DRS Email 14-009, Holiday Leave Banks

  • Notice No.: 14-009
  • Date: June 19, 2014
  • Applies to: Cities, Counties, and Political Subdivisions
  • Subject: DRS Email 14-009, Holiday Leave Banks

This Notice is provided to clarify the rules for reporting data to DRS regarding holiday leave banks.

Certain employees whose duties entail providing essential or emergency services (such as firefighters, police officers, correctional officers, 911 dispatchers, etc.), are often required to work on recognized holidays. Some employers create holiday leave banks for these employees and if an employee works the holiday, it is considered a regular workday. Later, the employee may use hours from the holiday leave bank to take a day off and/or cash out all or some of the hours in the future.

First, we will answer some FAQs (frequently asked questions) on this topic; then, we will present scenarios based on an example of a holiday leave for 10 standard State holidays, plus a Federal holiday (Christmas Eve).

FAQs

What are recognized holidays for purposes of this email Notice?

  • Holidays recognized by either the State of Washington, the Federal government, or formalized by an organization; and tied to a specific date.
  • If an employer utilizes a holiday leave bank; the employer must identify the recognized holidays associated with the hours that are added to the holiday leave bank.

Are personal or floating holidays considered recognized holidays for purposes of holiday leave bank cash outs?

No. Personal or floating holidays are not tied to a specific date and are not considered recognized holidays for the purposes of holiday leave bank cash outs.

Is a cash out of a personal or floating holiday treated the same way as a cash out of holiday leave?

  • A cash out of a personal or floating holiday is considered a cash out of leave and is not reportable for most DRS plans (leave cash outs are reportable only for certain TRS 1 and PERS 1 members).
  • A cash out of a recognized holiday from a holiday leave bank is considered overtime.

If employees are allowed to cash out hours from a holiday leave bank; do not include non-recognized holidays in the holiday leave bank. Don’t combine these different types of leave into the same bank because each type of leave must be treated differently if cashed out.

How are holiday leave bank hours used as leave different than holiday leave bank hours cashed out?

  • Used as leave: If hours from the bank are used as leave, report the hours used and compensation earned to DRS just as you would for any other leave used, such as vacation or sick leave.
  • Cashed out: When an employee receives an additional payment because he or she works on a recognized holiday, the payment is considered overtime. Therefore, if an employee cashes out hours from the holiday leave bank, treat it as a deferred payment of overtime and report it as regular earnings using status code A. Report no service (hours) because you should have already reported the hours when the employee worked the holiday(s).

Are cash outs of a holiday leave bank considered reportable compensation?

Cash outs for recognized holidays are considered overtime; therefore, it depends upon whether overtime is considered reportable compensation for the employee’s retirement system/plan. Overtime is considered reportable compensation for members of:

How should employers report cash outs from a holiday leave bank (for hours related to recognized holidays)?

Report compensation only with an “A” code in the month of the associated holiday. Examples to follow.

Sample Holiday Leave Bank and Scenarios

This sample holiday leave bank is for 10-hour shift workers who work Monday - Thursday. At the beginning of the year, the workers are credited with 10 hours per holiday for the following 11 holidays for a total of 110 hours in the holiday leave bank. The employer offers the option of cashing out unused holiday leave bank hours in December of each year.

State Legal Holiday Names State Statutory Designation of Holiday (RCW 1.16.050) Observed Holiday Dates
New Year's Day First day of January January 1, 2013 (Tuesday)
Martin Luther King Jr.'s Birthday Third Monday in January January 21, 2013 (Monday)
Presidents' Day Third Monday in February February 18, 2013 (Monday)
Memorial Day Last Monday of May May 27, 2013 (Monday)
Independence Day July 4 July 4, 2013 (Thursday)
Labor Day First Monday in September September 2, 2013 (Monday)
Veterans' Day November 11 November 11, 2013 (Monday)
Thanksgiving Day Fourth Thursday in November November 28, 2013 (Thursday)
Day Immediately Following Thanksgiving Day Immediately Following Thanksgiving November 29, 2013 (Friday)
Christmas Eve December 24 (Federal Holiday) December 24, 2013 (Tuesday)
Christmas Day December 25 December 25, 2013 (Wednesday)

Scenario 1:

The employee either took each holiday off or otherwise used all of her holiday leave bank hours throughout the year and has no holiday leave balance to cash out. The employee’s hourly rate of pay is $35 and she works Monday Thursday, 10-hour shifts. She worked no other overtime during the year. The hours and compensation would look very normal as shown below:

Earn Period Hours Compensation Comment
01/2013 190 $6650 If every month, the worker took the holiday off or otherwise used all of her holiday leave bank leave during the year.
02/2013 160 $5600
03/2013 160 $5600
04/2013 180 $6300
05/2013 180 $6300
06/2013 160 $5600
07/2013 190 $6650
08/2013 170 $5950
09/2013 170 $5950
10/2013 190 $6650
11/2013 160 $5600
12/2013 180 $6300

Scenario 2:

Same 10-hour shifts, same work days (Monday-Thursday), and same pay as in Scenario 1. This employee used 60 hours of his holiday leave bank hours as leave to take time off and it was reported in the same way as vacation or sick leave used would be reported the hours and compensation were reported “as earned” in the month it was used.

It is now December. The employer will pay the employee for the holiday leave bank balance of 50 hours in a lump sum payment on his December 31 paycheck.

How should the employer report this information to DRS? DRS does not require employers to track exactly which holidays an employee chooses to work, and which holidays an employee chooses to take off. If an employer does not track the leave used, the employer must use the FIFO (first in, first out) method to report compensation for a holiday leave bank cash out. Using FIFO would assume that the first 60 hours had been used for the first 6 holidays. This is how the employer would report the remaining 50 hours’ worth of compensation to DRS from that December payroll.

Earn Period Hours Compensation Comment
01/2013 190 $6650 Holiday leave, vacation leave, & sick leave were used during the year through 10/2013.The hours and compensation look normal to DRS.
02/2013 160 $5600
03/2013 160 $5600
04/2013 180 $6300
05/2013 180 $6300
06/2013 160 $5600
07/2013 190 $6650
08/2013 170 $5950
09/2013 170 $5950
10/2013 190 $6650
11/2013 160 $6650

Regular compensation $5600 + $1050 of holiday leave cash out which will be associated with 11/2013 for the 3 holidays (30 hours of pay) in this month. Note that no additional hours are reported. The $1050 is considered a deferred payment of overtime; the hours are considered to have been worked as a normal day on the holiday and reported already.

It is as if the person worked the holidays and received double-time for doing so. The employee did not actually work extra hours, but in essence was paid overtime for working on a holiday.

12/2013 180 $7000

Regular compensation of $6300 + $700 of holiday leave cash out which will be associated with the 2 holidays (20 hours of pay) in this month. Note that no additional hours are reported. The $700 is considered a deferred payment of overtime; the hours are considered to have been worked as a normal day on the holidays and reported already.

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