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U.S. Master™ Wage-Hour Guide, 2009 Edition 
Presents a first approach to the broad and complex controls under the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and other statutes regulating employee wages and hours.
Code Sec. 403(b) plans may be able to offer participants the opportunity to contribute the dollar equivalent of unused paid time off, Rhonda Migdail, manager, IRS Employee Plans, said on October 28, 2009. Migdail also clarified the FICA tax treatment of unused paid time off contributions. Migdail spoke during an IRS teleconference on recent retirement plan news.
In September, the Obama administration and the IRS announced several initiatives to encourage retirement savings. Rev. Rul. 2009-31, I.R.B. 2009-39, 395, explains how a qualified plan may permit certain annual contributions of the dollar equivalent of an employee's unused paid time off. Rev. Rul. 2009-32, I.R.B. 2009-39, 398, provides that a qualified plan may allow employees on the termination of employment to contribute the dollar equivalent of unused paid time off to the plan.
Many employers have a "use or lose" policy for paid time off. Some employers permit employees to carry over unused paid time off from year-to-year, Migdail noted. An employee may be able to cash-out accumulated unused paid time off when he or she separates from employment.
403(b) plans
The provisions in Rev. Rul. 2009-31 and Rev. Rul. 2009-32 would not apply as currently stated to Code Sec. 403(b) plans, Migdail said. However, the IRS is considering extending the rules to Code Sec. 403(b) plans, she added. Migdail did not indicate when the IRS may issue additional guidance.
FICA
When Rev. Rul. 2009-31 and Rev. Rul. 2009-32 were announced, many employers, plan sponsors, and practitioners questioned if paid time off contributions would be subject to FICA tax. The guidance did not address FICA tax treatment. "If it (the contribution of unused paid time off) goes in as a nonelective contribution, it will not be subject to payroll taxes," Migdail explained.
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