Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Senior Account Analyst

Nolan Financial
(Remote / Bethesda MD)

Nolan Financial logo

Plan Compliance Analyst (Administrator)

RPA
(Remote / Falls Church VA)

RPA logo

Retirement Plan Administrator

Premier Plan Consultants
(Remote / San Diego CA)

Premier Plan Consultants logo

DC Plan Administrator

Farmer & Betts, Inc.
(Remote / Tacoma WA / CO / OR)

Farmer & Betts, Inc. logo

Customer Experience Specialist

Aimpoint Pension
(Remote / Pompano Beach FL)

Aimpoint Pension logo

401(k) Recordkeeping Manager

July Business Services
(Remote / Waco TX)

July Business Services logo

Sr. Benefits Plan Administrator

The Catholic Diocese of Arlington
(Arlington VA)

The Catholic Diocese of Arlington logo

DC Plan Administrator

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Account Representative

Nolan Financial
(Remote / Bethesda MD)

Nolan Financial logo

Retirement Plan Consultant

Cetera Retirement Plan Specialists
(Remote)

Cetera Retirement Plan Specialists logo

Retirement Plan Consultant (RPC)

Qualified Plan Consultants, LLC (QPC)
(Remote)

Qualified Plan Consultants, LLC (QPC) logo

Retirement Plan Consultant

DWC - The 401(k) Experts
(Remote)

DWC - The 401(k) Experts logo

Senior Retirement Plan Administrator

TPS Group
(Remote / Buffalo NY)

TPS Group logo

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Stock Options and Leased Employees

(Posted September 5, 2001)

Question 124: Can a recipient organization provide an Incentive Stock Option (ISO) plan to persons who perform services for the recipient organization but are leased from a staffing firm?

Answer: Let's start by looking at the definition of an ISO in IRC 422(b):

For purposes of this part, the term "incentive stock option" means an option granted to an individual for any reason connected with his employment by a corporation, if granted by the employer corporation or its parent or subsidiary corporation, to purchase stock of any of such corporations, but only if--[conditions deleted]
So, the entity granting the option (and the stock involved in the option) must be the employer of the recipient or a parent or subsidiary of the employer.

This, of course, moves us back to my favorite question (other than, perhaps "How large of a retainer would you like?"): Who's the Employer? If it is the recipient, as it usually is (see Chapter 4 of my book, Who's the Employer?), then there is absolutely no problem with the recipient granting an option to one of its common law employees. If the staffing firm is the true employer (rare), then there is no authority for the recipient to grant an ISO. The provisions of 414(n) do not apply to 422.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2021 BenefitsLink.com, Inc.