December 17, 2004
In this issue:
- Treasury Department Guidance on Nonqualified Deferred Compensation Delayed
- FASB Issues Final Stock Option Expensing Standard
Treasury Department Guidance on Nonqualified Deferred Compensation Delayed
BENEFITS BRIEFING Still Scheduled for December 20 at 3 p.m. ET
U.S. Treasury Department guidance on the recently enacted deferred compensation provisions of the American Jobs Creation Act of 2004, previously expected to be released on December 17, has been temporarily delayed pending final departmental review. The guidance is now likely to be released on December 20.
On December 20, at 3 p.m. Eastern Time, the Council will hold a Benefits Briefing conference call to provide analysis and perspective on the guidance. This call is still proceeding as scheduled; if guidance is not released by that time we will notify you of a cancellation. On the call, we will be joined by guests including Bill Sweetnam, benefits tax counsel for the Treasury Department, and Dan Hogans, attorney-adviser in the Office of Benefits Tax Counsel of the Treasury Department. To RSVP and for call-in information, click here or paste the following link into your Web browser:
A CD recording of the call will be available for purchase for $50.
For more information, contact Lynn Dudley, Council vice president and senior counsel, at (202) 289-6700.
FASB Issues Final Stock Option Expensing Standard
On December 16, the Financial Accounting Standards Board (FASB) released FAS 123(R), Share-Based Payment, the new standard for expensing stock options. FAS 123(R), a revision of the original FAS 123 standard, generally requires companies to expense all stock options granted, modified, repurchased or cancelled after June 15, 2005. (Small businesses and non-public entities have until December 15, 2005.) Along with the statement, FASB released a supplemental collection of Frequently Asked Questions.
The standard covers a wide range of share-based compensation arrangements including stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee stock purchase plans (ESPPs). However, employers sponsoring ESPPs that meet certain requirements including limiting any discount to 5 percent or less are not required to recognize an expense for stock purchased through the ESPP.
In a December 15 news release, the Securities and Exchange Commission encouraged early adoption of this standard and indicated its intention to provide guidance.
A number of bills addressing this issue were left pending in the 2004 Congress, such as the Stock Option Accounting Reform Act (H. R. 3574), which would require expensing for the top five executives of a company but not for stock options provided to other employees. The legislation would effectively block FASB's proposal until a study of the economic impact of expensing is conducted. H.R. 3574 passed the House of Representatives on July 21 but faced considerable opposition in the Senate, particularly from Richard Shelby (R-AL), chairman of the Senate Banking, Housing and Urban Affairs Committee, which has Senate jurisdiction on this issue.
For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.