The coronavirus (COVID-19) outbreak has been declared a national emergency. This creates special considerations for PTO leave sharing / donation plans. See IRS Notice 2006-59.
The IRS has issued specific guidance for PTO leave sharing and donation plans. These are plans that are coordinated by employers and permit employees to donate PTO / unused vacation and/or leave to an employer-sponsored "pool" for use by other employees.
"..employees who donate PTO/leave/vacation time will be treated as having W-2 compensation for the donated time (based on his or her rate of pay at the time of the donation). This rule is based on the long-standing “assignment of income” tax law doctrine."
Schwartz explains further that the IRS has created several exceptions to this general rule:
An employer can create / sponsor a PTO leave-sharing plan for its employees for federally-designated national emergencies, now including the coronavirus (COVID-19) crisis.
With this designation:
According to Schwartz, the major disaster or national emergency leave sharing plan must be a written plan and meet the following requirements:
The IRS does not require an employer to obtain pre-approval or file subsequent reports. The only reporting obligation is to properly account for, keep records of, and report on W-2 wages and withholding taxes for the participating employees.
Learn more specific detail and tax implications on using leave sharing plans with COVID-19 from the experts at Jackson Lewis.
While the ultimate impact of COVID-19 is still unknown, we realize that many individuals are relying on the flexibility of their employers more than ever. In some cases, employees and organizations are organically "sharing" unused vacation / PTO with others that are either directly or indirectly affected by virus.
We've seen more and more interest in this recently, though many organizations are doing this manually and are likely not fully in compliance with IRS guidelines.
PTO Exchange has developed a flexible benefits platform that allows and facilitates giving and sharing of PTO amongst employees who need it most. This is one aspect of our platform that can be turned on expeditiously, as quickly as 24 hours, if the need arises.
This is a notable time with many companies making bold adjustments to their PTO strategy and trying to find new ways to help their employee community bridge the changes that are affecting their lives.
If PTO sharing is something that can help your organization navigate through this situation, we are here to help.
There is something very unnatural and unnerving about this particular challenge. Human beings are social creatures, and we are being asked not to come together in the physical sense that would be our first instinct. But we can still demonstrate community and caring, through the innovative tools we have today.
Best of luck navigating the coming weeks and please feel free to reach out to us if we can be of service.
To learn more, download our free ebook, "12 Things You Need to Know About Setting Up a COVID-19 Leave-Sharing Plan."
Take good care,
Gregg Makuch ("may-kish")
CMO
PTO Exchange