UnitedHealth Workers to Get Options Payments

June 8, 2007 (PLANSPONSOR.com) - About 900 employees of UnitedHealth Group are expected to receive a cash payment from the company to make up for stock options they received in a 1998 plan now with an exercise price per share below fair market value.

A Reuters news report said the payments are an effort to relieve a tax burden on those inadvertently caught up in the options scandal that led to the departure of the chief executive. Directors or executive officers won’t be eligible for the program, according to the offer as described in a regulatory filing on Friday.

If a stock option is granted below fair market value, it is considered a discounted option for tax purposes and subject to a hefty excise tax in addition to income tax.

The Reuters report said it took a $5-million charge in the first quarter to account for the cost of the tender offer.

Under the tender offer, employees may elect to amend eligible options for an equivalent number of shares with an exercise price equal to the fair market value and for each amended eligible option receive a cash payment equal to the difference between the amended exercise price and the original exercise price, according to the news report.

Long-time CEO William McGuire left the company late last year after United’s independent counsel found evidence of stock options that were incorrectly dated to take advantage of share-price increases (See   UnitedHealth’s McGuire To Depart over Stock Options Scandal ).