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CCH® PENSION AND BENEFITS — 9/14/06

Employees subject to tax on value of transferred vacation time income

State employees who assigned their rights to accrued leave under a collectively bargained program to the leave bank of certain deceased state employees for the benefit of their survivors were required to include the transferred leave in gross income, the IRS has privately ruled. Generally, assignment to another person of a right to receive compensation does not relieve an employee of tax liability on the assigned compensation, unless the program is a medical emergency leave program or is designed specifically to aid the victims of Hurricane Katrina. The state was, therefore, required to withhold on the value of these amounts and report the value of any transferred leave on the transferor-employee's Form W-2. The IRS withheld an opinion regarding the federal tax consequences of payments to survivors who received the cash value of transferred leave under the program.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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