Employee Benefits Blog

Posts tagged Disaster area

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Hurricane Sandy: Favorable Rules for Leave-Sharing Plans

As discussed in our August 10, 2012 post on medical leave-sharing plans, employees are generally taxed on income that they earn and then assign to somebody else.  In IRS Notice 2006-59, the IRS created an exception in the case of certain leave-sharing plans under which employees transfer earned leave to an employer-sponsored leave bank for use by other employees who have been adversely affected by a major disaster.  (This exception was created in the wake of Hurricane Katrina.)  In IR-2012-84, the IRS indicated that this treatment applies in the case of Hurricane Sandy.  Thus, for leave-sharing plans that meet the specific requirements of Notice 2006-59, the recipient of the leave, not the donor, is taxed on the forgone leave.