UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM 10-K/A

Amendment No. 1

For the fiscal year ended December 31, 2020

For the transition period from ____ to ____

Commission File No. 1-6639

__________________________

MAGELLAN HEALTH, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (800) 642-1716

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rul 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “accelerated filer, “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the Common Stock (“common stock”) held by non-affiliates of the registrant based on the closing price on June 30, 2020 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $1.8 billion.

The number of shares of Magellan Health, Inc.’s common stock outstanding as of April 16, 2021 was 26,153,303.

DOCUMENTS INCORPORATED BY REFERENCE:

None

EXPLANATORY NOTE

Amendment No. 1 on Form 10-K/A

This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of Magellan Health, Inc. (the “company,” “we,” “us” or “our”) for the fiscal year ended December 31, 2020, which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 26, 2021 (the “Original Report” and, as amended by this Amendment, the “2020 Annual Report”), and is being filed to provide certain information required by Items 10, 11, 12, 13 and 14 of Part III and to update certain of the information included in the list of exhibits included in Item 15 of Part IV and the Exhibit Index of the 2020 Annual Report.

The information required by Items 10 through 14 of Part III was previously omitted from the Original Report in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above-referenced items to be incorporated in the Form 10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year end. We are filing this Amendment to include Part III information in our Form 10-K because a definitive proxy statement containing this information will not be filed by us within 120 days after the end of the fiscal year covered by the 2020 Annual Report. The reference on the cover of the Original Report to the incorporation by reference to portions of a definitive proxy statement or amendment to our Form 10-K into Part III of the Original Report is hereby deleted.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Part III, Items 10 through 15 of the Original Report are hereby amended with the addition of the disclosures set forth in this Amendment. This Amendment does not modify or update the other disclosures presented in the Original Report and does not reflect events occurring after the filing of the Original Report except as set forth in such Items 10 through 15. Accordingly, this Amendment should be read in conjunction with the Original Report and with our filings with the SEC subsequent to the Original Report.

Pursuant to Rule 12b-5 under the Exchange Act, this Amendment also contains new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are attached hereto as Exhibits 31.3 and 31.4. Because no financial statements are included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted.

Merger Agreement with Centene Corporation

On January 4, 2021, the company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Centene Corporation, a Delaware corporation (“Centene”), and Mayflower Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Centene (“Merger Sub”). The Merger Agreement provides for, subject to the satisfaction or waiver of specified conditions, the acquisition of the company by Centene at a price of $95.00 per share of company common stock in cash. Subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into the company (the “Merger”), with the company surviving the Merger as a wholly owned subsidiary of Centene. The material terms and effects of the Merger are described in the company’s definitive proxy statement on Schedule 14A filed on February 19, 2021 (the “Merger Proxy Statement”). From and after the effective time of the Merger, the company’s common stock will no longer be outstanding, and various equity instruments described in this Amendment which were awarded for compensatory purposes will be treated as described in such proxy statement.

MAGELLAN HEALTH, INC.

FORM 10-K/A

PART III

Item 10 – Directors, Executive Officers and Corporate Governance

BOARD OF DIRECTORS

As of the date of this Amendment, our Board of Directors (the “board”) consists of nine members. The following table lists the age and committee memberships as of the date of this Amendment of each director. A description of each director’s business experience during the past five years is set forth in the next section, entitled “Directors” below.

Directors

The company’s by-laws require a majority of directors to be independent in accordance with the listing standards of The NASDAQ Global Select Market (“Nasdaq”). Upon the recommendation and with the assistance of the Nominating/ Corporate Governance Committee, the board of directors has determined that, except for Mr. Fasola, who is the company’s chief executive officer, all directors who are currently serving are independent, as that term is defined by the Nasdaq listing standards. For a discussion of these independence standards see “Item 13 — Certain Relationships and Related Transactions, and Director Independence — Director Independence” below.

Steven J. Shulman was first elected to the board in his current stint in 2019. He serves as the managing partner at Shulman Family Ventures, Inc., a healthcare private equity firm. He previously served as an operating partner at Water Street Healthcare Partners, LLC, a healthcare- focused private equity firm, from 2008 until March 2015; and Tower Three Partners LLC, another private equity firm, from 2008 until 2018. From 2002 to 2008, Mr. Shulman served as chairman and chief executive officer of Magellan Health Services, Inc. (n/k/a Magellan Health, Inc.), where he spearheaded its turnaround and restructuring following bankruptcy. Mr. Shulman previously served as chairman and chief executive officer of Internet Healthcare Group, LLC and as chairman, president and chief executive officer of Prudential Healthcare, Inc., a healthcare insurer. Prior to that, Mr. Shulman served in senior executive positions at Value Health, Inc. (NYSE:VH), a specialty managed care company he founded and took public. Mr. Shulman currently serves on the board of SOC Telemed (NASDAQ: TLMD), a sponsor of acute telemedicine programs. He also currently serves as a director of several other privately-held companies, including CareCentrix, an analytics and care coordination company supporting at-home care; VillageMD, a national provider of primary care; Facet, a medical device company; Pager, Inc., a mobile healthcare technology company; and Healthmap, an online resource using informal sources for disease outbreak monitoring and surveillance of public health threats.

Swati Abbott was first elected to the board in 2018. She currently serves as the president and chief executive officer of Health Intelligence Company LLC, doing business as Blue Health Intelligence, a healthcare data and analytics company, a post that she has held since 2011. Prior to joining Blue Health Intelligence, Ms. Abbott served as the president of MEDai, Inc., an industry leader in predictive analytics which was acquired by Reed Elsevier in 2008. She also served as managing director for the Medical Management Strategic Business Unit at ViPS. She currently serves on the board of directors of The Ensign Group, Inc. (NASDAQ: ENSG), a publicly-held assisted living, skilled nursing and rehabilitation care company.

Christopher J. Chen, MD was elected to the board for the first time at the 2020 annual meeting. Dr. Chen currently serves as the chief executive officer of ChenMed LLC, a physician-led, family-oriented primary care organization which he founded which is built on a full-risk model serving seniors in 40 cities and municipalities across eight states. He is a clinically trained physician who is board certified in several specialty areas centered around primary care and cardiology and is licensed to practice medicine in several states.

Kenneth J. Fasola was first appointed to the board in 2019 and was elected for the first time at the 2020 annual meeting. He currently serves as the company’s chief executive officer. Mr. Fasola previously served as chief growth officer of ancillary and individual health services at United Healthcare from January to November 2019. Prior to that position, he served as chairman, president and chief executive officer of HealthMarkets, Inc., one of the largest health insurance agencies in the US and a subsidiary of UnitedHealth Group, from September 2010 through January 2019.

Peter A. Feld was first elected to the board in 2019. He serves as a managing member and head of research of Starboard Value LP, a New York-based investment adviser, a position he has held since April 2011. From November 2008 to April 2011, Mr. Feld served as a managing director of Ramius LLC and as a portfolio manager of Ramius Value and Opportunity Master Fund Ltd. Mr. Feld currently serves as a member of the board of directors and the chairman of GCP Applied Technologies Inc. (NYSE:GCP), a construction products technologies company; and as a director of Norton LifeLock Inc., formerly Symantec Corporation (NASDAQ:NLOK), a cybersecurity software and services company. Mr. Feld previously served on the boards of directors of several public companies during the last five years, including AECOM (NYSE: ACM), a multinational engineering firm; Marvell Technology Group Ltd. (NASDAQ:MRVL); The Brink’s Company (NYSE:BCO); Insperity, Inc. (NYSE:NSP); and Darden Restaurants, Inc. (NYSE:DRI).

