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Prepared by:
Quality Reporting Service Center
Railroad Retirement Board
844 North Rush Street
Chicago, Illinois 60611-2092
| Phone: |
(312) 751-4992 |
| Fax: |
(312) 751-7190 |
| E-mail: |
QRSC@rrb.gov |
Purpose The purpose of this letter is to advise employers of new
instructions governing reporting statutory stock options as creditable
compensation.
Prior Law Under previous law any qualified employee statutory stock
option plan purchased by an employee was not considered creditable compensation
under the Railroad Retirement Act (RRA) or Railroad Unemployment Insurance Act (RUIA);
nor was it considered taxable compensation under the Railroad Retirement Tax Act
(RRTA).
However, the difference between the option price and the fair market value of
the stock (commonly referred to as the "spread") at the time of exercise was
considered creditable compensation under the RRA & RUIA and taxable compensation
under the RRTA.
New Law Under Public Law (P.L.) 108-357, effective with tax year 2002,
the exercise of a statutory stock option does not yield taxable compensation
under the RRTA. As a result, the Railroad Retirement Board has determined that
the exercise of a statutory stock option does not yield creditable compensation
under the RRA or RUIA.
Questions
If you have questions concerning creditable compensation under the RRA or
RUIA, please contact a Compensation Reporting Specialist by e-mail at QRSC@RRB.GOV
or by telephone at (312)751-4992. If you have questions about taxable
compensation, please contact the Internal Revenue Service, as they administer
the RRTA.
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We recommend using the latest version.
