Medco 2014 Annual Report Download - page 83

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Express Scripts 2014 Annual Report
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.UponconsummationoftheMerger,theCompanyassumedsponsorshipofthe
planshistoricallysponsoredbyESI(the“ESI401(k)Plan”)andMedco(the“Medco401(k)Plan”).
EffectiveJanuary1,2013,theMedco401(k)PlanmergedintotheESI401(k)Plan.Thecombinedplan(the
“ExpressScripts401(k)Plan”)isapplicabletoallfull-timeandpart-timeemployeesoftheCompany.UndertheExpress
Scripts401(k)Plan,eligibleemployeesmayelecttocontributeupto50%oftheirsalary,andtheCompanymatchesupto6%
oftheemployees’compensationcontributedtotheplanforsubstantiallyallemployeesafteroneyearofservice.
PriortoJanuary1,2013,undertheESI401(k)Plan,employeeswereabletoelecttoenterintoasalarydeferral
agreementunderwhichamaximumof25%oftheirsalarycouldbecontributedtotheplan.UndertheMedco401(k)Plan,
employeeswereabletoelecttocontributeupto50%oftheirsalary.TheCompanymatched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ESI401(k)Plan
afteroneyearofservice.TheCompanymatchedupto6%oftheemployees’compensationcontributedtotheplanfor
substantiallyallemployeesundertheMedco401(k)Plan.
FortheyearsendedDecember31,2014,2013and2012,wehadcontributionexpenseofapproximately$75.3
million,$79.9millionand$67.6million,respectively.Contributionsunderallplansaresubjecttoaggregatelimitsrequired
undertheInternalRevenueCode.
Employee stock purchase plan.WeofferanemployeestockpurchaseplanthatqualifiesunderSection423ofthe
InternalRevenueCodeandpermitsalldomestic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2014,2013and2012,approximately224,000,289,000and229,000sharesof
ourcommonstockwereissuedundertheplan,respectively.Ourcommonstockreservedforfutureemployeepurchasesunder
theplanisapproximately1.6millionsharesatDecember31,2014.
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2014,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electedbytheparticipants.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$0.6million,
$1.2millionand$1.0millionin2014,2013and2012,respectively.AtDecember31,2014,approximately5.9millionsharesof
ourcommonstockhavebeenreservedforfutureissuanceundertheplan.Wehave$0.3millionand$0.3millionofunearned
compensationrelatedtounvestedsharesthatarepartofourdeferredcompensationplanatDecember31,2014and2013,
respectively.
Stock-based compensation plans in general.In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,
directorsandkeyemployeesselectedbytheCompensationCommitteeoftheBoardofDirectors.The2011LTIPwasapproved
byESI’sstockholdersandbecameeffectiveJune1,2011.UponconsummationoftheMerger,theCompanyassumed
sponsorshipofthe2011LTIP.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,2014,approximately20.6millionsharesofourcommonstockareavailableforissuanceunderthisplan.
Subsequenttotheeffectivedateofthe2011LTIP,noadditionalawardshavebeenorwillbegrantedunderthe
2000Long-TermIncentivePlan(the“2000LTIP”),whichprovidedforthegrantofvariousequityawardswithvarioustermsto
ESI’sofficers,directorsandkeyemployeesselectedbytheCompensationCommitteeoftheBoardofDirectors.However,this
planisstillinexistenceasthereareoutstandinggrantsunderthisplan.Underthe2000LTIP,ESIissuedstockoptions,SSRs,
restrictedstockunits,restrictedstockawardsandperformanceshareawards,whichawardswereconvertedintoawardsrelating
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