Frequently-Asked Questions
How does the PTO Donation Program work?
All donated PTO hours are converted into a monetary value and maintained in a bank until requested by an eligible employee. The granting of PTO from the PTO Donation Bank is based on hours, not the rate of pay. Upon approval, the monetary value of the requested hours will be debited from the PTO Donation Bank and the number of hours credited to the recipient’s PTO bank as Donated PTO.
Example:
- Employee earns $22 per hour and requests 75 hours (two weeks) of PTO from the PTO Donation Bank.
- Upon approval, 75 hours are credited to the employee’s Donated PTO bank and $1,650 (75 hours x $22 per hour) is debited from the PTO Donation Bank.
What are the tax implications for donors?
There is a general tax law concept that the individual who earns Paid Time Off and has the choice to receive it as income (use the time) or dispose of it (donate it) is still obligated to pay taxes on it. Therefore, any time off earned by one employee and donated to another would be taxable income to both parties. The IRS allows for two exceptions in which time off can be donated without negative tax consequences to the donor. The CMU PTO Donation Program is set up under the "medical emergency” exception. Therefore, a donor does not realize any income and incurs no tax for the time off donated. Donated time off does not qualify as a charitable contribution for the donor’s tax purposes.
What are the tax implications for recipients?
A recipient will be taxed on the value of the PTO Donation Bank time paid to them at their most recent rate of pay upon use of the time off. The value of such payments is subject to all applicable tax deductions and withholdings, the same as regular PTO.
What is a catastrophic illness?
A catastrophic illness generally means that the employee is incapacitated from work for an extended period of a minimum of seven calendar days and/or the employee’s family member experiences a qualifying event. The qualifying event must meet one or more of the following:
- Poses a threat to life;
- Is a progressive debilitating illness from which recovery is prolonged or unlikely, or which involves medical incapacity for an extended period of time; and/or requires extended inpatient or hospice health care.