It has been common practice in certain industries to provide favorable equity award treatment to employees who terminate due to retirement. Often, retirement is defined with reference to reaching a certain age, or a certain age plus a certain number of years of service with the company (e.g., 55 years and 10 years of service). Employees who meet the definition of retirement will be allowed to continue to vest in awards after termination, have vesting of their awards be accelerated, or be allowed a longer post-termination exercisability period (for options).
As traditional retirement plans become less common, more and more companies are considering these provisions in order to provide additional benefits to employees who are nearing, or have reached, retirement.
With respect to U.S. employees, it is well understood that allowing retirement-eligible employees to continue to vest in awards after termination can cause accounting and tax issues (i.e., compliance with Section 409A as well as an accelerated social security tax liability).
For non-U.S. employees, the same accounting considerations apply, but in addition, companies also need to consider age discrimination concerns and changes to the taxable event of awards.