1 begin prior to January 11, 1973. Where such a decision and order requires payments, awards, or grants are to be charged as wages and salaries, and payments, awards, or grants are made after January 10, 1973, such payments, ds, or grants are made after January 10, 1973, such payments, awards, or s, together with any other wage and salary increases subject to voluntary ols, shall be subject to the general wage and salary standard set forth in .13, unless such payments, awards, or grants are made during a control covered by a Pay Board or Council decision and order which limits wage salary increases paid in an appropriate employee unit which includes plan, ice, or program participants. In such latter cases, the payments, awards, or ts which are to be charged as wage and salary increases may be paid only e extent consistent with such other decision and order, as provided in § 152.1 2). › Pay adjustments subject to mandatory controls.-Where a decision and relating to executive and variable compensation affecting employees in the health services, or construction industry, requires that payments, awards, ants are to be charged as wages and salaries, then such payments, awards, ants made after January 10, 1973, together with any other wage and salary ases, shall be subject to the rules for pay adjustments in the applicable stry, as set forth in this part.

) Executive control groups. A decision and order of the Pay Board or Counssued prior to August 29, 1973, which applies to or affects members of an utive control group (determined pursuant to § 152.130), shall remain in t with respect to payments, awards, or grants of items of incentive compen›n with respect to the plan, practice, or program year covered by such deciand order, as provided in paragraphs (a), (b) and (c) of this section. Any nents, awards, or grants lawfully made pursuant to the terms of such deciand order shall not constitute a violation of the provisions of § 152.130. 2.134 Submissions to the Council.

ny prenotification, report, or application under the provisions of this subpart t be sent to Office of Wage Stabilization, P.O. Box 983, Washington, D.C. 4.

2.135 Executive and variable compensation guidance.

a) Scope.-The provisions of this section are applicable to pay adjustments I are subject to self-administration under the provisions of subpart B of this t, and that do not apply to or affect a member of an executive control group termined pursuant to § 152.130).

b) Adjustments subject to standards.-The rules contained in this subpart, the guidance set forth in paragraph (c) of this section, relating to executive variable compensation, should be used in determining whether payments, ards, or grants are charged as wage and salary increases which, when added other wage and salary increases, are subject to the general wage and salary ndard set forth in § 152.13. Stock option grants under plans which meet all the uirements of § 152.126 (c) (1) (i) should not exceed the aggregate share limitaà applicable to such plans, except to the extent necessary to prevent gross inities, serious market disruptions, or localized shortages of labor. Except as proed in § 152.124 (d) (2) (ii) and § 152.125(d)(2) (iii), payments, awards, or nts of items of incentive compensation pursuant to plans operating under 52.124 or practices operating under § 152.125 should not excede the allowable ounts determined pursuant to § 152.124(d) or § 152.125 (d), as applicable, ext to the extent necessary to prevent gross inequities, serious market disrupis, or localized shortages of labor.

c) Guidance for replacement, modified, and new executive and variable comsation plans. (1) General.—The guidance set forth in this paragraph should used by employers subject to self-administration with respect to the implemenion after January 10, 1973, of replacement, modified, or new executive and iable compensation plans, practices, or programs of the types covered in this part. For employers subject to voluntary controls. such implementation does t require prior approval. This paragraph provides the principles, policies, and ditions that have been used by the Pay Board and Council in their consideran of such plans, practices, or programs submitted for approval during Phase II d Phase III of the Economic Stabilization Program.

(2) Replacement incentive compensation plans or practices. When an emover adopts a new incentive compensation plan or practice (other than a stock tion plan) replacing such a plan or practice which has lapsed or terminated account of the operation of time, the new plan or practice is not considered

to increase wages and salaries if the aggregate amount of compensation attr able to the new plan or practice is not an increase over the aggregate an which would have been granted under the replaced plan or practice had t terminated. If the amount of compensation is increased over that attrib to the replaced plan or practice, the amount in excess should be treated wi increase in wages and salaries.

(3) Modified or revised incentive compensation plans or practices.-Whe employer modifies or revises an incentive compensation plan or practice than a stock option plan), the modification or revision is not considered to incre wages and salaries if the aggregate amount of compensation attributable to modified or revised plan or practice is not an increase over the aggregate an attributable to the plan or practice had it not been modified or revised. E amount of compensation is increased over that attributable to the plan or prac prior to modification or revision, the amount in excess should be treated as increase in wages and salaries.