Mural R. Josephson, CPA was elected to the board for the first time at the 2020 annual meeting. He is a Registered Certified Public Accountant in Illinois and serves as a financial consultant. Mr. Josephson retired from Kemper Insurance Companies in 2002. At Kemper, he held key management positions, including senior vice president and chief financial officer and senior vice president of finance. Prior to joining Kemper, he held several senior level positions at KPMG, including 19 years as an audit partner. Mr. Josephson from 2007 until 2020 served on the board of directors of Argo Group International Holdings, Ltd (NYSE:ARGO), an international underwriter of specialty insurance and reinsurance products in the property and casualty market, where he served on the audit committee as an audit committee financial expert. He also served on the board of directors and as chair of the audit committee at HealthMarkets, Inc., one of the largest health insurance agencies in the US and a subsidiary of UnitedHealth Group, from 2007 to 2019.

G. Scott MacKenzie was first appointed to the board in 2016 and was elected for the first time at the annual meeting in 2017. He currently serves as the chief executive officer of RevSpring, a leading provider of consumer engagement, billing and payment solutions. He previously served as the chief executive officer of M*Modal, Inc., a privately held clinical documentation technology and services company, a position which he held from 2014 to 2019. He also served as the president of Experian Health from 2013 to 2014 and as chief executive officer of Passport Health Communications from 2009 to 2014. Mr. MacKenzie serves on the board of directors of MedHost, Inc., a privately-held healthcare information technology company.

Leslie V. Norwalk, Esq. was first elected to the board in 2019. She serves as strategic counsel to Epstein Becker Green, P.C., a law firm with a focus on healthcare and life science. Additionally, since 2008, Ms. Norwalk has served as an advisor to several private equity firms. From 2006 to 2007, she was the acting administrator of the Centers for Medicare & Medicaid Services, where she managed the operations of federal health care programs, including Medicare and Medicaid. From 2002 to 2005, she was the agency’s deputy administrator. She also previously served in the George H.W. Bush Administration in the White House Office of Presidential Personnel and the Office of the US Trade Representative. Currently, Ms. Norwalk serves on the boards of directors of Neurocrine Biosciences Company (NASDAQ: NBIX), a biopharmaceutical company; Arvinas, Inc. (NASDAQ: ARVN), a clinical-stage biopharmaceutical company; ModivCare (NASDAQ: PRSC), a social services corporation; and NuVasive, Inc. (NASDAQ: NUVA), a medical device company. Within the past five years, Ms. Norwalk served on the board of Volcano Corporation (formerly NASDAQ: VOLC), a medical device company, until its acquisition by Royal Philips NV; Press Ganey Associates, Inc. (formerly NASDAQ: PGND), a health care company known for developing and distributing patient satisfaction surveys; and Endologix, Inc. (NASDAQ: ELGX), a developer and marketer of innovative treatments for aortic disorders.

Guy P. Sansone was first elected to the board in 2019. He currently serves as chairman and chief executive officer of H2 Health, LLC, a privately-held health, wellness and therapy services provider. He previously served as a managing director at Alvarez & Marsal in New York, a financial advisory and consulting firm notable for its work in turnaround management and performance improvement, where he served as chairman of the firm’s Healthcare Industry Group before retiring in January 2020. Mr. Sansone also serves on the board of directors of Brookdale Senior Living (NYSE: BKD), an owner and operator of senior living and retirement communities; and Mednax Inc. (NYSE: MD), a physician-led national medical group. He previously served on the board of directors of Civitas Solutions, Inc. (NYSE: CIVI) until its acquisition by Celtic Intermediate Corp. in March 2019. From November 2014 through December 2016, Mr. Sansone served as the interim chief executive officer of the Visiting Nurse Service of New York, the largest post-acute home-based services provider in New York State. He also served as interim president of Life Cell Corporation and as chief restructuring officer of Erickson Retirement Communities (n/k/a Erickson Living).

Starboard Agreement

On December 13, 2018, Starboard Value LP and certain of its affiliates (collectively, “Starboard”) announced that they had acquired beneficial ownership of approximately 9.8% of the company’s outstanding stock. On February 22, 2019, Starboard notified the company and announced its intention to nominate six director candidates for election at the 2019 annual meeting in opposition to the company’s director candidates. On March 28, 2019, the company entered into an agreement with Starboard regarding, among other things, the membership and composition of the board and committees thereof (the “Starboard Agreement”). Under the terms of the Starboard Agreement, the company appointed Messrs. Shulman, Feld and Sansone and Ms. Norwalk to serve on the board and agreed to nominate them for election to the board at the 2019 annual meeting. Each of these individuals was elected by the stockholders at the 2019 annual meeting. The company has no continuing obligation under the Starboard Agreement regarding who is nominated for election as a director in the future.

EXECUTIVE OFFICERS

The following table lists the ages, positions and year first appointed for each of our executive officers as of the date of this Amendment. There are no family relationships among any of our directors or executive officers.

Information for Kenneth J. Fasola, our current chief executive officer, is presented above under “Directors.”

David Bourdon. Mr. Bourdon was appointed as chief financial officer effective September 8, 2020. He previously served as chief financial officer for Cigna Corporation’s Integrated Medical, Life and Disability and International Markets businesses. Prior to those positions, Mr. Bourdon served as chief financial officer for numerous other Cigna businesses since 2005.

James E. Murray. Mr. Murray was appointed as president and chief operating officer effective December 9, 2019. He previously served as president of PrimeWest Health in 2019 and as chief executive officer of LifeCare Health Partners from 2017 to 2019. LifeCare Hospitals filed for protection under Chapter 11 of the Bankruptcy Code in 2019. Prior to holding those positions, Mr. Murray served as chief operating officer of Humana.

Mostafa M. Kamal. Mr. Kamal previously served as senior vice president and general manager of Magellan Rx Management’s specialty pharmacy business, as well as its chief underwriting officer. From 2011 to 2014, Mr. Kamal was vice president of pricing, underwriting and analytics. Before joining the company, he served as director of strategy and analytics at Medco Health Solutions, Inc. (now known as Express Scripts). He currently serves as a director of the Pharmaceutical Care Management Association.

David Haddock. Mr. Haddock was appointed as general counsel and secretary in February 2020. Prior to joining the company, Mr. Haddock was the general counsel and secretary at Quality Care Properties, Inc., a healthcare real estate investment trust, from November 2016 to July 2018. From 2010 to 2013, he served as the general counsel and secretary at Sunrise Senior Living, an operator and developer of senior living facilities.

Caskie Lewis-Clapper. Ms. Lewis-Clapper has held several senior positions in human resources since joining the company in 1999. Prior to joining Magellan, Ms. Lewis-Clapper served as Human Resources Operations lead for Helix Health, a Baltimore, Maryland-based health care system. Prior to joining Helix, she was with General Physics Corporation, where as a staff consultant she worked with clients across several industries on learning, organizational development and performance improvement initiatives.

CODES OF ETHICS

The board has adopted a Code of Ethics for Directors, covering directors only, and a Code of Ethics for Covered Officers, covering senior executives and individuals reporting directly to the chief executive officer and finance department employees at a vice president level or above. In addition, the company has adopted a Code of Conduct covering all employees.

The Code of Ethics for Directors deals with conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of company assets, compliance with laws, insider trading and personal loans to executive officers and directors. The Code of Ethics for Covered Officers deals with good faith and fair dealing in all negotiations and transactions, actual and apparent conflicts of interest, responsible use and protection of company assets, disclosures filed with the SEC or otherwise communicated to the public, compliance with laws, prompt reporting of violations of the code of ethics and other applicable policies, and accountability with respect to compliance with the code of ethics.

The Code of Conduct, among other things, contains a whistleblower policy that sets forth steps an employee should take if he or she has a question about a legal or ethical issue related to his or her job or the company, and prohibits retribution against any person raising an issue.

The company will provide to any person without charge, upon request, copies of its Code of Ethics for Directors, Code of Ethics for Covered Officers and Code of Conduct for all employees. Any such request should be made in writing to the Investor Relations Department, Magellan Health, Inc., 4801 E. Washington Street, Phoenix, Arizona 85034. The Code of Ethics for Directors, Code of Ethics for Covered Officers and Code of Conduct are also available in the Investor Relations — Corporate Governance section of our website at MagellanHealth.com. The company intends to disclose any future material amendments to the provisions of the codes of ethics and material waivers from such codes of ethics, if any, made with respect to any of its directors and executive officers on its website.

