Oura Delayed a $2.2 Billion IPO. An Employee Can Trigger Social Security’s Earnings Test Before Selling a Share

Employees of health intelligence platform Oura were getting close to something private-company workers can wait years for: a public market for their shares. Then the smart-ring maker postponed its IPO, citing uncertainty in the market.

Take a hypothetical 63-year-old Oura employee who gets Social Security while still working. She has vested nonqualified stock options and exercises them. The stock puts no cash in her pocket and may be unsellable. Her Social Security checks can still take a hit before she sells a single share.

A $150,000 Paycheck She Never Cashed

Say she has 10,000 vested options with an exercise price of $5. At exercise, the shares are worth $20 each. She writes a $50,000 check to buy them, and the gap between what the shares are worth and what she paid (the “spread”) comes to $150,000.

With a typical nonqualified option, that spread counts as compensation income at exercise. It shows up on her W-2 like a bonus:

• Cash from selling shares: $0
• W-2 compensation created: $150,000

Social Security Sees Wages Before She Sees Cash

Income from nonqualified options is treated as wages for payroll tax purposes. She is under full retirement age (FRA) and taking in benefits, so those wages fall under the retirement earnings test, which holds back benefits from people who claim early and keep working.

For 2026, the limit for anyone below the full-benefit age for the whole year is $24,480. For every $2 she makes above it, benefits are reduced by $1.

The spread alone puts her far over that limit. Counting only the $150,000, the program could withhold $62,760 in benefits. A $2,000 monthly benefit equals $24,000 a year, so every check she would otherwise receive this year could be held back.

Social Security bases this on the wage figure from the exercise. If the shares later lose value or stay unsellable, the wage figure stays at $150,000. Once she reaches the age for full benefits, the agency recalculates her benefit to give credit for the withheld months. She gets the money back over time, but that is cold comfort when she counts on the checks every month.

A Delayed IPO Splits One Event Into Two

An IPO usually opens a path to selling. Oura’s delay means that path did not open on schedule. She must treat exercise and sale as two separate events. Exercise creates compensation now. Sale may come much later. The benefit hit comes with the exercise.

Incentive Stock Options Play by Different Rules

Oura’s plan lets an option be designated either an incentive stock option or a nonqualified stock option. Exercising an incentive option generally does not create W-2 wages, so it adds nothing to the earnings test. The spread can instead set off the alternative minimum tax. For 2026, the alternative minimum tax exemption for a single filer is $90,100.

Two coworkers holding economically identical options can end up with very different results. Neither one has turned stock into cash. The option type usually determines the result at exercise, unless a nonqualified option qualifies for the special-wage-payment rule.

Why the $184,500 Wage Cap Offers No Shelter

In 2026, only the first $184,500 of earnings goes onto her Social Security record. A $60,000 salary plus the spread brings her to $210,000, so the top slice no longer adds to her future benefit. The earnings test has no cap. Wages above the $184,500 Social Security taxable maximum can still count toward the earnings test until she reaches FRA.

There is one important exception. A nonqualified option exercised in a year after the year it was earned can qualify as a special wage payment and stay out of the earnings test. IRS guidance says that rule can apply not only to retirees, but also to employees who continue working while receiving Social Security benefits.

Questions Worth Answering Before She Exercises

1. Which type of option is it? Her grant agreement says whether it is incentive or nonqualified, and that detail determines whether the earnings test applies.
2. How much cash does she need, and how big is the spread? The exercise price sets her out-of-pocket cost. The current share value sets the taxable amount.
3. Can she sell anything? If not, both the exercise cost and the tax come from her savings.
4. What else counts toward the limit? Her salary gets added to the spread, driving her further over.
5. How far away is the age for full benefits? Once she reaches it, the earnings test no longer applies. Waiting until then may eliminate the withholding problem. With incentive options, she still must check the alternative minimum tax.

Timing the Exercise Matters Most

A delayed IPO does not delay the tax on an option exercise. A worker can own stock she cannot sell, get no cash from it, and still create enough W-2 wages to lose a year of Social Security checks. She cannot undo an exercise. Grant terms, birthdays, and the month she exercises can each change the math, so it pays to run her actual numbers first (we mapped out four of the tax traps that catch people who keep working while collecting benefits in a free semi-retirement guide here: Retire Twice).

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