(4) New incentive compensation plans or practices.-When an employer adr a new incentive compensation plan or practice (other than a stock option pa which is neither a replacement nor modification or revision of an existing a or practice, the amount granted with respect to the first 12 months of the ope tion of the plan or practice should be treated as an increase in wages and are The amount so granted with respect to the first 12-month period should the meaning of §§ 152.124 (c) (4) and 152.125 (c) (4)) become the "base re amount" for such plan or practice in computing the "allowable amount respect to future plan years. Payments in subsequent plan years that e the "allowable amount" should also be considered an increase in wages salaries.

(5) Special rules for certain incentive compensation plans and practicespurposes, paragraph (c) (4) of this section, the amount of certain types awards should be determined as follows

(i) For performance share awards.-In an amount equal to the fair marar value of the stock at the time of the award assuming attainment of at least " percent of the performance goal allocated over the performance period.

(ii) For phantom stock awards. In an amount equal to 25 percent of fair market value of an equivalent number of actual shares of the employer i the time of the award.

(6) Replacement stock option plans.—If an employer subject to volunts" compliance adopts a new stock option plan which meets all the requirements § 152.126 (c) (1) (i). and the new plan replaces a stock option plan which met those requirements but which had lapsed

(i) On account of the operation of time, or

(ii) Because all of the authorized shares had been the subject of opti grants, or

(iii) Because the authorized shares available for award were insufficient ** grant options covering the applicable aggregate share limitation; then for purposes of determining the aggregate share limitation applicable to the ne plan, the new plan and the replaced plan should be treated as a single plan. If s an employer adopts a new stock option plan described in § 152.131, which repla a prior plan that has lapsed or terminated, then the increases in wages and salaries attributable to grants and exercises of stock options under the replace ment plan should be considered pursuant to the operation of an incentive pensation plan under § 152.124.

(7) Modified or revised stock option plans.—If an employer modifies or revise a stock option plan which meets all the requirements of § 152.126 (c) (1) (i). aggregate shares to be granted under the modified or revised plan should exceed the aggregate shares which would have been granted under the pla had it not been modified or revised. If such an employer modifies or revises stock option plan described in § 152.131, any increase in wages and salar attributable to awards under such plan should be considered pursuant to the operation of an incentive compensation plan under § 152.124.

(8) New stock option plans. If an employer adopts a new stock option n'a which is neither a replacement nor a modification or revision and which me all the requirements of § 152.126 (c) (1) (i), the aggregate share limitation fo the first fiscal year of operation should be 25 percent of the number of she authorized for stock options at the time the plan was adopted. The aggrega share limitation for subsequent fiscal years should be determined in accord ance with the provisions of § 152.126 (d) (2) (ii). If such an employer adopts a

k option plan described in § 152.131, the increase in wages and salaries atutable to the options granted or exercised under the new plan should be sidered pursuant to the operation of an incentive compensation plan under 2.124.

or

1) Replacement sales or commission plans or practices and certain incentive grams.-When an employer adopts a new sales or commission plan or praca production incentive program (other than a program described in 01.61 of this title) replacing such a plan, practice, or program, the payments ler the new plan, practice, or program are not considered to increase wages 1 salaries if the aggregate amount of compensation attributable to the new n, practice, or program (using the new formula or method for determining yments) is not an increase over that which would have been granted (using ▸ old formula or method for determining payment) under the plan, practice, program had it not been terminated. If the amount of compensation is ineased solely due to the change in formula or method for determining payments er that attributable under the replaced plan, practice, or program, the amount excess should be treated as an increase in wages and salaries in the control ar such amounts are paid, should be apportioned to the appropriate employee its of the plan, practice, or program participants as provided in § 152.127, and ould be included in the respective units' base compensation for subsequent ntrol years.

