How to Manage Employee Vacation Time

December 23, 2013

How to manage employee vacation time? Avoid the year-end vacation-time scramble!


Is your team  scrambling-up to use up vacation time because of restrictions on what can be rolled over to the new year? Or do you allow rollovers and have veteran employees who have been accumulating large vacation balances that could create a significant liability on your books?

Then you may want to consider a paid time off (PTO) contribution agreement to allow your team to convert unused vacation hours 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.


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