The bill would allow employees to defer paying tax on stock option gains until they actually sell the stock. Current law says gains from stock options for most non-executives can be taxed when the option is exercised, as well as when the shares are sold.
Introduced last fall by Rep. John A. Boehner (R-Ohio), a substitute amendment by Boehner and Rep. Robert E. Andrews (D-NJ) allowed the Wealth Through the Workplace Act (H.R. 3462) to pass by voice vote.
The substitute amendment:
- increases to 70% from 50% the number of employees that must be covered by the stock option plan, similar to the current requirement for traditional pension plans
- restricts the options to employees of the employer corporation or of its parent or subsidiary corporation, with three exceptions; individuals who are members of the board of directors; an employer’s five most highly compensated employees; and 5% owners
- requires employers to provide “understandable” plan information for employees, along the lines provided in ERISA
- allows employers to exclude employees with less than a year of service with the employer. The original bill had allowed a two-year exclusion
- bars employers from sponsoring stock options pursuant to H.R. 3462 that provide “disproportionate amounts” of options to highly compensated employees
- expands plan eligibility to stocks regulated by the Securities and Exchange Commission but traded through an in-house exchange.
“The super option is designed to encourage more employers to grant stock options to more of their workers and to help workers use their options to build long-term wealth and retirement security once they’ve got them,” said Boehner, chairman of the Education and the Workforce Subcommittee on Employer-Employee Relations.
Rep. Andrews described the legislation as imperfect but important. The bill’s greatest risk is that it could become a tax shelter for very rich individuals, Andrews said.
Critics of the bill, including the AFL-CIO, say it will provide employers with an incentive to terminate pension plans in favor of the new benefit.
– Nevin Adams firstname.lastname@example.org
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