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March 01, 2001
Congress Urged to Help Expansion of Stock Plans
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"Many Americans are building future financial security through employer-sponsored stock option and stock purchase programs, which allow employees to share in the success their companies enjoy," said American Benefits Council President James A. Klein. "We urge Congress to act on the proposals we have made to encourage the expansion of employee stock ownership."
The council has released a report that urges Congress to:
- enact legislation exempting employee stock purchase plan (ESPP) and incentive stock option (ISO) transactions from employment and income tax withholding obligations;
- pass legislation that exempts income resulting from the exercise of stock options under ISO plans from the Alternative Minimum Tax (AMT);
- avoid mandates requiring part-time and short-service workers to be covered under stock plans and continue to allow employers needed flexibility in administering their stock benefit programs;
- allow an employer tax deduction when employees choose to leave dividends paid on employer stock in unleveraged employee stock ownership plans (ESOPs) for reinvestment, it encourages the accumulation of retirement savings through the employee's ownership interest in the employer;
- enact new tax incentives for employer-sponsored equity plans while not displacing existing arrangements;
- investigate and address the special problems involved in offering equity ownership to U.S. employees working in other countries (including the differing tax treatment of stock offerings, dividend distributions, and sales of shares across different countries); and,
- address the tax rules on employer stock in regard to lump-sum distributions and net unrealized appreciation with an eye towards making these rules simpler and more consistent.
"Between seven and 10 million employees participate in employer-sponsored stock programs," said Klein. "And 39 percent of major companies now have plans covering over half of their workforce, up from 17 percent in 1993. Meanwhile, a 2000 survey of 345 companies that grant stock options found that 47 percent do so to rank-and-file employees."
The complete report, "Taking Stock in Employee Benefits," is available on the council's Web site (PDF).