The NASPP Blog

As I write this week’s blog, I was hoping to have something “final” to say about the status of the payroll tax cut and its future. It would be really nice to put this topic behind us. Well, the answer’s not final yet, but there is news this week. Emerging Wednesday was word on the street that leaders of Congress have finally reached an agreement that will extend the payroll tax cut through the end of the year.

Cut to the Chase

I’ve blogged about this extensively, so I won’t recap all of the variables here. In short, the tax cut that resulted in the current social security tax withholding rate of 4.2% is anticipated to be extended through the end of the year. I don’t know about you, but I am exhaling a big sigh of relief for all of the issuers and their vendor partners. I didn’t envy the possibility of having to figure out how to deal with two different withholding rates in a calendar year. If this likely resolution stands, then the issue of multiple social security withholding rates will cease to exist, at least for 2012.

If and when the payroll tax cut extension transpires, we’ll post more info here and on our Facebook page. Now is a great time to “Like” us on Facebook if you haven’t already.

Some Interesting Feedback

On a separate note, last week I blogged about the artist, contracted by Facebook to paint their corporate offices, who stands to make a reported half billion dollars in stock option gains when Facebook goes public. You may recall that I threw a poll in for fun, wanting to know if you felt the potential stock option gains were justified. I expected some strong responses, and an overwhelming response I got! 93% of respondents either loved the concept of his risk/reward outcome or felt it was a simply an outcome that was rightly possible from the start. Only 7% thought it was a ridiculous scenario. I hadn’t planned to blog about the results of the poll, but the fact that the results were so much in support of the big potential payout got me thinking. What I like about the poll feedback is that it reminds me that we are professionals who “get” stock compensation. Stock compensation, particularly stock options, is a risk/reward proposition from the get-go. You’re granted stock options at a strike price, and then there are no guarantees. We’ve seen years of underwater stock options – so we’re well aware that stock prices can fall and options can be worthless. The flip side is that the stock price can appreciate and the stock options can have value. As stock plan professionals, I know we’re always rooting for the appreciation scenario; that’s the whole idea behind granting stock options. And, let’s admit it, it’s much more fun to administer a stock plan with options that are “in the money” than those that have no hope of ever having value. Somehow the energy that comes from people “cashing in” and reaping rewards for their hard work is much different than the empty feelings associated with worthless compensation.

The Facebook artist must have had some idea (in fact, in several media reports he was quoted saying that back when he took the stock options, he thought that Facebook was “ridiculous and pointless”) that accepting stock options in lieu of cash compensation was a risk/reward proposition. He took the risk, when the company was young and uncertain. I was excited that 93% of you felt that this was the ultimate appreciation scenario playing out in front of our eyes. Isn’t that what we wish could happen each and every time we granted employee stock options? Yes, that can’t be reality, but it’s sure fun to see some big payoffs for those who put their money on stock compensation payoffs – especially when cash was an alternate available choice.

Let’s see what next week brings us.

– Jennifer