AUDIT COMMITTEE

Our board has a standing Audit Committee. The board has adopted a written charter for the Audit Committee which is available in the Investor Relations – Corporate Governance section of our website at MagellanHealth.com. Our Audit Committee as of the date of this Amendment is made up of Messrs. Josephson (chair), MacKenzie and Sansone and Dr. Chen. All members of the Audit Committee are independent, as independence is defined in Rule 10A-3 under the Exchange Act and under the Nasdaq listing standards. Our board has determined that Mr. Josephson qualifies as an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K.

Item 11 – Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Elements of our 2020 Compensation Program

The various elements of our 2020 executive compensation program for our Named Executive Officers (“NEOs”) are described below:

The mix of elements of our executive compensation program, illustrated below, is designed so that a large portion of the target compensation is performance-based (83% for our CEO in 2020 and 79% on-average for our other NEOs) and tied to our financial and stock price performance results.

Role of the Management Compensation Committee

The Management Compensation Committee (the “committee”) of our board of directors in 2020 was comprised of four members of the board prior to the 2020 annual meeting and three members after the meeting, all of whom the board determined were independent for purposes of the Nasdaq listing standards. See “Item 13 — Certain Relationships and Related Transactions, and Director Independence” below. The duties and responsibilities of the committee included:

In practice, the committee specifically determined the compensation payable to the NEOs and our other executive officers with input from the chief executive officer and the committee’s independent compensation consultants.

Compensation Consultant

The committee engaged a nationally-recognized independent compensation consulting firm to provide the committee with information supporting compensation decisions with respect to our NEOs, other executive officers and key employees for their compensation in 2020. The committee was advised by Frederic W. Cook & Co. (“FW Cook”) on its management compensation plans and programs. FW Cook provided its report to the committee in mid-December 2019 and provided supplemental advice in connection with the hiring of Mr. Murray and Mr. Haddock in December 2019 and Mr. Bourdon in August 2020. The compensation consultant is engaged directly by the committee, although it periodically interacts with management to gather relevant data, to implement compensation plans and programs and to assist in the preparation of the company’s proxy statement and other public filings. The committee annually reviews the independence status of the compensation consultant under applicable SEC and Nasdaq rules and, for 2020, determined that FW Cook had no conflict of interest in its role as compensation consultant to the committee. The committee has sole authority to determine the compensation for and to terminate the compensation consultant’s services. The committee annually instructs the compensation consultant to perform a market analysis and develop competitive market data of comparable companies for all elements of compensation. The compensation consultant also provides advice to the committee on which companies it may consider comparable for these purposes. Based on its market analysis, the compensation consultant formulates a range of values within major elements of compensation, which the committee considers in making its compensation decisions. The compensation consultant does not determine the amount or form of executive and director compensation; its role is limited to providing data and advice to the committee for its consideration.

Our Peer Group and Other Market Data Sources

As a specialty managed healthcare company operating in multiple business segments, we have few similar peer companies with which we directly compete in the marketplace. However, we compete generally in the market for superior healthcare executive talent and seek to structure our incentives and compensation to attract, reward and retain those individuals. As a result, the committee instructed FW Cook in late 2019 to perform a broad multi-industry market analysis and an analysis of publicly-traded healthcare provider, service and pharmacy benefit management companies, to develop competitive market data to support compensation decisions regarding our NEOs and other executive officers. FW Cook provided a supplemental report to the committee in connection with the hiring of Messrs. Murray and Bourdon. FW Cook received and compiled aggregated data from broad-based market surveys in which we participated or were purchased by us. These market surveys contain compensation data for hundreds of companies operating in the healthcare and various other industry sectors of comparable size. FW Cook provided the committee with a proprietary statistical summary of this information, presented in chart form. This summary information consisted of marketplace consensus of 25^th percentile, median and 75th percentile amounts for major elements of direct compensation (e.g., base salary, total cash compensation and total direct compensation) for executive officer positions which were considered comparable to that of each of the company’s NEOs.

FW Cook also reviewed for comparative purposes the executive compensation reported by the following companies which operate in lines of business in which our company is engaged, including managed care companies, pharmacy benefit management companies and specialized healthcare services companies with annual revenues ranging from 4.7% to 912% of our estimated revenues for 2019, ranking at the 70^th percentile within this peer group. Consensus figures were developed by weighting the peer group values by 33% and the other surveys by 67%.

Mr. Fasola’s actual total direct compensation was reviewed, both with and without adding-in his sign-on equity awards, and was found to be in both cases below the median of the peer group. His base salary was also below the median, as was his total cash compensation.

Magellan CEO Target Compensation Compared to Peer Group

(000s)

Mix of Compensation

The committee annually sets target compensation for each of the NEOs which is allocated among a three-part program which includes base salary and benefits, annual bonuses under our Incentive Compensation Plan (“ICP”) and long-term incentive equity awards. In general, base salary and bonus opportunities are determined by an assessment of the degree of impact the individual has over company performance and competitive compensation for similar positions. Bonuses are funded based on segment profit performance company-wide and by business unit. Long-term incentive equity awards are made by determining a target value representing a percentage of base salary, divided by a per share value yielded by a Monte Carlo simulation, Black-Scholes model or other applicable valuation model appropriate for the type of equity instrument awarded. The committee believes that this three-part program, which is heavily-weighted toward performance-based compensation, and within the performance-based component is heavily-weighted toward long-term equity compensation, incentivizes management to maximize the sustainability of the company’s performance over the long-term and is in the best interests of its stockholders.

The charts below demonstrate that the performance-based elements of our executive compensation program, which consist of ICP awards and equity awards, made up the majority of our NEOs’ compensation in 2020.

Targeted and Actual Mix of Compensation for 2020

Base Salary

The committee determines base salary for each of our NEOs based on several factors, including the following:

The employment agreements we have entered into with each of our NEOs specify an initial amount which is subject to annual review and adjustment. Base salary amounts may also be adjusted when an executive is promoted or assumes additional responsibilities. The following table shows the percent increase and base salary rate for our NEOs effective April 1, 2020 for each of the NEOs other than Mr. Murray, whose base salary was as of December 9, 2019, when he began serving; Mr. Haddock, whose base salary was as of February 3, 2020, when he began serving; and Mr. Bourdon, whose base salary rate was as of September 8, 2020, when he began serving:

2020 Base Salary Rates

In maintaining Mr. Fasola’s base salary at $1,000,000, the committee reviewed competitive market rates, including the base salary paid to the 2020 Peer Group, and determined that $1,000,000 was an appropriate base salary. To determine the 2020 adjustments to base salaries for Messrs. Kamal and Rubin, in early 2020, Mr. Fasola completed an analysis of each executive’s current base salary compared to competitive market rates and each executive’s individual performance, and recommended salary increases to the committee based on his analysis. The committee reviewed Mr. Fasola’s recommendations for base salary increases for 2020 and adjusted the increases in its discretion. Mr. Bourdon’s and Mr. Haddock’s base salaries were set based on competitive market data provided by our compensation consultant also taking into account their background and experience. Mr. Murray’s base salary was set based on a competitive review of similar roles in our industry, as well as considering his experience and the significant business transformation initiatives he is responsible for formulating and implementing.

Annual Bonuses

The NEOs also participate in our ICP, which provides annual incentive cash bonuses and is available to all management-level employees. At the beginning of each year, the committee establishes performance targets and corresponding funding factors for achievement of segment profit, considered on a company-wide basis and at the individual’s specific business unit. The ICP was funded for 2020 with a 100% weighting based on segment profit performance company-wide and within several business units. After the end of the year, the committee reviews the company’s performance in relation to these targets, assesses the recommendations of the chief executive officer, and determines the amount of individual ICP awards for the NEOs for that year. Segment profit is determined based on the following business units: Magellan Health Corporate, Magellan Behavioral and Specialty Health, Magellan Rx Management and Magellan Complete Care. We successfully sold Magellan Complete Care to Molina Healthcare at the end of 2020.

