Funding a tax sheltered annuity 403 (b) plan
Roman
15 Posts
We currently have a tax sheltered annuity program which is totally funded by employee contributions. Employees have a portion of pay sent directly to the annuity program (Nationwide Insurance) each pay period.
Many of our employees have accrued significant amounts of sick time saved up. These accrued hours are not paid out unless an employee leaves employment after 10 years of time. If someone leaves before ten years the sick time is lost.
A question has arisen about the possibility of funding a retirement plan with accrued sick time or even vacation pay. Does anyone know if it would be possible to allow employees to direct money from a sick time or vacation bank directly to a Roth IRA for example or to a 403 (b) (annuity) account since we are nonprofit??
Thanks
Many of our employees have accrued significant amounts of sick time saved up. These accrued hours are not paid out unless an employee leaves employment after 10 years of time. If someone leaves before ten years the sick time is lost.
A question has arisen about the possibility of funding a retirement plan with accrued sick time or even vacation pay. Does anyone know if it would be possible to allow employees to direct money from a sick time or vacation bank directly to a Roth IRA for example or to a 403 (b) (annuity) account since we are nonprofit??
Thanks
Comments
Good luck!
Nae
I checked with the editors of our Benefits and Compensation Law Alert for Nonprofits, and this is what I found out:
It is possible to develop a paid time-off plan under which employees of a tax-exempt organization each year may make an election BEFORE THAT YEAR BEGINS) to either receive extra PTO days for the next year or receive contributions to a 403(b) or 457 plan.
It is also possible to establish a PTO plan under which unused days at retirement are automatically used (in a cascading
fashion) to provide for contributions for 403(b), 457 or retiree
medical.
Sick time can be forfeited, but, its different
than PTO or vacation time in that vacation/PTO time can be used for any
purpose, but sick time is contingent on a particular event (getting
sick).
This is a highly technical question, and one which you should run by a qualified benefits attorney.
Anne Williams
Attorney Editor
M. Lee Smith Publishers, LLC
Thanks very much for your very concise and helpful response. This is the best summary I have received and will continue the conversation with our company attorney.
Much appreciated.
Roman