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Aon Employees Face Tax Hit in HQ Move to London

Aon spokesman David Prosperi declined to comment when asked whether the company would ease holding requirements on senior executives who must maintain certain percentages of Aon stock.

January 24, 2012

Aon Corp. laid out some bad news for its U.S. employees who hold company stock: They may owe taxes after the corporate headquarters moves to London.

Employees who hold stock outside a retirement plan will be subject to capital gains taxes, the Chicago-based company said in a memo to employees that was filed with the Securities and Exchange Commission. About 34,000 of Aon's roughly 59,000 employees are in the U.S.

"The transaction is not a tax-exempt exchange, and U.S. colleagues that own shares could recognize a capital gain . . . in connection with this event," the company said in its note, sent Monday.

It also gave employees of Lincolnshire-based corporate consultant Hewitt Associates Inc., who became Aon workers after the insurance giant bought Hewitt in late 2010, a solid idea of how much they will owe the taxman on their converted Hewitt shares.

Their basis in Hewitt stock that was converted to Aon's will be $39.235 per share. With Aon shares trading at about $47, that means they're facing at least a 15 percent tax on about $8 a share — a hit of about $1.20 a share.

In general, Aon said, employees holding shares outright will pay taxes on the difference between the value of the stock when the exchange takes place and the value of the stock when they acquired it. These include restricted stock awards that have vested, exercised stock options, stock acquired through the employee stock purchase plan and performance-plan shares that have vested.

Taxes in general won't apply to shares held in employees' 401(k) plans, unvested options and restricted stock awards, vested options not yet exercised and shares acquired via the current employee stock purchase plan, which began Jan. 1 and closes June 30, the company said.

Aon said it has hired PricewaterhouseCoopers to answer employees' questions. But, the company said, "If you have a personal tax adviser, we recommend you speak with him or her about this topic."

Aon spokesman David Prosperi declined to comment when asked whether the company would ease holding requirements on senior executives who must maintain certain percentages of Aon stock.

Aon surprised the world when it announced Jan. 13 that it planned to move its headquarters from its namesake tower in downtown Chicago to London. One of the reasons its executives cited for the change of address was lower corporate taxes in the United Kingdom.

Filed by Steve Daniels of Crain's Chicago Business, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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