ICP awards are calculated so that segment profit performance has a funding factor that varies from 40% at threshold up to a maximum of 200% of the individual executive’s target award opportunity, subject to further adjustment in the committee’s discretion based on individual performance. If threshold segment profit performance is not attained for the company overall, no awards are paid to any of the NEOs, regardless of which business unit they are measured against.

Target segment profit performance for 2020 was set at $260 to $265 million company-wide, $142.5 million for the Magellan Behavioral and Specialty Health business unit, $90.0 million for the Magellan Rx Management business unit and $67.5 for the Magellan Complete Care business unit, each before adjusting for the ICP target and actual award payouts but after making certain adjustments related to the COVID-19 pandemic’s impact on our business which included increasing targets in some cases. The sum of the three business unit segment profit targets does not equal the company-wide segment profit target due to corporate overhead and liabilities that are not allocated to the business units.

The chart below shows performance and formula payout at threshold, target and maximum company-wide performance levels.

Mr. Bourdon was not eligible for an ICP award in 2020 based on his hire date of September 8, 2020. However, in lieu of his 2020 ICP award, he received a sign-on bonus equal to $500,000, payable in two installments. The first installment of $250,000 was paid on September 18, 2020 and the second installment of $250,000 was paid on December 31, 2020. The committee approved an ICP award for Mr. Rubin based on his service in 2020 and agreeing to remain employed until his replacement was hired and for a period of time afterwards in order to ensure a smooth transition.

We define “segment profit” as profit or loss from operations before stock compensation expense, depreciation and amortization, interest expense, interest and other income, changes in fair value of contingent consideration recorded in relation to acquisitions, gain on sale of assets, special charges or benefits, and income taxes. We use segment profit information for internal and external reporting and control purposes and consider it important in making decisions regarding the allocation of capital and other resources, risk assessment and employee compensation, among other matters. Segment profit information referred to in this proxy statement may be considered a non-GAAP financial measure.

The company’s segment profit disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Original Report differs from the adjusted segment profit amount used for purposes of determining ICP awards because the cost of the ICP awards at target and actual is added back to the original target, which is net of the ICP awards. Further information regarding this measure, including the reasons management considers this information useful to investors, and a reconciliation to the GAAP measures set forth under “Results of Operations,” is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Segment Results” and “— Non-GAAP Measures” in the Original Report, and will be included in our Quarterly Reports on Form 10-Q to be filed with the SEC as required.

The committee has determined that segment profit is an appropriate measure of company and business segment performance for purposes of determining annual bonuses. We use segment profit in our management reporting and decision-making. In addition, we discuss segment profit when reporting our financial results and believe many stockholders and analysts use it as an important measure of overall company performance. Setting annual bonus performance targets based upon segment profit is designed to align incentives for our executives and employees with the interests of our stockholders.

Each individual’s ICP bonus target is determined as a percent of base salary. Set forth below is the range of values which may be awarded under the ICP formula (or in the case of Mr. Bourdon, outside the ICP) to the NEOs and the amount of the actual bonus awards:

2020 Bonus Ranges

Equity Awards

In 2020 we provided our NEOs with equity awards under our 2016 Management Incentive Plan (the “2016 MIP”). The equity awards are designed to act as a long-term incentive vehicle to promote a focus on longer term goals, to build stockholder value and to retain our senior executives. Our equity awards for our NEOs, when added to base salary and annual bonus under the ICP, are targeted at or above the 50th percentile, depending on performance, of total compensation in the marketplace consensus prepared by the committee’s compensation consultant. Our policy is to grant annual equity awards on the third business day of March, shortly after the filing of our annual report on Form 10-K. We may also grant equity awards at other times during the year when we hire new executives or when an executive’s role is expanded. For new hires like Messrs. Murray, Haddock and Bourdon, we grant sign-on equity awards on the first business day of the first month following the start of employment. See “Equity Award Procedures Generally” below.

Consideration of annual equity awards is made as part of the annual review of other compensation components, and is based on both competitive market analyses and individual and company performance assessments. The annual equity awards to Messrs. Murray, Kamal and Rubin and our other executive officers were approved by the committee on the recommendation of the chief executive officer and were subject to adjustment at its discretion.

Mr. Murray began serving as president and chief operating officer on December 9, 2019, shortly after entering into an employment agreement with the company on December 3, 2019. Under the terms of his employment agreement, Mr. Murray was to receive sign-on equity awards consisting of PSUs with a value of $1,500,000, non-qualified stock options with a value of $750,000 and RSUs with a value of $750,000. The number of sign-on PSUs awarded on January 2, 2020 was 14,006, vesting at the end of three years and based on a fair market value determined by using a Monte Carlo simulation of TSR for our stock compared against an index of health care companies; 25,346 non-qualified stock options exercisable at $76.64 per share and vesting over a three-year period, determined by using a Black-Scholes valuation formula; and 9,786 RSUs vesting over a three-year period, determined based on the closing price of our stock on the grant date.

Mr. Haddock began serving as general counsel on February 3, 2020, shortly after entering into an employment agreement with the company. Under the terms of his employment agreement, Mr. Haddock was to receive sign-on equity awards consisting of PSUs with a value of $750,000 and RSUs with a value of $750,000. Mr. Haddock was awarded these sign-on awards on March 2, 2020 which included 10,605 PSUs vesting at the end of three years and based on a fair market value determined by using a Monte Carlo simulation of TSR for our stock compared against an index of health care companies; and 12,710 RSUs vesting over a three-year period, determined based on the closing price of our stock on that date.

Mr. Bourdon began serving as chief financial officer on September 8, 2020, shortly after entering into an employment agreement with the company. Under the terms of his employment agreement, Mr. Bourdon was to receive sign-on equity awards consisting of PSUs with a value of $500,000 and RSUs with a value of $500,000. Mr. Bourdon was awarded these sign-on awards on October 1, 2020 which included 4,362 PSUs vesting at the end of three years and based on a fair market value determined by using a Monte Carlo simulation of TSR for our stock compared against an index of health care companies; and 6,575 RSUs vesting over a three-year period, determined based on the closing price of our stock on the grant date.

Our annual equity awards for 2020 to our NEOs were made on March 4, 2020 and consisted of PSUs and RSUs with a grant value of 50% and 50%, respectively, of the aggregate value of the award to each executive. The annual PSUs granted in 2020 vest 100% after three years from the grant date based on the company’s TSR performance during the three-year period extending from January 1, 2020 to December 31, 2022 compared with the TSR of the companies included in the S&P Health Care Services Industry Index as of January 1, 2020, and the annual RSUs vest ratably over three years. PSUs and RSUs also automatically vest if the employment of our NEOs is terminated by us “without cause” or by the executive for “good reason” in either case following a change in control of the company. See “Compensation of Named Executive Officers on Change in Control and Other Termination of Employment” below.

The committee determines annual equity awards to our NEOs based on the following:

The committee believes that determining an equity award based on a percentage of each executive’s base salary and performance is consistent with best practices and is the most appropriate basis on which to make equity awards, properly size the awards, recognize past performance and create incentives for future performance. The committee also considered the long-term incentive award data available to it in the peer groups and consensus analyses provided by the compensation consultant. The following table shows the base salary rate in effect as of January 1, 2020 (where applicable) and the target value of each of the NEOs’ annual equity awards in 2020 as a percentage of that base salary:

2020 Annual Equity Award Targets

Our equity awards to our NEOs in recent years have emphasized PSUs whose value is tied to our TSR over a three-year performance period as compared to the S&P Health Care Services Industry Index. If TSR performance relative to the index is below median, NEOs will receive fewer shares at the end of the performance period, and if the company’s TSR is below threshold levels, they will not receive any shares. In 2020 we awarded RSUs in addition to the PSUs, instead of the stock options that we have awarded in prior years, because we wanted to emphasize retention of our key executives and align our mix of equity instruments more closely with our competitors.

