Vacation Use It or Lose It Policy vs Change to 401K Employee Deferral Rollover?
Posted: 11 March 2008 11:27 AM   [ Ignore ]
New Member
Rank
Total Posts:  1
Joined  2008-03-11

We currently have a use-it-or lose it policy for vacation.  We are in the state of Louisiana.

Our company is pretty generous in our policy accruals and we are a “lean” staffed company.  Sometimes this makes it hard for people to take all accrued leave.

One of the ideas that we are looking at is allowing employees to roll a portion of the balance into a sick leave plan or rolling it into the 401K plan as an employee deferral. 

Does anyone currently have this type policy they are willing to share or thoughts on the subject?

Profile
 
 
Posted: 12 March 2008 08:34 AM   [ Ignore ]   [ # 1 ]
Administrator
Avatar
RankRankRank
Total Posts:  59
Joined  2006-07-26

I’m not sure if it has any benefit plan implications, but it seems to make sense to me.  I don’t see the downside when you’re talking about doing this for vaction time, as opposed to sick leave, where you deal with the issue of presenteeism (e.g., Sick days, vacation all the same in ‘time-off’ banks).

 Signature 


Patrick Della Valle
Employment Law Information Network
Innovation Center @ Wilkes-Barre
7 South Main Street, Suite 219
Wilkes-Barre, PA 18701

Patrick Della Valle - LinkedIn Profile

Profile
 
 
Posted: 12 March 2008 09:31 AM   [ Ignore ]   [ # 2 ]
New Member
Rank
Total Posts:  4
Joined  2008-03-04



I’ve suggested this to one of my clients and am looking for all the issues.  If placed carried vacation or sick days into a retirement or other benefit I beleive it would be tax free.  The company and the employee would enjoy not paying FICA expenses on the deferral.  One of the issues is if you allow conversion to another plan how is it vallued.  We theorized that if you would cash out at the end of the year, that would be the value no matter what alternative plan the employee selected.

Ed Kaplan

Profile
 
 
Posted: 19 March 2008 02:00 PM   [ Ignore ]   [ # 3 ]
Member
RankRank
Total Posts:  6
Joined  2008-01-16

Hello,

This is longer than most posts, but I’m new at it.  hope etiquette is OK…

I understand you are interested in rolling unused vacation into something useful like a 401k or banked sick time.  I have never heard of rolling unused vacation into a 401k.  I do know of companies who roll their unused vacation into a sick time bank- but NEVER with a Use or Lose policy- it goes against the definition of the term - to me….

I would suggest backing up and look at the issue causing the available vacation over run and why the original policy was THOUGHT to be set up as use or lose….

To me, the companies I know with “use or lose” vacation policies do so for some reasons I’ll mention below:
1.  to either force employees to take time off and prevent burnout like with nurses or heavily OT weighted operations, or
2.  to prevent the accumulation of 75 ++  calendar days at 8 hours a day for 600 hours that have been squirreled away over the last 15 years .  example.. like teachers who can go on sick leave, then immediately roll into retirement,  or  
3.  to prevent low paid - or high paid for that matter from   percieving their unused vacation as a “bonus” that will be paid out at the end of the year in some way.  ie, they include vacation into their total compensation package from a $$ perspective- not REST perspective.

more reasons too..

So, why is there unused time?  That’s what I would seriously look at first.  You can REQUIRE employees to take their time off - OR LOSE IT- like your policy dictates.  If you find the policy needs changing, don’t wrap the 401k into it so soon.  Keep them separate.

SURE,  you’ll have a few people who say- I don’t need a vacation, so I’m coming in anyway,
and
nobody can do my job, like me, so I’m coming in or things will be a mess when I get back,
and
I’m so busy - If I take time off, I’ll never get ahead,

And the excuses go on.  If these people were hit by the bus today, the business would still operate- so send them home to sit on the porch, go fishing, play with kids or take a long deserved trip abroad - alone.

Hope this helps..

Brian Phillips

 Signature 

Brian Phillips -  Harvis Inc

Profile
 
 
Posted: 19 March 2008 02:56 PM   [ Ignore ]   [ # 4 ]
New Member
Rank
Total Posts:  4
Joined  2008-03-04

I think you’ve combined questions and taken a left turn.  My question is in regard to using vacation or sick time to fund (bamk) longer term absences or a 401K.  For me this is an ERISA issue and wanted other’s input.

If recommended i suggested that my client mandate the use of at least 1/2 of the annual vacation time allotment.  I wanted to know about the ERISA implications.  I’m aware of the pros and cons of not taking time off.

Ed

Profile
 
 
Posted: 19 March 2008 03:27 PM   [ Ignore ]   [ # 5 ]
Member
RankRank
Total Posts:  6
Joined  2008-01-16

Oh,

So, your issue was ERISA and not the nuts and bolts.  I’m sure you have this link to EBSA, if not…

http://www.dol.gov/ebsa/aboutebsa/org_chart.html#section13

Go to bottom of the link for an office near you.    Just call them.    They’re pretty fast about returning calls..

Brian

 Signature 

Brian Phillips -  Harvis Inc

Profile
 
 
Posted: 08 May 2008 02:04 PM   [ Ignore ]   [ # 6 ]
Member
RankRank
Total Posts:  17
Joined  2008-03-04
Sherry Lewis, SPHR - 11 March 2008 03:27 PM

We currently have a use-it-or lose it policy for vacation.  We are in the state of Louisiana.

Our company is pretty generous in our policy accruals and we are a “lean” staffed company.  Sometimes this makes it hard for people to take all accrued leave.

One of the ideas that we are looking at is allowing employees to roll a portion of the balance into a sick leave plan or rolling it into the 401K plan as an employee deferral. 

Does anyone currently have this type policy they are willing to share or thoughts on the subject?[/quote

Sherry,

Our company started that type of Plan two years ago and it is working great. I worked with my 401K providers and he wrote it into the plan as a profit share clause. I am not sure how but it is okay with the IRS and passed the audit.

There were some exceptions, employees making over 100,000 a year could not roll their amounts of unused time to the 401K.

Also we only allow a portion of the unused amount. It goes on the years you have been with the company as does the PTO accrual.

Our schedule is thus:

1-4 years of employment   earn 80 hours     roll over 40 hours
5-9 years of employment   earn 184 hours     roll over   80 hours
10-19 years of employment earn 224 hours   roll over   120 hours
20+ years employment     earn 240 hours   roll over   160 hours

Those working 21-29 will receive PTO at 50% of the above amounts. and can roll over at 50% of the allowed amounts.

Highly compensated employee earning 100,000 or more in salary are not eligible for the PTO/401K conversion benefit.

We like it a lot…we no longer lose unused PTO.

Shirley

Profile