Relative to the earlier W2 Box 11 discussion, I found the following excerpt from an article by Lou Vlahos very interesting. I think this is the reason why my Box 11 is zero and therefore NSO proceeds can count as earned income towards an IRA (combined with the fact I didn't hold the shares). I assume this would not be the case if the employee (retiree in my case) held the shares for 1 year and 1 day after exercising resulting in it all being treated as long term capitol gain.
"The Section 409 Regulations provide that an NSO to purchase a fixed number of shares of employer stock is not treated as a nonqualified deferred compensation plan subject to section 409A (and therefore is exempt from section 409A) if the exercise price is not less than the fair market value (“FMV”) of the underlying stock on the grant date of the option and certain other requirements are met.
Conversely, if the exercise price is less than such FMV, the option is treated as a nonqualified deferred compensation plan subject to section 409A that must meet the time and form of payment requirements under the section 409A regulations."
