Mandatory Vacation Payout question...

[ultrarunner]

Lot of changes going on at work... been working the same job since 1991.

Just learned all employees will have unused vacation pay added to their last 2013 paycheck in December.

I've got over 7 weeks accumulated because of not being able to take time off due to the needs of the business.

Was planning on a month off in February... said that may or may not be possible... again, depending on the needs of the business.

I did ask if I could have vacation pay added straight to my 401k... mostly for tax reasons... so far, I've been told no.

It's been years since I contributed... stopped when employer match disappeared.

Looking for suggestions on best way to deal with this windfall...

 

[murphy1244]

Have you heard rumors of closing or a buyout?

 

[ultrarunner]

Yes... on again, off again for the last 3 years.

Two years ago we already had new medical cards and the sign company was changing the name on the building when a judge blocked the sale...

Nothing to do was us... just a pawn in a power struggle...

Welcome to Healthcare 2013 where no one really knows what the future holds...

 

[murphy1244]

Yes... on again, off again for the last 3 years.

Two years ago we already had new medical cards and the sign company was changing the name on the building when a judge blocked the sale...

Nothing to do was us... just a pawn in a power struggle...

Welcome to Healthcare 2013 where no one really knows what the future holds...

Sounds like they are clearing the books.

 

[luvmexfood]

Don't know about tax laws or anything but take the cash. If they were to bankrupt or sell you might not see a dime of it. You could always put in an IRA for tax reasons.

 

[ultrarunner]

One of the things I'm considering is an IRA... never opened one because the local banks all charge maintenance fees

 

[two_bit_score]

Sounds like time for a Roth IRA if you dont already have one.

 

[hawkeye08]

Not unusual to reduce liabilities on the books. We went through it a number of years ago. I had 12 weeks carried over (max allowed to carry over). They gave us a couple of years to use it or lose it, hard to take that much time off and keep a job, I took alot of Fridays off, etc. Got it all used up and now we are not allowed to carry any over. Boss canceled vacation plans this last summer for business reasons and now I am working on using the vacation I planned for summer this fall when things were already busy...

 

[ultrarunner]

I was asked to take it and said if I did, I would be gone untill January...

Of course that does not work for the Boss... I'm the only engineer left.

 

[smstonypoint]

I did ask if I could have vacation pay added straight to my 401k... mostly for tax reasons... so far, I've been told no.

I would pursue this avenue. Your HR/payroll office should be able to change your 401K contributions for just your last paycheck for 2013. The 2013 limit is $17,500 with an additional $5,000 catchup if you are over the age of 50. If they are saying "No," they are being jerks and/or trying to avoid work. Who knows, there may be state/federal regulations that prohibit companies from denying you the opportunity to make a 401k contribution.



Steve

 

[ultrarunner]

I suggested the administrator let people know sooner as opposed to later...

I think a lot of people would go the 401k route if they have the option.

My CPA said I should ask to defer to my first Jan 2014 paycheck and that was denied.

Seems we have two types of employees... those that are always short of vacation time and those that accumulate it... mostly because there is seldom a good time to use it.

 

[sixdogs]

This is good advice and was very common as of a couple years ago. I did it as well. Just change the final 401K withholding to the maximum you can put in. You might have to pick a dollar amount.

Not sure why they would buy off vacation time but it would seem to me either window dressing for a hoped for sale or burning some cash to prevent another company from trying to buy them with, in effect their own money.

I would pursue this avenue. Your HR/payroll office should be able to change your 4o1K contributions for just your last paycheck for 2013. The 2013 limit is $17,500 with an additional $5,000 catchup if you are over the age of 50. If they are saying "No," they are being jerks and/or trying to avoid work. Who knows, there may be state/federal regulations that prohibit companies from denying you the opportunity to make a 401k contribution.



Steve

 

[WM75Guy]

Standard accounting practice has accrued vacation time accounted for in the balance sheet as a liability as the employer would have to pay a lump sum if the employee quits. Tally up all the accrued time and the company could have quite a bit of cash tied up just sitting there. That is why most companies limit the amount you can accrue. If the company is up for sale clearing off liabilities makes the balance sheet look better. The buyer does not get saddled with that liability.

 

[ultrarunner]

I'm pretty sure this has to do with making the company more attractive... the partners are getting older and have been looking for a way to cash out...

It is kind of ironic because many times my former boss has had me cancel vacation plans or simply said no because she was going to be away...

Since 1991, any vacation time I took could only be when the boss was not on vacation...

 

[sixdogs]

Wouldn't hurt to start shopping your services around just in case. Always pays to have a leg up.

 

[dmccarty]

..
Just learned all employees will have unused vacation pay added to their last 2013 paycheck in December.

I did ask if I could have vacation pay added straight to my 401k... mostly for tax reasons... so far, I've been told no.

It's been years since I contributed... stopped when employer match disappeared.

Looking for suggestions on best way to deal with this windfall...

Since you know that the payment will be in the last paycheck in December, can you change your payroll elections so that vacation money goes directly to the 401K? You would just have to make sure that the percent of your paycheck that went into the 401K did not exceed the yearly maximum amount put into a 401K. Any extra amount could be put into a ROTH IRA or IRA.

Later,
Dan

 

[ultrarunner]

Boss said there will be a letter going out mid November with options and it should answer any questions...

Going forward a new policy of maximum vacation accrual will be going into effect... so... either use it or no more will be added.

I already put in a request for May and it was denied...

Every 3 years the facility goes through accreditation and there will be a moratorium for all managers February through June regarding vacation...

My cousin is getting married in May and my Godparents have a 50th anniversary 2 weeks before... I would have no problem taking a couple of weeks going to Europe in May.

I'm actually more worried about sick leave since I have the maximum of 3 months on the books... never taken a sick day since I started in 1991....

Sick leave has been a godsend for several that had cancer and were off.... thankfully, all did well and returned to work...

 

[300UGUY]

If you can't get the lump sum put into the 401K, a IRA is a good method. I'd go with Fidelity or the boglehead one - look up FIRE on the net, it's a website for those folk who are financially independent or those who aspire to be.

 

[dave1949]

"Laundering" that contribution through a 401k would be the best tax advantage I think. You are more likely to hit contribution limits in an IRA or Roth IRA. Once the funds are in a 401k, they can be rolled into a self-directed IRA account with no tax penalty. That's my take on it.

If you never need the IRA funds, your beneficiary(s) can spread out the IRA proceeds as income over a five year period. That can be useful tax-wise.

 

[sixdogs]

A company 401K contribution will only be withheld/deducted by the company up to the maximum you can put it and it has to be done by Dec 31. The IRA's can be contributed until you file a return and then only to the degree your income and contribution to other plans will allow. I agree, the best course is to sock away as much as you can whenever you can and be thankful for the opportunity.

One question not known is if the income from vacation not taken counts as "income" that is subject to the 401K contribution rules or it is some sort of miscellaneous income that is not subject as 401K income. That would be the only reason I could think why a company would not allow the 401K contribution against that income. That's what accountants figure out.