The following table summarizes the equity awards made to the NEOs during 2020, including sign-on equity awards to Messrs. Murray, Haddock and Bourdon as described above:

2020 Equity Awards

The following table shows the range of shares which may be issued upon settlement of the annual and sign-on PSU awards to the NEOs at various relative total shareholder return levels:

(1)            Represents a sign-on award.

(2)            Consists of a sign-on award of 14,006 target shares and an annual award of 18,206 target shares

(3)            Represents a sign-on award.

The total equity award packages to the individuals were valued for purposes of determining the awards at $4,000,024, $1,000,001, $5,625,030, $2,249,499, $1,500,003 and $1,893,713 for Messrs. Fasola, Bourdon, Murray, Kamal, Haddock and Rubin, respectively. The NEOs will only realize the award date target values with respect to the PSUs if the company achieves a TSR during the three-year performance period from January 1, 2020 through December 31, 2022 which ranks at the 50^th percentile among the group of peer companies.

The award values of the PSUs were determined for purposes of determining the size of the award, based on the following assumptions:

The award value of the stock options awarded to Mr. Murray was determined by our compensation consultant for purposes of determining the award based on the following assumptions:

On March 3, 2021 the company awarded to the NEOs then serving the following time-vesting RSUs under the 2016 MIP. The company awarded only RSUs, not PSUs, due to the pending merger with Centene, which based on its terms converts any outstanding unvested PSUs to time-vesting RSUs upon closing of the Merger. For further information on the treatment of the PSUs in the Merger, see the Merger Proxy Statement.

2021 Equity Awards

Retirement Vehicles/Deferred Compensation

We maintain a 401(k) savings plan which permits employees to defer compensation and to which the company makes matching contributions on behalf of the NEOs on the same basis as all other participants. We have never maintained a defined-benefit pension plan. We also operate a Supplemental Accumulation Plan (the “SAP”), a non-qualified deferred compensation plan that is designed to enhance opportunities for retirement savings in the absence of any retirement programs other than our 401(k) plan. The SAP includes a discretionary component funded by us which is determined on an annual basis as a fixed percentage of an executive’s base salary, and a voluntary deferral component under which the participant may make contributions from base or incentive compensation. The discretionary component is offered to a limited group of executive officers who historically have received this contribution, but the committee has not offered it to any newly promoted or newly hired executives since 2013. In 2020, the only NEO to receive a SAP contribution was Mr. Rubin. For a description of the SAP, see “Narrative to the Summary Compensation Table and the Grants of Plan-Based Awards Table — Deferred Compensation Plan” below.

Perquisites

We have historically provided certain perquisites to a small number of our NEOs depending on their level within the company and the provisions of that person’s employment agreement. The perquisite benefits we provide to the NEOs are designed as protection benefits (e.g., supplementing life and disability insurance to ensure three times base salary and 60% of salary coverage, respectively). These perquisites have historically been offered to a limited group of executive officers; however, the committee has not offered them to any newly promoted or newly hired executives since 2013. In 2020, the only NEO to receive the perquisite benefits was Mr. Rubin. For further information on the perquisites provided to each NEO in 2020, see “Summary Compensation Table” below and “All Other Compensation Column.”

Adjustments or Clawbacks of Compensation

Under certain circumstances, we may have the right or the duty to adjust compensation before it is paid to our NEOs or to claw-back compensation after it is paid to our NEOs. Under Section 304 of the Sarbanes-Oxley Act of 2002, if we are required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities laws, our chief executive officer and chief financial officer must reimburse the company for any bonus or other incentive-based or equity-based compensation received by them during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the document embodying that financial reporting requirement and any profits realized by them from the sale of our securities during that 12-month period. We have also adopted a specific compensation recovery policy that covers our executive officers and other designated key employees under which our Management Compensation Committee has the discretion to recover any excess performance-based compensation (including performance-based equity and bonus awards) paid to the covered person, which is based on a material financial restatement. The committee has the right to recover such excess compensation by a variety of means, to the extent allowed by law, including the cancellation or forfeiture of any vested or unvested incentive-based compensation, forfeiture of severance payments due or repayment of any incentive-based compensation previously paid. The committee also has the discretion to forego or reduce the amount of the recovery, including if the person’s conduct did not cause or contribute to the material restatement. Under a provision of the Dodd-Frank Act which appears in Section 10D of the Exchange Act, the SEC and Nasdaq are to promulgate rules which require listed companies to recover incentive-based compensation paid during the previous three years that is based on financial information which the company is required to restate due to a material non-compliance with financial reporting requirements. The SEC and Nasdaq have not yet promulgated these rules.

Under Section 12 of the 2016 MIP and predecessor equity plans, and by the terms of our equity award agreements, we have the right to declare equity awards to be forfeited or to recover any gains realized under any award under those plans for the previous three years, either during the term of a participant’s employment or during the one-year period following his or her termination of employment, if the participant engages in certain types of conduct described in the plans and considered injurious to the company. Section 12 of the 2016 MIP and predecessor equity plans also provide that any clawback or recoupment provision required under the Dodd-Frank Act will apply to awards under that plan.

Equity Award Procedures Generally

Our Policy Regarding Awards of Equity-Based Incentive Arrangements to Executive Officers and Other Employees deals with the terms, timing and pricing of equity awards and the process for the grant and approval of awards. The policy provides that the committee determines the number of shares covered by awards for our NEOs and the terms of those awards, including specified performance goals. It also provides that the committee establishes a pool of options, restricted shares, RSUs and PSUs which the chief executive officer has the power to award to other executive officers and employees generally. The actual number of options, restricted shares, RSUs and PSUs awarded annually to employees other than our NEOs and other senior executives is determined under the policy by our chief executive officer under delegated authority from the committee; awards are then made on the same date as the awards to our NEOs. Officers and certain employees who are hired prior to January 1 are eligible for an annual award which is granted on the third business day in March unless otherwise determined by the committee. Awards of stock options must have an exercise price which is not less than the fair market value of the company’s stock on the date of the award, measured by the closing price on Nasdaq. The purpose of this practice is to communicate and price equity awards to executive officers and employees early in the year, and to encourage them to attain the company’s strategic objectives during the year. In a case where an executive or other eligible employee is newly-hired or promoted or under other special circumstances, the award is made on the first business day of the month following the event giving rise to the award.

The committee met in early February 2020 to tentatively set the percentage of base salary for which equity awards would be made. The 2020 equity awards were then approved on February 24, 2020 and awards were valued and made on March 4, 2020, as required by the company’s equity award policy. The grant date of the awards followed the public announcement on February 28, 2020 of the company’s annual financial results for 2019. The awards to Messrs. Murray, Haddock and Bourdon on January 2, 2020, March 2, 2020 and October 1, 2020, respectively, were made after their hire dates on the dates specified in the company’s equity award policy.

We also grant stock options, RSUs and PSUs in connection with the hiring of certain executives, and in connection with the signing of new or revised employment agreements with certain executives. We may also grant equity awards outside of the yearly cycle to an executive who undertakes substantial additional responsibilities during the year. Under our policy, awards made in connection with new hires, promotions or under other special circumstances, are made effective on the first business day of the month following the relevant event.

In most cases, our equity plans restrict the transferability of awards, permitting only transfers to certain family members and entities held by or established for the benefit of family members.

The company recognizes compensation expense for financial statement reporting purposes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, “Stock Compensation” (“ASC Topic 718”), based on the grant-date value of the awards. The company recognizes substantially all of the compensation cost associated with the awards of stock options, PSUs and RSUs on a straight-line basis over the specified service period, which is generally the three-year vesting term. Awards of PSUs are valued using a Monte Carlo simulation of performance outcomes, and the value is recognized as stock compensation expense on a straight-line basis over the vesting period. Awards of RSUs are valued using the closing price of the company’s common stock on the date of the award. The Black-Scholes grant-date values of option awards are recognized as compensation expense on a straight-line basis over the vesting period. For further information on our accounting methods for equity awards, see Notes 2 and 6 to the consolidated financial statements included in the company’s Original Report.