(10) Modified or revised sales or commission plans or practices and certain inntive programs.-When an employer modifies or revises a sales or commission an or practice or a production incentive program (other than a program deribed in § 201.61 of this title), the payments under the modification or revision e not considered to increase wages and salaries if the aggregate amount of mpensation attributable to the modified or revised plan, practice, or program using the modified formula or method for determining payments) is not an inease over that which would have been granted (using the old formula or method or determining payments) under the plan, practice, or program had it not been odified or revised. If the amount of compensation is increased solely due to the ange in formula or method for determining payments over that attributable der the modified or revised plan, practice, or program, the amount in excess hould be treated as an increase in wages and salaries in the control year such mounts are paid, should be apportioned to the appropriate employee units of he plan, practice, or program participants as provided in § 152.127, and should e included in the respective units' base compensation for subsequent control

ars.

(11) New sales or commission plans or practices and certain incentive prorams.-When an employer adopts a new sales or commission plan or practice r production incentive program (other than a program described in § 201.61 of his title), which is neither a replacement, nor modification or revision, of an xisting plan, practice or program, the amount granted with respect to the new lan, practice, or program should be treated as an increase in wages and salaries n the control year such amounts are paid, should be apportioned to the approprite employee units of the plan, practice, or program participants as provided in 152.127, and should be included in the respective units' base compensation for ubsequent control years.

[From the Federal Register, Oct. 17, 1973]

COST OF LIVING COUNCIL

[6 CFR Part 150]

PHASE IV PRICE REGULATIONS

NOTICE OF PROPOSED RULEMAKING

Notice is hereby given that, pursuant to the authority of Executive Orders 11695 and 11730, the Cost of Living Council, as part of its continuing review of the operation of price controls with respect to the petroleum industry, is considering the adoption of certain amendments to the Phase IV petroleum regulations to be effective October 31, 1973.

The proposed amendments represent substantive changes in the manner by which sellers of special petroleum products (gasoline. No. 2-D diesel fuel and No. 2 heating oil) at all sales levels must compute their selling prices for those

products. New rules governing non-product cost allocation for refiners and other technical changes are also included in these regulations. While these regulatives are under consideration by the Council, price ceilings have been imposed up all prices charged for these petroleum products at all sales levels. Notice of this ceiling price imposition appears in amendments to Part 150, published elsewhere in this edition of the FEDERAL REGISTER.

The proposed rulemaking would only change the basic rules for gasoline, No 2-D diesel fuel and No. 2 heating oil. All other petroleum products would remai subject to the rules under which they are now controlled. These new rules are designed to establish an orderly, more simplified system by which sellers of the special petroleum products determine maximum price levels and pass throug costs from one sales level to another. This new system insures that no discrimine tion will exist among petroleum marketers in the method of establishing pries for petroleum products. The proposed rules would in no manner alter the genera principle that all increased costs of imports and domestic crude petroleum ng be passed through at every level of distribution in order to encourage a maxine expansion of supplies of petroleum products.

Under this new system, the present retail price ceiling is removed and the pass through of increased petroleum costs by refiners, resellers and retailers is limited to full penny increments. Fractional cost increases cannot be passed forward but all increases in one cent increments may be passed through by all distributors in :luding retailers.

CRUDE PETROLEUM

Included in this proposed rulemaking is a technical amendment to the exis ing pricing rule of § 150.354 for producers of released domestic crude petroleum Some confusion has arisen concerning the price which may be charged under the pricing formula. The new rule clarifies the formula price by stating that the lesser of either the formula price or the market price is to be the price for released crude petroleum.

REFINERS' PRICING RULES FOR SPECIAL PRODUCTS

Several changes are made in the refiners' pricing rule of § 150.358, which is renumbered as § 150.355. Sales of special products at retail are made subject to this section and old § 150.355 which contained the ceiling price rules for speci products is revoked. Special product retail sales prices are measured by the celling price in effect on October 31, 1973, or the base price (determined in the sau manner as for nonretail sales) whichever is greater, plus allowable cost increases Upward adjustments to special product prices must be made only in one cet increments measured from the October 31 ceiling price level.

The one cent increment rule further extends to a special product sold at other than retail by a refiner, but these penny adjustments must be measured from the selling price on October 31, 1973. Downward changes in base prices for the special products must also be reflected only in whole penny adjustments fre the October 31 selling price level.

