As part of the “Savings Initiative,” guidance (Rev Rul 2009-31 and Rev Rul 2009-32) provides that qualified retirement plans (401(k) and profit-sharing plans) can be modified to allow annual contributions of an employee's unused paid time off (PTO). One ruling covers the contribution of unused PTO, determined as of the end of the plan year, and the other deals with post-severance contribution of accumulated and unused PTO.

The company’s PTO and Profit-Sharing Plan is amended to provide that unused PTO cannot be carried over to a subsequent year. The dollar equivalent of the PTO is contributed to the profit sharing plan, not to exceed the annual contribution limits (or less if the employee so elects). Any excess is paid to the employee by February 28 of the subsequent year. (Rev Rul 2009-31)

The company’s PTO and Profit-Sharing Plan is amended to provide that unused PTO is allocated to the terminated employee’s profit-sharing account, not to exceed the annual contribution limits (or less if the employee so elects), and any excess is paid to the employee within 60 days of termination. (Rev Rul 2009-32)