elect to defer up to 50% of their base earnings and 100% of specific bonus awards. Participants become fully vested
in our contributions on the third anniversary of the end of the plan year for which the contribution is credited to their
account. For 2012, our contribution was equal to 6% of each qualified participant’s total annual compensation, with
25% being allocated as a hypothetical investment in our common stock and the remaining being allocated to a
variety of investment options. We have chosen to fund our liability for this plan through investments in trading
securities, which primarily consist of mutual funds (see Note 1 – Summary of significant accounting policies). We
incurred net compensation expense of approximately $1.0 million, $0.6 million and $1.5 million in 2012, 2011 and
2010, respectively. At December 31, 2012, approximately 5.9 million shares of our common stock have been
reserved for future issuance under the plan. We have $0.2 million and $0.3 million of unearned compensation
related to unvested shares that are part of our deferred compensation plan at December 31, 2012 and 2011,
respectively.
Stock-based compensation plans in general. In March 2011, ESI’s Board of Directors adopted the ESI
2011 Long-Term Incentive Plan (the “2011 LTIP”), which provides for the grant of various equity awards with
various terms to our officers, Board of Directors and key employees selected by the Compensation Committee of the
Board of Directors. The 2011 LTIP was approved by ESI’s stockholders in May 2011, became effective June 1,
2011, and we assumed its sponsorship upon the closing of the Merger. Under the 2011 LTIP, we may issue stock
options, stock-settled stock appreciation rights (“SSRs”), restricted stock units, restricted stock awards, performance
share awards and other types of awards. The maximum number of shares available for awards under the 2011 LTIP
is 30.0 million. The maximum term of stock options, SSRs, restricted stock units, restricted stock awards and
performance shares granted under the 2011 LTIP is 10 years. As of December 31, 2012, approximately 24.7 million
shares of our common stock are available for issuance under this plan.