Equity Ownership Policy

Our board adopted an equity ownership policy which required our executive officers to maintain ownership of a specified minimum value of our stock and other equity-linked securities, in order to ensure that their financial interests remain aligned with those of our stockholders. The policy applied to our chief executive officer, chief financial officer, our other officers who are considered “executive officers” under Section 16(b) of the Exchange Act and certain other officers who report directly to our chief executive officer. Under the policy, our chief executive officer was required to hold equity with a current fair market value equal to at least five times his base salary; our chief financial officer was required to hold equity with a current fair market value equal to at least three times his base salary; and various other executive officers were required to maintain equity with a current fair market value equal to at least two times their base salary. The policy prohibited a covered executive officer from making any sales or other transfers of equity if its requirements were not then met by the executive officer or if any such sale or other transfer would cause the executive officer not to meet those requirements. In October 2020, the committee approved a revised ownership policy which requires our chief executive officer to hold equity with a current fair market value equal to at least six times his base salary and all other officers subject to Section 16(b) of the Exchange Act to hold equity with a current fair market value equal to at least three times his or her base salary. Under the revised policy, until an executive officer has satisfied his or her required minimum ownership level, 50% of the net shares received as a result of the exercise, vesting or payment of any equity awards granted to the executive officer must be retained.

Equity Hedging and Pledging Policies

Our stock trading policy includes a policy which prohibits our directors, officers and employees from transferring to another person all or any part of the economic risk (either positive or negative) of any equity award, either by contract, by substituting securities or any other arrangement which has that effect. The policy also prohibits directors, officers and employees from purchasing equity securities of the company on margin or pledging such equity securities as collateral for a loan.

Compensation of Named Executive Officers upon a Change in Control and Other Termination of Employment

The company has agreed under the terms of the employment agreements and applicable award agreements with its NEOs to provide them with the following payments and other benefits upon termination under the specified scenarios. The company considers these severance and change in control benefits to be an important part of its executive compensation program and consistent with competitive market practices. Providing appropriate severance benefits helps the company to attract and retain highly-qualified executives by mitigating the risks associated with leaving a previous employer, and by providing income continuity following an unexpected termination. Change in control benefits also help to mitigate any executive’s personal concerns and to focus on the company’s and its stockholders’ interests in a change in control situation.

The following table summarizes the severance benefits payable to the NEOs serving as of December 31, 2020 if they are terminated without cause or they terminate their employment for good reason or in the event termination occurs in connection with a change in control. For further information on termination and change of control provisions of the NEOs’ employment agreements, see ''Employment Contracts and Termination of Employment and Change of Control Payments'' below.

Severance Benefits

Review of Risks and Incentives

We seek to implement compensation policies and practices that encourage the careful management of operating and financial risk. We believe that our compensation policies and practices as they relate to our executive officers and employees are currently well-aligned with this risk-management objective. Each year the committee reviews all of the compensation programs that the NEOs and all other employees participate in to determine the level of risk and whether it is appropriate and the controls that are in place for mitigating risk.

In order to manage our risk in compensation decisions and to align the incentives that we provide to our executive officers and employees with the interests of our stockholders, we provide a diversified set of incentives. These are carefully balanced between fixed cash compensation (base salary), short-term variable cash incentives (bonus awards under the ICP) and long-term incentives (awards of PSUs which depend on company TSR performance relative to TSR performance of a set of index companies, restricted stock units and phantom cash unit awards under the 2016 MIP and predecessor equity plans). Our base salary is designed to provide basic financial security to our executive officers and other employees, with the amount set at a level designed to reflect the degree of influence which the recipient has over company performance and to be competitive for the employee’s role as compared to similar roles in organizations that are similar in size and industry as reported in salary surveys.

Awards of short-term bonuses under our ICP are based on a percentage of an executive officer’s or other employee’s base salary, to reflect the level of impact that the individual has over our corporate performance and to provide an incentive appropriate to the individual’s position in the company. Our ICP awards are based on achievement of the segment profit targets set for the company or for particular business segments of our overall business set on an annual basis by the board. See “Annual Bonuses” above. Higher target bonus percentages are assigned to the NEOs who face a higher degree of accountability for the company’s annual performance and to be competitive in order to recruit and retain the level of executive talent we need to be successful. We believe that this individualized approach serves as a factor mitigating the operating and financial risk that we face in awarding short-term cash bonuses. Another factor mitigating the risks of awarding short-term cash bonuses is that our mix of total compensation is weighted heavily toward long-term equity incentives, which motivates our NEOs to build long-term stockholder value.

In making long-term equity awards for 2020, we sought to carefully balance the risks and incentives posed by PSU and RSU awards. With our annual awards, we awarded to our NEOs PSUs with a value equal to 50% of the total equity award and RSUs with a value equal to 50% of the total award. The PSU awards are designed to expose the recipient to the risk that the company’s TSR will underperform relative to a peer group of companies and provide a retention incentive due to the value that is received upon vesting. These awards vest at the end of a three-year period, creating a long-term incentive for the recipient to maintain and increase the company’s stock price during that time. Our PSU awards are earned based on relative TSR performance and are settled after a three-year performance period, mitigating any risk that the settlement will be based on short and potentially unrepresentative performance. See “Equity Awards” above. We used RSUs instead of stock options as in previous years (except in the case of Mr. Murray’s negotiated sign-on option award) in order to align our long-term equity award practices with our peer groups and to provide an increased emphasis on retention over the increasing shortage of executive talent in the healthcare industry. The RSUs vest ratably over a three-year period. The result is that the incentive is long-term in nature and is earned over a period of years, and provides for participation in future value creation as measured by the company’s stock price performance. While our stock price may be subject to periodic short-term fluctuation in response to factors other than long-term company performance, we believe that the terms of our equity awards create incentives to create real, long-term value in our stock, while avoiding risks that are reasonably likely to have a material adverse effect on the company.

Under the terms of the 2016 MIP and other equity plans and our equity award agreements, we have the right to adjust compensation before it is paid or to claw-back compensation after it is paid, if the participant engages in certain types of conduct considered injurious to the company. See “Adjustments or Clawbacks of Compensation” above. In addition, Section 304 of the Sarbanes-Oxley Act affords the company clawback rights against the chief executive officer and chief financial officer if an accounting restatement is necessary due to misconduct. We have also adopted a formal compensation recovery policy which allows our Management Compensation Committee to recover any excess performance-based compensation if we declare a material financial restatement. These clawback rights are designed to mitigate several risks by removing incentives for different types of negative conduct and help assure accountability if the situations to which they apply should arise. Our equity ownership policy, which is described above under “Equity Ownership Policy,” is also designed to mitigate the risks of awarding equity to our NEOs by requiring them to always have personal economic exposure to the company’s stock price performance which is material relative to their base salary.

Consideration of Stockholder Votes on Executive Compensation

At our 2020 annual meeting, we held an advisory vote on the compensation of our NEOs. Our stockholders voted to approve our executive compensation, with 93.1% of all of the shares that voted on the matter (excluding abstentions and broker non-votes) voting in favor. Based on the large majority vote in favor of our NEO compensation at our 2020 annual meeting, we believe that our NEO compensation is aligned with our financial performance.

At the 2020 annual meeting we also held an advisory vote on how often we should hold our advisory vote on the compensation of our NEOs. At that meeting, our stockholders voted by a large majority for an annual vote. Based on these voting results, we determined to hold our advisory vote on executive compensation on an annual basis.

