ANOTHER OPTION – House Committee Passes "Super" Option Bill

June 21, 2000 ( - A Committee of the House of Representatives has approved a bill intended to expand the availability of stock options to all employees, following the acceptance of a substitute amendment. The bill would also make it easier for employees to take advantage of those "super" stock options.

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