With the expiration of the Families First Coronavirus Act (FFCRA) and no new government guidance to replace it, knowing how to handle paid time off (PTO) requests related to COVID-19 is a challenge. You certainly want to ensure that your staff are okay, but you also have a business to run that requires you to have staff on-site to run it. So, what do you do? COVID-19 PTO leave sharing plan.
The answer might be a leave sharing plan. Due to the COVID-19 pandemic, the IRS is allowing employers to set up leave sharing plans to help those employees who have been adversely affected by this public health emergency (PHE). COVID-19 PTO leave sharing plan.
Implementing this type of solution can be a little tricky, but it gets your entire team involved helping each other, and can provide you with the coverage you need. COVID-19 PTO leave sharing plan.
What is a Leave Sharing Plan?
Leave sharing plans allow your practice to set up a general pool for PTO (vacation, sick or leave time) that your employees donate to for the use of other staffers who have no paid leave left. The staffers who borrow from the pool must have suffered from a major disaster (including a public health emergency (PHE)) or have medical emergencies. Some examples where staff might qualify to access this shared leave include: they contract COVID-19, a family member contracts the virus and they must care for them, or their child’s school is closed and must stay home to watch him/her.
An employee who deposits leave under this plan (leave donor) will not have to claim the deposited leave in income or wages. However, they also cannot report an expense, charitable contribution or loss deduction related to the leave.
The rules and related tax information on leaving sharing plans set up to help employees deal with major disasters are listed in IRS Notice 2006-59. These include the stipulation that the President of the United States must have declared a major disaster. COVID-19 pandemic disaster declarations exist in all 50 states, the District of Columbia, Puerto Rico and certain U.S. territories.
COVID-19 PTO Leave Sharing Plan Requirements
If your practice is considering creating a leave sharing plan for COVID-19-related PTO, be sure you adhere to the following IRS guidelines:
- Your plan must allow a leave donor to deposit accrued PTO in a leave bank sponsored by your practice for use by other employees who have been “adversely affected” by COVID-19. To qualify, the virus must have “caused severe hardship” to your employee or a family member of theirs that requires them to be absent from work.
- A leave donor cannot choose the leave recipient who receives their donation
- A leave donor cannot donate more leave than they accrue in a year
- A leave recipient receives paid leave at their normal compensation rate from the leave bank. They MUST use this leave for COVID-19-related issues.
- The plan must designate a time limit on how long after the pandemic occurs that a donor can deposit leave and a recipient must use it
- Leave MAY NOT be converted to cash
- A leave recipient can use leave to eliminate a negative leave balance that resulted from the effects of COVID-19
- A leave recipient can substitute leave received from the plan for leave without pay used because of COVID-19
- Each leave recipient’s amount of time off is determined by need. You must decide how much leave each approved leave recipient is eligible to receive.
- Leave deposited due to COVID-19-related issues may be used only for employees affected by COVID-19
- Any leave not used by the end of your designated time limit must be returned to the leave donors so they can use it. The amount of leave returned to each donor must be representative of the portion that donor gave to the entire leave pool for COVID-19.
IMPORTANT: If your COVID-19 leave sharing plan does not meet these specific IRS requirements, your leave donors MUST claim W-2 compensation for their donated PTO. This is based on their pay rate at the time of their donation as stated in IRS Letter Ruling 200720017. This obviously makes donating to the leave bank much less appealing.
Of course, any PTO program must be implemented in accordance with both your state laws and federal requirements. This adds an entirely new set of complications to the process. But you can get the help you need to do it right. On Wednesday, April 14th at 1 PM ET, healthcare employment law attorney, Jonathan R. Mook, JD is presenting an online training session that can help. Jonathan will provide you with a step-by-step roadmap of EXACTLY how you can comply with complex COVID-19 PTO rules. He will breakdown the rules into easy-to-understand pieces, explain the importance of proper documentation to protect your practice, and include how to correctly communicate your policies to your staff. Don’t wait. Register for this must-attend online training today.
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