Loans to Executive Officers and Board Members

The committee has determined not to provide loans of any sort, including but not limited to relocation loans and loans to pay the exercise price of stock options, to our NEOs or members of the board of directors. No such loans are currently outstanding.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code (the “IRC”) generally limits the deductibility of compensation paid each year to a publicly-held company’s chief executive officer, chief financial officer and to its three most highly paid senior executive officers to $1 million per person. Prior to the adoption of the Tax Cuts and Jobs Act in December 2017, compensation in excess of the $1 million limitation was excluded from this limit if it was based on, among other things, pre-established performance criteria. The Tax Cuts and Jobs Act eliminated this performance-based exclusion going-forward.

While in previous years the committee attempted to structure our compensation programs to maximize the deductibility of compensation under Section 162(m), this is no longer possible. As a result, a large portion of our executive compensation in excess of $1 million was not deductible in 2020.

REPORT OF MANAGEMENT COMPENSATION COMMITTEE

The Management Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on that review and discussion, has recommended to the board that the Compensation Discussion and Analysis be included in this Form 10-K/A.

SUMMARY COMPENSATION TABLE FOR 2020, 2019 AND 2018

The following table sets forth, for the three years ended December 31, 2020, 2019 and 2018, the compensation paid by the company to our principal executive officer, principal financial officer and the three next most highly compensated executive officers serving at December 31, 2020 and our former chief financial officer, who was not serving as an executive officer at December 31, 2020 (collectively, the “Named Executive Officers” or “NEOs”):

Base Salary Column

The figures shown in the Base Salary column above represent amounts actually paid to the NEOs during the fiscal year. New pay rates for continuing employees are typically effective as of April 1 of each year; however, in the case of recently-hired executive officers like Messrs. Murray, Bourdon and Haddock, base salary may not be raised on that date. Base salary figures for 2020 for Messrs. Bourdon and Haddock and for 2019 for Mr. Murray represent partial-year salary received after their start dates on 9/8/20, 2/3/20 and 12/9/19, respectively.

Stock Awards Column

The figures shown in the Stock Awards column above represent the aggregate grant date fair values for financial reporting purposes of PSUs and RSUs awarded in 2020, 2019, and 2018, computed in accordance with ASC Topic 718, without any discount attributable to estimated forfeitures. The PSU awards made in 2020 represent annual awards to Messrs. Fasola, Murray, Kamal and Rubin made on 3/4/20 and sign-on awards to Messrs. Murray, Haddock and Bourdon made on 1/2/20, 3/2/20 and 10/1/20, respectively. The PSUs were valued for financial reporting purposes using a Monte Carlo simulation at the following values using the following assumptions:

For further information regarding the determination of the fair value of the PSUs, see Note 6 to our financial statements included in the Original Report.

The RSUs represent annual awards to Messrs. Fasola, Murray, Kamal and Rubin made on 3/4/20 and sign-on awards made in 2020 to Messrs. Murray, Haddock and Bourdon on 1/2/20, 3/2/20 and 10/1/20, respectively. The annual awards were valued for financial reporting purposes at the closing price of the company’s common stock on 3/4/20, the date of the award, which was $60.07. The sign-on award to Mr. Murray was valued at the closing price on 1/2/20, the date of the award, which was $76.64; the sign-on award to Mr. Haddock was valued at the closing price on 3/2/20, the date of the award, which was $59.01; and the sign-on award to Mr. Bourdon was valued at the closing price on 10/1/20, the date of the award, which was $76.05.

The figures shown in the Stock Awards column above do not include shares issued upon settlement of previously-disclosed PSU awards but rather the grant date fair values of the awards made in the years in question. The PSU awards that were made on 3/3/17 were settled and shares were issued on 3/3/20 at 64% of the target numbers of shares awarded after vesting on 3/3/20, see “Option Exercises and Stock Vested for 2020―Value Realized on Vesting of Stock Awards.” The PSU awards that were made on 3/5/18 did not achieve the threshold performance level based on the company’s TSR during the period 1/1/18 to 12/31/20, so no shares were issued upon settlement of those awards on 3/5/21. The awards which were settled on these dates are listed at their target values in the “Outstanding Equity Awards at December 31, 2020” table below.

Option Awards Column

The amounts shown in the Option Awards column above represent the grant date fair values of the options awarded to certain of the NEOs in 2020, 2019 and 2018, computed in accordance with ASC Topic 718. The values and assumptions used to determine the compensation expense of the awards for financial reporting purposes differ from the values and assumptions used by the Management Compensation Committee to determine the size of the awards. The option award to Mr. Murray on 1/2/20 represents a sign-on award which was valued for financial reporting purposes based on the following assumptions:

For further information regarding the determination of the fair value of the options, see Note 6 to our financial statements included in the Original Report.

Non-Equity Incentive Plan Compensation Column

The amounts shown in the Non-Equity Incentive Plan Compensation column above for the NEOs represent performance-based cash compensation amounts actually awarded under the ICP for service during the indicated year but paid in the following year. See “Compensation Discussion and Analysis — Compensation Program Components and Rationale for our Named Executive Officers — Annual Bonuses” above for a discussion of the targets, formulas and criteria for the ICP awards, including the discretion of the Management Compensation Committee to adjust formula awards.

All Other Compensation Column

Mr. Bourdon’s amount represents a negotiated sign-on cash bonus award of $500,000 which was made in two installments on 9/18/20 and 12/30/20. Mr. Haddock’s amount includes a $525,000 performance bonus outside of the ICP relating to the successful divestiture of Magellan Complete Care as of 12/31/20. The other amounts set forth in the All Other Compensation column above include:

Supplemental LTD amounts are supplemental long-term disability insurance coverage provided to certain executives. Tax gross-up payment amounts are described below under “Narrative to the Summary Compensation Table and the Grants of Plan-Based Awards Table — Perquisites.”

GRANTS OF PLAN-BASED AWARDS FOR 2020

The following table sets forth, for the year ended December 31, 2020, information regarding grants of non-equity incentive plan awards and all other stock and option awards to the NEOs.

Estimated Future Payouts Under Non-Equity Incentive Plan Awards Columns

The values in these columns above represent possible formula cash awards under the ICP. For a discussion of the operation of the ICP, see “Compensation Discussion and Analysis — Annual Bonuses” above. The threshold award represents 40% of the applicable target formula award while the maximum award represents 200% of the applicable target formula award, which is a specified percentage of the NEO’s base salary. The committee retains discretion to award a higher amount than under the formula portion of the ICP if it considers warranted. The figures do not include discretionary bonuses which were paid to the NEOs for 2020 under the terms of the ICP for individual performance during 2020, nor a discretionary bonus paid to Mr.Haddock outside of the ICP for his work in connection with the divestiture of Magellan Complete Care. Mr. Bourdon was not eligible for a 2020 ICP award under the terms of his employment agreement; however, he did receive a sign-on bonus in the amount of $500,000 and a discretionary bonus as described above. Mr. Haddock’s ICP target award is a pro-rated award based on his date of hire. If it were not pro-rated, his target would be $341,250, threshold would be $136,500 and maximum formula award would be $682,500.

Estimated Future Payouts Under Equity Incentive Plan Awards Columns

The values in these columns above represent pro forma settlement of PSUs which were awarded during 2020 at threshold, target and maximum share award levels. The actual number of shares to be settled on those awards depends on the Company’s TSR for the three-year performance period beginning in the year of the award relative to the S&P Health Services Index, as described under “Compensation Discussion and Analysis — Equity Awards” above. The grant date fair values of PSUs shown in this column represent the amounts used by the company for financial reporting purposes, calculated in accordance with ASC Topic 718. The grant date fair values of the PSU awards for purposes of determining the size of the awards and the assumptions used in calculating those values are described above under “Compensation Discussion and Analysis — Equity Awards.”

All Other Stock Awards Column

The share amounts in this column represent time-vesting RSUs which were awarded during 2020. For further information on these awards, see “Compensation Discussion and Analyses—Equity Awards” above.

All Other Option Awards Column

The share amount in this column represents a sign-on option award to Mr. Murray which was made in 2020.

