Resignation, What To Do With Accrued PTO??

[J89Mike]

I recently accepted a new RN position at another organization and on Monday, I'm going to be giving my notice that I will be leaving the current company I am with.

I currently carry about 160 hours of PTO. Since I will no longer be with this organization due to my upcoming resignation, I see that for employees that are resigning, via their HR department, "the PTO balance will be paid out within two pay period after termination has been processed." The company's HR later says "PTO pay-outs are taxed at the higher supplemental tax rate as required by law"

I know I will already be hit hard with the taxes, however, is there any adjustments, or anything I could do, to not feel as if I've lost so much of the compensation for it once I resign?

Anybody have any prior experiences with this? Can I make any exemptions or adjustments prior to resigning or just accept the higher tax rate? Thank you.

[Lunah, MSN, RN]

I worked for a hospital system that only reimbursed you for 75 cents on the dollar for each hour of PTO, and it was taxed. And for this reason (a savings to them), you were not allowed to burn PTO during your notice period.

[KelRN215, BSN, RN]

I worked for a hospital system that only reimbursed you for 75 cents on the dollar for each hour of PTO, and it was taxed. And for this reason (a savings to them), you were not allowed to burn PTO during your notice period.

My last employer was a large national infusion pharmacy. They changed their PTO policy ~2 years ago to be "PTO will not be paid out upon separation except in states where it's required by law." It is required by law in my state but people working for other branches of the company got completely screwed. They also changed their PTO policy to use it or lose it except for in states that don't allow that. I actually think their policy violated the earned sick time law in my state, which is that employees that accrue time on a biweekly basis must be allowed to carry over 40 hrs of PTO but, as far as I know, no one has tried to challenge them on it yet. This company is why I will never work for a national company or a for-profit company ever again. Their motto may as well have been "we'll screw our employees unless the law says we can't."

[SC_RNDude]

If you are using a 403b or 401K you could increase the withholding amount to divert more of the money to retirement than to cash and you can also change your W4 federal tax withholding to keep more of the cash. I don't think you would owe money at the end of the year by increasing your W4, but even if you don't that just means you'll get a bigger tax refund at the end of the year.

Once you start your new job, sign up for their 401K or 403B and transfer your old retirement account into it via an instituational transfer when you are able. It is a better option than an IRA because there is a little known loop hole that you can access the money tax free if you quit or retire after you turn 55 and can than access the money without penalty. This is not an option with an IRA, you have to wait till your 59 1/2 to use the money without penalty, barring a few exceptions like a first time home or for college, I believe.

In this day and age of uncertainty a person needs all the flexibility they can get. I pair my 403b with a Roth IRA because I know I can access the money without penalty if my back was against the wall. I have a pension too, but it is a church pension and is not guaranteed by the govt pension insurance fund, nice loophole, thanks to our corrupt bought and sold for govt! I may very well take the cash balance upfront rather than the life time annuity because I have read about other hospital systems where people lost their pensions due to this church pension ********!

I'm afraid your "little known loophole" is inaccurate. If it were true, I'm not sure how it would remain "little known".

Your 401k and 403b will be taxed at some point. Even if you withdraw them after 55. What you are probably thinking of is the 10% penalty for early withdraws won't apply after 55.

Getting the PTO payout to a retirement account isn't a bad idea, but I doubt it's possible. I doubt you can direct just that part of your paycheck to your retirement contribution. You could up your contribution amount, but then they would do that to your entire paycheck. And usually there is a max contribution. Something along the line of 15-20%. So, not really worth the bother.

My advice is just not worry about it. It's just extra income that when all is said and done counts the same as the rest of your income.

[BBP42]

The last employer I left offered me the option of having PTO accrued paid out in three equal amounts in weekly checks to minimize taxes. I did not take them up on it as I would just as soon have it paid into taxes and owe less come next spring. I did not know the option existed until the HR person asked as it was not listed in our handbook.

[Oldmahubbard]

The last employer I left offered me the option of having PTO accrued paid out in three equal amounts in weekly checks to minimize taxes. I did not take them up on it as I would just as soon have it paid into taxes and owe less come next spring. I did not know the option existed until the HR person asked as it was not listed in our handbook.

But the money would still be taxed as a bonus, even if paid out over 10 checks. And it would still be taxed as ordinary income at the end of the year.