What is a vacation purchase program

Note: If you are a U. This will not change during the year, even if there is a change in scheduled hours or salary e. Any unused purchased vacation days will not roll over into the following year unless state or local law provides otherwise and cannot be sold back, so be sure to use all your purchased vacation days before the end of the year. During the enrollment period each year, follow these steps to purchase additional vacations days:.

Check with your manager before purchasing any additional vacation days. ET, Monday through Friday, excluding holidays. So you can't "buy" salary reduce a paid week off thru a plan. I agree, but a cafeteria plan can include elective PTO as a permitted taxable benefit through the plan and the plan otherwise complies with the requirements set forth in the proposed regs.

See 1. No problem there. This is where you and I are misconnecting. Scenario 2 isn't a vacation purchase plan. It's an unpaid time off plan which is entirely different. Instead of looking at benefits regulations, IMO you should be looking at wage and hour laws. The DOL website page on Salary Basis employees says: "Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability I suggest having a written guideline in place so it's clear how many days per year can be taken and that those must be full days.

Also, you can't deduct for more days than the employee actually takes off ie can't let an employee buy a week and they then only use 3 days.

Let's put aside your exempt employee wage payment law issues, which are definitely well taken. Assume that the employees are non-exempt. And assume that the employee is absent for work for a full week other than for disability or sickness and the absence was approved by the employer.

What is your analysis of the W-2 tax consequences of my two scenarios? As long as we recognize that in scenario 2 "vacation purchase" is merely a semantic for what's really unpaid time off, then I agree. The term "excused absence" comes to mind when discussing a non-exempt employee and an unpaid time off plan. Like in our factory, you get paid for a holiday only if you work the days before and after or you have an excused absence.

But that's more just a thought out loud, as that seems be more what you're talking about here. Masteff - your analysis regarding the "purchase" of vacation outside of a cafeteria plan as being a semantic for unpaid time off makes sense i. Setting aside the wage payment law issues as requested by Chaz, the advantage you note in Scenario 2 is that there is no risk of forfeiture, which implies that there is a risk of forfeiture in Scenario 1.

Is the risk of forfeiture due to employer discretion i. In either event, it would seem that unused "purchased" vacation cannot be sold back outside of a cafeteria plan at the end of the year without violating constructive receipt rules.

Based on the original post, the employer doesn't want to allow cash out, so by purchasing vacation as a block of days, this creates the risk of forfeiture. Also IMO Scenario 1 only works under a cafeteria plan because, outside of such, you can't get around the wage and hour laws. So then a quick review of what's allowed under a caf plan might be useful Generally speaking, in a cafeteria plan, for unused vacation days, the employer either can cashout or apply to another benefit allowed under the caf plan or can forfeit.

Carry forward can't be allowed as it creates improper deferral of income in violation of Section cafeteria plan rules. And I'd have to think over the constructive receipt rules a little further to answer your last statement. But it would only be academic as those wage and hour laws we set aside would have sufficient weight on the analysis as to impact the outcome.

So I'll simply bring those rules back into play and say you weren't permitted outside a cafeteria plan to deduct the unused days in the first place so they have to be restored before year-end. You need to be a member in order to leave a comment. The reason is, buying additional vacation days allows you to lock in your current salary and divide the cost of your purchased days into each paycheck.

Bob makes 50k a year and starts with 0 accrued vacation days and 5 purchased vacation days. He gets 10 days a year in normal accrued vacation days or. To celebrate his raise, Bob takes two weeks off and goes to Mexico. Since this was the first year the plan has ever been offered, I ended up buying three extra days of vacation. This was the argument I heard most against buying days, but who decided that two weeks was the right amount of vacation? I think two weeks might be enough for some people but life is short and vacation is all that much better because you work.

Readers, does your work offer you a vacation purchase plan like this? Do you think two weeks of vacation is too little, too much or just right? This year I had two separate personal travels that were really important weddings, etc , so I had to plan from the year prior to make sure I had plenty of days to get there and still have a few days off when Christmas comes around.

Yea 2 weeks is definitely tough. I would be happy if they gave me 3 weeks but then again, I would probably want 4 weeks once I got 3, haha. I work for a company that is based in Germany, so one of the few perks we get is that we have 26 days per year of paid vacation. As such there is no vacation purchase plan but at previous jobs I wish there had been.

As it is now, I still travel a lot but I do a lot of short weekend 3 day type trips to closer destinations. Your number of days would go up every two years. I do think that two weeks is to low and really should be more. My companies vacation plan is very similar to the one described. We also only get 10 days of vacation a year with the option to purchase 5 additional days. However, our plan states that employess will receive a refund at the end of the year for any unused optional vacation days.