Avoid the year-end vacation-time scramble
Every December are your employees scrambling to use up their vacation time because of limits on what they can roll over to the new year? Or do you allow rollovers and have long-time employees who’ve built up large balances that create a significant liability on your books? Then you may want to consider a paid time off (PTO) contribution arrangement that allows employees with unused vacation hours to elect to convert them to retirement plan contributions.
If the plan has a 401(k) feature, it can treat these amounts as a pretax benefit, similar to normal employee deferrals. Alternatively, the plan can treat the amounts as employer profit sharing, converting the excess PTO amounts to employer contributions.
If you’d like to offer this option, you simply need to amend your plan. However, you must still follow the plan document’s eligibility, vesting, rollover, distribution and loan terms, and additional rules apply. Please contact us for more information on the ins and outs.