[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3462 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 3462

To amend title I of the Employee Retirement Income Security Act of 1974 
to establish certain requirements enforceable under such title relating 
  to certain stock purchase arrangements maintained by employers for 
 employees, and to amend the Internal Revenue Code of 1986 to provide 
 favorable treatment for such arrangements meeting such requirements, 
 subject to certain restrictions on disposition of transferred shares.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 18, 1999

 Mr. Boehner (for himself, Mr. Oxley, and Mr. Portman) introduced the 
 following bill; which was referred to the Committee on Education and 
the Workforce, and in addition to the Committee on Ways and Means, for 
a period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
to establish certain requirements enforceable under such title relating 
  to certain stock purchase arrangements maintained by employers for 
 employees, and to amend the Internal Revenue Code of 1986 to provide 
 favorable treatment for such arrangements meeting such requirements, 
 subject to certain restrictions on disposition of transferred shares.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Wealth Through the Workplace Act of 
1999''.

SEC. 2. STOCK PURCHASE ARRANGEMENTS.

    (a) In General.--Section 3 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002) is amended by adding at the end 
the following new paragraph:
    ``(42) The term `stock purchase arrangement', as used in paragraph 
(1) and sections 105(e) and 414, means any arrangement which--
            ``(A) is maintained by an employer corporation for the 
        purpose of transferring, directly or indirectly, to the 
        employees covered under the arrangement shares of stock 
        pursuant to the exercise by the employee of an option granted 
        under the terms of the arrangement to the employee, and
            ``(B) is expressly designated in the terms governing the 
        arrangement as a stock purchase arrangement intended to meet 
        the requirements of section 414(b).''.
    (b) Treatment as Employee Welfare Benefit Plan.--Paragraph (1) of 
section 3 of such Act (29 U.S.C. 1002(1)) is amended by adding at the 
end the following new sentence: ``Solely for purposes of sections 
105(e) and 414 and part 5 (as applicable with respect to such 
sections), a stock purchase arrangement shall be deemed to be an 
employee welfare benefit plan and any employee covered under such an 
arrangement shall be deemed to be a participant thereunder.''.

SEC. 3. STOCK PURCHASE ARRANGEMENTS.

    (a) In General.--Part 4 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended--
            (1) by redesignating section 414 (29 U.S.C. 1114) as 
        section 415; and
            (2) by inserting after section 413 (29 U.S.C. 1113) the 
        following new section:

                     ``stock purchase arrangements

    ``Sec. 414. (a) In General.--A transaction which constitutes an 
option or transfer described in section 3(42) under a stock purchase 
arrangement shall be treated, solely for purposes of paragraph (5) of 
section 502(a) (and part 5 as it relates to such paragraph), as a 
practice in violation of the requirements of this title, unless such 
stock purchase arrangement meets the requirements of subsection (b).
    ``(b) Requirements.--An allowable stock purchase arrangement meets 
the requirements of this subsection if the following requirements are 
met thereunder with respect to options and transfers described in 
section 3(42):
            ``(1) Employment status required in relation to exercise of 
        option.--Under the terms of the arrangement--
                    ``(A) options are to be granted only to employees 
                of the employer corporation or of its parent or 
                subsidiary corporation (including members of the board 
                of directors of any such corporation) to purchase stock 
                in the employer corporation or any other such 
                corporation, and
                    ``(B) no option that has been granted to an 
                employee can be exercised unless, at all times during 
                the period beginning with the date of the granting of 
                the option to the employee and ending on the day 6 
                months before the date of the exercise of such option 
                by the employee, the employee is an employee of the 
                employer corporation, of a parent or subsidiary 
                corporation of the employer corporation, or of a 
                corporation (or a parent or subsidiary corporation of 
                such corporation) issuing or assuming a stock option in 
                a transaction to which subsection (c) applies.
            ``(2) Approval.--Such arrangement is approved by the board 
        of directors of the granting corporation (or, if required by 
        the bylaws of such corporation, by its shareholders), in 
        writing indicating that the arrangement is intended to meet the 
        requirements of this section, within 12 months before or after 
        the date such arrangement is adopted.
            ``(3) Larger shareholders excluded.--Under the terms of the 
        arrangement, no employee can be granted an option if such 
        employee, immediately after the option is granted, owns stock 
        possessing 5 percent or more of the total combined voting power 
        or value of all classes of stock of the employer corporation or 
        of its parent or subsidiary corporation. For purposes of this 
        paragraph, the rules of subsection (d) shall apply in 
        determining the stock ownership of an employee, and stock which 
        the employee may purchase under outstanding options shall be 
        treated as stock owned by the employee.
            ``(4) Participation.--
                    ``(A) General rule.--Such options are granted 
                during each fiscal year of the arrangement to at least 
                50 percent of all individuals who are employees of the 
                employer corporation and, if any employee of a parent 
                or subsidiary corporation of the employer corporation 
                is covered under the arrangement, 50 percent of the 
                individuals who are employees of such parent or 
                subsidiary corporation.
                    ``(B) Exception.--If the arrangement provides for 
                the exclusion of individuals--
                            ``(i) who have been employed less than 2 
                        years,
                            ``(ii) whose customary employment is 20 
                        hours or less per week,
                            ``(iii) whose customary employment is for 
                        not more than 5 months in any calendar year, or
                            ``(iv) who are not United States citizens 
                        or lawful permanent residents of the United 
                        States (as defined in section 7701(b)(6) of the 
                        Internal Revenue Code of 1986),
                then subparagraph (A) shall be applied after first 
                disregarding all such excluded individuals.
            ``(5) Uniform rights and privileges.--All employees granted 
        such options shall have the same rights and privileges, except 
        that the amount of stock which may be purchased by any employee 
        under such option may bear a uniform relationship to the total 
        compensation, or the basic or regular rate of compensation, of 
        such employee, and the arrangement may provide that no employee 
        may purchase more than a maximum amount of stock fixed under 
        the arrangement.
            ``(6) Valuation requirements.--Under the terms of the 
        arrangement, the option price is not less than the lesser of--
                    ``(A) an amount equal to 85 percent of the fair 
                market value of the stock at the time such option is 
                granted, or
                    ``(B) an amount which under the terms of the 
                arrangement may not be less than 85 percent of the fair 
                market value of the stock at the time such option is 
                exercised.
            ``(7) Limited transferability.--Under the terms of the 
        arrangement, such option is not transferable by the employee 
        otherwise than by will or the laws of descent and distribution, 
        and is exercisable, during his lifetime, only by him.
            ``(8) Publicly traded and regulated stock.--The class of 
        shares of stock with respect to which the option is granted is 
        a class of shares of stock which are publicly traded on an 
        exchange regulated by the Securities and Exchange Commission.
            ``(9) Rate of cash compensation must be unaffected.--The 
        grant of any options under the arrangement may not be directly 
        linked with a systematic reduction in the annual rate at which 
        basic or regular cash compensation is paid to employees under 
        the arrangement, as determined under regulations prescribed by 
        the Secretary of the Treasury.
    ``(c) Corporate Reorganizations, Liquidations, Etc.--For purposes 
of this section, the term `issuing or assuming a stock option in a 
transaction to which subsection (c) applies' means a substitution of a 
new option for the old option, or an assumption of the old option, by 
the employer corporation, or by a parent or subsidiary of the employer 
corporation, by reason of a corporate merger, consolidation, 
acquisition of property or stock separation, reorganization, or 
liquidation, if--
            ``(1) the excess of the aggregate fair market value of the 
        shares subject to the option immediately after the substitution 
        or assumption over the aggregate option priced of such shares 
        is not more than the excess of the aggregate fair market value 
        of all shares subject to the option immediately before such 
        substitution or assumption over the aggregate option price of 
        such shares, and
            ``(2) the new option or the assumption of the old option 
        does not give the employee additional benefits which he did not 
        have under the old option.
For purposes of this subsection, the parent-subsidiary relationship 
shall be determined at the time of any such transaction under this 
subsection.
    ``(d) Attribution of Stock Ownership.--For purposes of this 
section, in applying the percentage limitations of subsection (b)(3)--
            ``(1) the employee with respect to whom such limitation is 
        being determined shall be considered as owning the stock owned, 
        directly or indirectly, by or for his brothers and sisters 
        (whether by the whole or half blood), spouse, ancestors, and 
        lineal descendants, and
            ``(2) stock owned, directly or indirectly, by or for a 
        corporation, partnership, estate, or trust, shall be considered 
        as being owned proportionately by or for its shareholders, 
        partners, or beneficiaries.
    ``(e) Definitions and Additional Rules.--
            ``(1) Parent corporation.--For purposes of this section, 
        the term `parent corporation' means any corporation (other than 
        the employer corporation) in an unbroken chain of corporations 
        ending with the employer corporation if, at the time of the 
        granting of the option, each of the corporations other than the 
        employer corporation owns stock possessing 50 percent or more 
        of the total combined voting power of all classes of stock in 
        one of the other corporations in such chain.
            ``(2) Subsidiary corporation.--For purposes of this 
        section, the term `subsidiary corporation' means any 
        corporation (other than the employer corporation) in an 
        unbroken chain of corporations beginning with the employer 
        corporation if, at the time of the granting of the option, each 
        of the corporations other than the last corporation in the 
        unbroken chain owns stock possessing 50 percent or more of the 
        total combined voting power of all classes of stock in one of 
        the other corporations in such chain.
            ``(3) Special rule for applying paragraphs (1) and (2).--In 
        applying paragraphs (1) and (2) for purposes of subsection 
        (b)(1)(B), there shall be substituted for the term `employer 
        corporation' wherever it appears in paragraphs (1) and (2) the 
        term `grantor corporation' or the term `corporation issuing or 
        assuming a stock option in a transaction to which subsection 
        (c) applies' as the case may be.
    ``(f) Modification, Extension, or Renewal of Option.--
            ``(1) In general.--For purposes of this section, if the 
        terms of any option to purchase stock are modified, extended, 
or renewed, such modification, extension, or renewal shall be 
considered as the granting of a new option.
            ``(2) Special rules.--In the case of the transfer of stock 
        pursuant to the exercise of an option which has been so 
        modified, extended, or renewed, the fair market value of such 
        stock at the time of the granting of such option shall be 
        considered as whichever of the following is the highest:
                    ``(A) the fair market value of such stock on the 
                date of the original granting of the option,
                    ``(B) the fair market value of such stock on the 
                date of the making of such modification, extension, or 
                renewal, or
                    ``(C) the fair market value of such stock at the 
                time of the making of any intervening modification, 
                extension, or renewal.
            ``(3) Definition of modification.--The term `modification' 
        means any change in the terms of the option which gives the 
        employee additional benefits under the option, but such term 
        shall not include a change in the terms of the option--
                    ``(A) attributable to the issuance or assumption of 
                an option under subsection (c),
                    ``(B) to permit the option to meet the requirements 
                of subsection (b)(7), or
                    ``(C) in the case of an option not immediately 
                exercisable in full, to accelerate the time at which 
                the option may be exercised.
    ``(g) Director or Stockholder Approval.--For purposes of this 
section, if the grant of an option is subject to approval by directors 
or stockholders, the date of grant of the option shall be determined as 
if the option had not been subject to such approval.
    ``(h) Limited Effect on Tax Provisions.--The provisions of this 
section shall not be construed to alter, amend, modify, invalidate, 
impair, or supersede any provision of section 421 or 423 of the 
Internal Revenue Code of 1986, except as provided in section 421(d) of 
such Code.''.
    (b) Conforming Amendment.--The table of contents in section 1 of 
such Act is amended by striking the item relating to section 414 and 
inserting the following new items:

``Sec. 414. Allowable stock purchase arrangements.
``Sec. 415. Effective date.''.

SEC. 4. NOTICE REQUIREMENT.

    (a) In General.--Section 105 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025) is amended by adding at the end 
the following new subsection:
    ``(e) The employer corporation maintaining a stock purchase 
arrangement shall provide at least annually to employees who have been 
granted an option to purchase stock under such arrangement a 
description of disclosure statements regarding the stock that are 
available from the Securities and Exchange Commission and the manner in 
which such disclosure statements may be obtained from such Commission. 
Descriptions under this subsection shall be made in language that is 
easily understood by the typical employee.''.
    (b) Penalty of $100 a Day for Noncompliance.--Section 502(c)(3) of 
such Act (29 U.S.C. 1132(c)(3)) is amended by inserting ``or 105(e)'' 
after ``section 101(e)(2)''.

SEC. 5. TREATMENT UNDER INTERNAL REVENUE CODE OF 1986.

    Section 421 of the Internal Revenue Code of 1986 (relating to 
general rules for certain stock options) is amended by adding at the 
end the following new subsection:
    ``(d) Stock Options Under Section 414(b) of Employee Retirement 
Income Security Act of 1974; Deduction Allowed to Corporation.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, subsection (a) (other than paragraph (2) thereof) 
        shall apply to any share of stock transferred to an individual 
        in a transfer in respect of which the requirements of section 
        414(b) of Employee Retirement Income Security Act of 1974 are 
        met.
            ``(2) Effect of disqualifying disposition.--If--
                    ``(A) any share of stock is transferred to an 
                individual in a transfer in respect of which the 
                requirements of section 414(b) of Employee Retirement 
                Income Security Act of 1974 are met, and
                    ``(B) such individual disposes of such share within 
                2 years from the date of the granting of the option or 
                within 1 year after the transfer of such share to such 
                individual,
        then any increase in the income of such individual for the 
        taxable year in which such exercise occurred attributable to 
        such disposition shall be treated as an increase in income in 
        the taxable year of such individual in which such disposition 
        occurred.
            ``(3) Limitation on employer deduction.--If--
                    ``(A) any share of stock is transferred to an 
                individual in a transfer in respect of which the 
                requirements of section 414(b) of Employee Retirement 
                Income Security Act of 1974 are met, and
                    ``(B) such share is not disposed of in a 
                disposition to which paragraph (2) applies,
        the aggregate deduction allowed under section 162(a) to the 
        corporations referred to in subsection (a)(2) shall not exceed 
        the excess (if any) of the fair market value of such share at 
        the time the option is exercised over the fair market value of 
        such share at the time the option is granted.
            ``(4) Other rules.--References in subsection (c) to section 
        423 shall be treated as references to the corresponding 
        provisions of section 414(b) of Employee Retirement Income 
        Security Act of 1974.''

SEC. 6. EFFECTIVE DATE.

    The amendments made by this Act shall take apply with respect to 
options offered on or after January 1, 2000.
                                 <all>