Establishing FMV for Discounted Option Analysis Under 409A

[401 Chaos]

I would appreciate others' thoughts on whether an exercise price for an option that is not established until some future date will be subject to 409A if the terms do not clearly prohibit the future exercise price from being below FMV on the date of grant. For example, if an exercise price is to be set in the future in a manner that makes it very very very very very very unlikely (but not technically impossible) that the exercise price could be below FMV at the date of grant, is such an option considered a "discounted option" subject to 409A out of the gate? Is there any ability to withhold judment on the 409A aspect until actual exercise in order to determine if the option really did operate as a discounted option.

I note that the preamble to the proposed 409A regulations provide as follows:

"Thus, an option with an exercise price that is or may be below the fair market value of the underlying stock at the date of grant (a discounted option) is subject to the requirements of section 409A."

Based on that language, it seems any option where the exercise price is not set at grant and could potentially end up below FMV at the date of grant would have to be considered a discounted option when granted no matter how highly unlikely it is that the exercise price would actually end up below FMV on the date of grant.