An allocation formula has been included to provide for the allocation of not product cost increases in a manner similar to that used in allocating increased costs of product in § 150.356. These new rules concern the allocation of nor product costs only at the refinery and require prenotification any time a price is to be charged in excess of a base price. A refiner's nonproduct costs incurred in other operations, such as reselling or retailing, are not includable in these computations. The allocation rule specifies further that price increases above base prices of special products are to be made by the penny increment to the ceiling price of October 31 for retail sales, and to the selling price of October 31 fü other than retail sales. The price reduction rule is retained, with the added pro vision for special product price reductions to be made in one penny amounts.

REFINERS' ALLOCATION OF INCREASED PRODUCT COSTS

The allocation formula of § 150.356 is not changed by this rulemaking, althoug the superscript "n" is altered to more accurately represent seasonal changes. T proposed "n" would involve a "floating" three month period of the preceding year with the middle month of the period corresponding to the current month repr sented in the formula by "u." The pricing rules for products refined by the refine are modified to permit increases in special product base prices only in one ce increments to conform with the rules of new § 150.355. The rules concerning the

method of allocating cost increases computed under the general formula are clarified in § 150.356, to permit the refiner to assign such costs in the manner he considers best.

A new paragraph is inserted in this section also to add clarification and specificity in the manner for carrying over costs from one month to be recouped in a Later month. For a special product, the unused cost must be applied in the subsequent month by a method that adjusts for quantity changes for that special prodict between the two months. Other products may bear their unused cost allocation according to the refiner's chosen method of allocation, equally applied to each class of purchaser.

RESELLERS AND RETAILERS

With the institution of a system of cost pass-through at all levels of sales, the resellers' and retailers' price rule of § 150.359 is expanded to include nonrefiners' retail sales of special products. The one penny rule is also applied for special product prices at retail and resale levels. Increased costs are added to the May 15 selling price for retail sales by one penny increments to the October 31 ceiling price and for other than retail sales by penny increments to the October 31 selling price.

A price decrease provision is added to this section, to require that prices fully reflect costs on a dollar-for-dollar basis. For special products this price decrease occurs in the same manner as the price increases.

NEW ITEM

An addition to the new item base price determination in § 150.361 is made to accommodate the new reseller rule of § 150.359. The price for a new item sold by resellers and retailers is that of the nearest comparable outlet; costs are determined by the cost of the new item when first offered for sale.

POSTING AND RECORDS

The posting rule of § 150.362 is amended to incorporate the gasoline octane posting requirement and the rule for posting maximum prices of gasoline and No. 2-D diesel fuel at retail sales. Each adjustment to these maximum prices would be reflected in the posted price.

With respect to No. 2 heating oil price increases under new § 150.355 or new § 150.359, the rule of § 150.363 is amended to include the reporting requirement previously in effect. The new rule applies to retail sales of this item and requires Chat reports be submitted by the fifth day after the increase is implemented.

In issuing this notice of proposed rulemaking, the Council is inviting public comment on these amended petroleum industry price control rules contemplated for the remaining term of Phase IV.

Interested persons are invited to participate in the rulemaking by submitting written data, views or arguments with respect to the proposed regulations set forth in this notice to the Executive Secretariat, Cost of Living Council, 200 M Street NW., Washington, D.C. 20508.

Comments should be identified on the outside envelope and on the document submitted with the designation "Proposed Phase IV Petroleum Amendments." and should be organized so that those comments dealing with a particular rule are ɔn a separate page from those dealing with other rules. Ten copies should be subnitted. All comments received by October 25, 1973, will be considered by the Council before final action is taken on the proposed regulations. The proposed regulations may be changed in light of the comments received. All comments received in response to this notice will be available for examination and copying by interested persons at the Cost of Living Council, 2000 M Street NW., Washington, D.C. 20508, during the hours of 9 a.m. to 5 p.m., Monday through Friday. Submissions may be inspected both before and after the ending date for comment. (Economic Stabilization Act of 1970; as amended, Pub. L. 92-210, 85 Stat. 743; Pub. L. 93-28. 87 Stat. 27: E.O. 11695, 38 FR 1473; E.Ó. 11730, 38 FR 19345; Cost of Living Council Order No. 14, 38 FR 1489.)

In consideration of the foregoing it is proposed to amend Part 150 of Title 6 of the Code of Federal Regulations as set forth below. Issued in Washington, D.C., on October 15, 1973.

JAMES W. MCLANE,

Deputy Director, Cost of Living Council.

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