Plan designed to incentivize debtor’s key employees to remain with the debtor post-petition.
The Code (per BAPCPA) now limits payment or allowance of claims for retention bonuses or severance pay to “insiders” unless they are “essential to the survival of the business” and have a “bona fide job offer from another business at the same or greater rate of compensation.” In addition, the amount of the payment may not exceed 10 times the amount of a similar payment to a non-management employee during the same calendar year. If no such transfer has been made to non-management employees during the calendar year, then payment may not exceed 25 times the amount of any similar payment to an insider during the calendar year prior to the commencement of the case. Such limitations imposed by BAPCPA have caused Debtors to devise alternatives to KERPs such as “performance incentive plans” (commonly referred to as Key Employee Incentive Plans or KEIPs). Noted by many to often achieve the same result of merely pouring old wine (or rockgut to some) into new bottles.
Bankruptcy Code § 503.