Grant Date Fair Value of Stock and Option Awards Column

The grant date fair values of the annual PSU awards to Messrs. Fasola, Murray, Kamal and Rubin and the sign-on PSU awards to Messrs. Bourdon, Murray and Haddock for purposes of determining the size of the awards was based on a Monte Carlo simulation using target numbers of PSUs. The grant date fair values of the annual RSU awards to Messrs. Fasola, Murray, Kamal and Rubin for purposes of determining the size of the awards was based on the closing price of the company’s stock on the date of the award. The grant date fair values of the sign-on RSU awards to Messrs. Bourdon, Murray and Haddock for purposes of determining the size of the awards was based on the closing price of the company’s stock on the dates of the awards, as prescribed by the company’s equity award policy.

The grant date fair value of the sign-on option award to Mr. Murray represents the amount used by the company for financial reporting purposes, calculated in accordance with ASC Topic 718, as set forth in the “Summary Compensation Table” above. The grant date fair value of the option award for purposes of determining the size of the award and the assumptions used in calculating that value are described under “Compensation Discussion and Analysis — Equity Awards” above.

NARRATIVE TO THE SUMMARY COMPENSATION TABLE AND THE GRANTS OF PLAN-BASED AWARDS TABLE

Base Salary. The base salary and the other terms of our employment agreements with our NEOs are set forth under “Compensation Discussion and Analyses―Compensation of Named Executive Officers upon a Change of Control and Other Terminations of Employment” above, and under “Employment Contracts and Termination of Employment and Change of Control Payments” below.

Annual Incentive Plan. In 2020, the executive officers other than Mr. Bourdon were eligible to participate in the company’s ICP, which was designed to provide bonus awards to officers and other employees based on the achievement of company and business segment goals tied to segment profit performance company-wide and for our business units. In 2020, the target formula bonus award levels for the executive officers ranged from 65% to 100% of their base salary, generally as specified in their employment agreements. For 2020, Messrs. Fasola, Murray, Kamal, Haddock and Rubin were entitled to an annual target formula bonus opportunity of 100%, 85%, 80%, 65% and 85%, respectively. In 2020 Mr. Bourdon received a negotiated sign-on cash bonus of $500,000 in lieu of an ICP bonus for 2020. Based on performance in relation to applicable targets, the amount of formula bonus can range from 0% to 200% of this target percentage, depending on company performance, and this formula result can then be adjusted by the committee for the individual performance for our executive officers and all other employees who participate in the ICP. Formula bonus pool funding and awards were based on the company or a particular business unit meeting or exceeding its segment profit goals, as described in “Compensation Discussion and Analysis — Annual Bonuses” above.

The following table summarizes the total bonus and base salary payments to each of the NEOs and shows the percentage that those cash payments represent of the NEOs’ total compensation for 2020.

2020 Bonus and Base Salary Payments

2016 Management Incentive Plan. The stockholders originally approved the 2016 MIP at the annual meeting of stockholders held on May 18, 2016. The stockholders also approved an amendment which increased the number of shares available for awards under the plan to 4,000,000 on May 18, 2016. The 2016 MIP is administered by the Management Compensation Committee of the board and allows several types of long-term incentives including stock options, stock appreciation rights, restricted stock awards, RSUs, PSUs and performance-based cash awards. The plan authorizes awards covering a total of up to 4,000,000 shares of common stock, plus the amount of future forfeitures and expirations under the 2011 Management Incentive Plan, the 2008 Management Incentive Plan, the 2006 Management Incentive Plan, the 2003 Management Incentive Plan and the 2006 Directors’ Equity Compensation Plan. The 2016 MIP also permits grants of equity to non-employee directors.

On March 4, 2020, the company awarded to Messrs. Fasola, Murray, Kamal and Rubin RSUs under the 2016 MIP for 33,295, 21,850, 18,724 and 15,763 shares, respectively. The RSUs vest in three equal installments on March 4, 2021, 2022 and 2023 if the executive remains in the company’s service on those dates. On the same date, the company awarded to Messrs. Fasola, Murray, Kamal and Rubin PSUs for 27,743, 18,206, 15,602 and 13,134 target shares, respectively. The PSUs entitle the grantee to receive a number of shares of the company’s common stock determined based on the company’s total shareholder return during a three-year performance period ending on December 31, 2022 and vesting on March 4, 2023, the settlement date, provided that the executive remains in the company’s service on that date.

In connection with his hiring, the company awarded several sign-on equity awards to Mr. Murray on January 2, 2020. The awards included an RSU award for 9,786 shares vesting in three equal installments on January 2, 2021, 2022 and 2023; a PSU award for 14,006 target shares, with Mr. Murray to receive a number of shares determined over a three-year performance period ending on December 31, 2022 and vesting on January 10, 2023, provided he remains in the company's service on that date; and a non-qualified stock option for 25,346 shares, exercisable at $76.64 and vesting in one third increments on January 2, 2021, 2022 and 2023.

In connection with his hiring, the company on March 2, 2020 awarded to Mr. Haddock an RSU award for 12,710 shares vesting in three equal installments on March 2, 2021, 2022 and 2023, and a PSU award for 10,605 target shares, with Mr. Haddock to receive a number of shares determined based on a three-year performance period ending on December 31, 2022 and vesting on March 2, 2023, provided he remains in the company’s service on that date.

In connection with his hiring, the company on October 1, 2020 awarded to Mr. Bourdon an RSU award for 6,575 shares vesting in three equal installments on October 1, 2021, 2022 and 2023; and a PSU award for 4,362 target shares, with Mr. Bourdon to receive a number of shares determined based on a three-year performance period ending on December 31, 2022 and vesting on October 1, 2023, provided he remains in the company’s service on that date.

The grant date values of the option awards and the assumptions used in calculating them, used for purposes of determining the size of the awards, are described under “Compensation Discussion and Analysis — Equity Awards” above.

Perquisites. Generally, the company does not provide any perquisites to its senior executive officers, including Mr. Fasola. The employment agreements with Messrs. Bourdon, Murray, Kamal, Haddock and Rubin entitle them to the benefits of employment as are from time to time provided to salaried employees of the company or adopted for employees at their level of responsibility. Previously, the company provided supplemental life and disability insurance to its executive officers. The company discontinued this practice in 2013. In 2020, Mr. Rubin was awarded these discontinued supplemental insurance and disability benefits, including a gross-up payment to cover the tax cost of receiving these benefits, as he was previously eligible for them, see “Summary Compensation Table – All Other Compensation Column.” For a summary of various provisions in those employment agreements in the event of a termination of employment without cause or for good reason, see “Employment Contracts and Termination of Employment and Change of Control Payments” below. No executives have the right to receive gross-up payments in connection with a change in control or termination of employment with respect to the excise tax under Section 4999 of the IRC, as described in that section below.

Deferred Compensation Plan. The Supplemental Accumulation Plan (the “SAP”) is a deferred compensation plan which is designed to promote the retention of key executives. Annually, the Management Compensation Committee approved a percentage contribution for executive officers, which it discontinued for any newly hired or promoted executive officers in 2013. Executive officers who were previously eligible for the contribution continue to receive it. For 2020, the Company awarded Mr. Rubin a company contribution of 11% of base salary under the SAP. All executive officers may make voluntary deferrals of base and/or incentive compensation to the SAP. Both company and voluntary contributions are paid to a trust sponsored by a third-party administrator and credited with investments in one or more mutual funds selected by the respective executive officer. Returns on each individual’s account balance are based on the performance of his or her selected investment options.

The fixed percentage amount contributed to the trust and any appreciation thereon is paid to the executive officer based on his or her distribution election following termination from the company, provided that the executive officer has complied with covenants not to compete with the company during that time period and the termination was not “for cause.”

The terms of the SAP provide that the amounts deposited in the trust on behalf of executive officers are to be immediately and fully vested upon a change in control of the company (as defined in the SAP plan document).

The company does not maintain any defined benefit pension plans.

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2020

The following table sets forth for the NEOs the number of shares and the value of option and stock awards outstanding as of December 31, 2020.