IRS ruling OKs sick leave conversion to cash balance credit.

Business Insurance, October, 1998 by Geisel, Jerry

JERRY GEISEL WASHINGTON - A new Internal Revenue Service private letter ruling could further increase the appeal of cash balance pension plans. Under the new ruling, employees annually could convert unused paid sick leave into a pay equivalent, have that amount credited to their cash balance plans and not be taxed on the paid sick leave at the time it is converted and contributed to the cash balance plan.

Such a conversion feature in a cash balance plan does not subject the converted unused sick leave to taxes because the employees do not have the option to receive cash rather than the credits. 'Thus the employee's receipt of the pay equivalent of the unused sick leave is not constructively received because the employee cannot elect to receive the unused...