Payments for accumulated leave credits to retiring employees

Payments for accumulated leave credits to retiring employees

Source: January 2014 edition of the FSLG Newsletter [Issue Number: 01-2014]

In its January 2014 edition of the FSLG Newsletter, the Internal Revenue Service states:

“Employees of local governments often have substantial accumulations of sick and vacation pay at the time they retire. In many cases, contractual agreements between the employer and employee call for a lump - sum payment of all accumulated sick and vacation pay, as of the date of retirement. Th e payments often leave local governments and employees with large, unexpected tax liabilities.

“Many times, local governments and employees negotiate a payment plan to lessen the tax burden for both parties.

“Generally, the agreements are executed to defer the tax liability into other years. However, under the constructive receipt rules, the full amount is generally taxable when the employee has the option to receive the full amount. An employee cannot decide when the tax will be paid.

“As we discussed in an article in our previous newsletter , the constructive receipt rules under Internal Revenue Code section 451 require that individuals recognize income as soon as they have effective  control over it; that is, when the funds are made available without substantial limitations. When an employee has an option to receive the income without restriction, it is recognized as income, regardless of whether the employee actually receives it at t hat time.

“Example:

“City Government A owes Employee Z $150,000 in accumulated sick and vacation pay as of the day of retirement. A month before Employee Z’s retirement date, City A reaches an agreement to pay Employee Z $50,000 a year. For  3 years. City A intends to treat each of the 3 payments as wages and subject the payment to Federal Income tax withholding, social security, and Medicare taxes in each year. This arrangement does not defer the tax due. City A may choose to make the payments over the 3 years, but because the entire $150,000 is available at retirement, it will be included in income, subject to income tax withholding and social security and Medicare taxes ,  as of the date the employee is entitled to the funds.

 

“There are two key considerations to remember when consider ing payments of accumulated sick and vacation pay. First, does the worker have a right to receive the money? The worker does not have to exercise that right; the simple existence of the right to receive the money is sufficient t o establish that a taxable event has occurred.

“Second, has the employee been given an option as to when to receive the funds? If the employee has an option, the n the  employee has constructively received the money. The right to receive the money or the opt ion to receive the money determines whether  the money has been constructively received. Once the money is deemed to have been constructively received, it is taxable at that point.”

For additional information and assistance, please discuss the liquidation of accrued leave credits with your attorney or tax advisor.

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Off-duty peace officer’s display of his weapon in the course of an altercation excused based on hearing officer’s finding that he feared for his safety

Off-duty peace officer’s display of his weapon in the course of an altercation excused based on hearing officer’s finding that he feared for his safety

OATH Index No. 825/13

An off-duty Bridge and Tunnel Officer was charged with misconduct for his role in a fight at a car wash, in course of which he displayed his firearm.

OATH Administrative Law Judge Kara J. Miller found that, given the individual’s peace officer status, he could be disciplined for initiating a physical altercation, even though he was off-duty.

However, Judge Miller recommended dismissal of a charge that the officer improperly displayed his weapon, finding that he objectively feared for his safety when the workers advanced on him. She credited the officer’s testimony that he did not place his finger on the trigger and that he re-holstered his weapon when the employees retreated.

The ALJ recommended that the Officer be suspended without pay for 30-day suspension.

The decision is posted on the Internet at:

http://archive.citylaw.org/oath/98_Cases/13-825.pdf

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Selected reports and information published by New York State's Comptroller Thomas P. DiNapoli

Selected reports and information published by New York State's Comptroller Thomas P. DiNapoli

Click on text highlighted in color to access the full report

DiNapoli Probe Prompts $15,000 Restitution

State Comptroller Thomas P. DiNapoli Wednesday announced that former Bombay Fire Company President Bridget Martin was sentenced to pay $15,000 in restitution after an auditand investigation by his office uncovered secret bank accounts and other misdeeds.


DiNapoli: DOT Needs To Improve Railroad Bridge Monitoring Program

The Department of Transportation does not adequately monitor whether railroads in New York state comply with bridge inspection and reporting requirements or fully carry out its own bridge inspection responsibilities, possibly putting the public at risk, according to an auditreleased December 10, 2013 by State Comptroller Thomas P. DiNapoli.

Comptroller DiNapoli Releases School Audits

New York State Comptroller Thomas P. DiNapoli announced his office completed audits of

the Cleveland Hill Union Free School District,

the West Buffalo Charter School, and

the West Valley Central School District.

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New York City’s Special Commissioner of Investigation may not compel a tenured educator to testify in the course of an investigation it is conducting

New York City’s Special Commissioner of Investigation may not compel a tenured educator to testify in the course of an investigation it is conducting

2013 NY Slip Op 08368, Appellate Division, First Department

New York City's Special Commissioner of Investigation for the New York City School District (SCI) is an arm of the City Department of Investigation. It has investigatory and subpoena power and reports the results of its investigations to the Department of Education (DOE), which has the power to initiate disciplinary actions against employees.

A mother complained to the police about alleged sexual harassment of her child, who attended a New York City school, by other students. This ultimately led to a report to, and an investigation by, the SCI as to whether certain DOE employees failed to act on the mother’s complaint.

The Special Commissioner subpoenaed a tenured assistant principal in the school to testify in the course of the investigation. The assistant principal appeared in compliance with the subpoena and “gave pedigree information,” but invoked her rights under Education Law §§3020(1) and 3020-a(3)(c)(i) not to testify further.

Supreme Court, New York County denied SCI’s petition to compel the assistant principal to comply with its subpoena ad testificandumand dismissed the proceeding. The Appellate Division affirmed the lower court’s determination.

The Appellate Division explained that forcing a tenured teacher or school administrator to testify in an SCI proceeding is tantamount to forcing that employee to testify in a New York City Department of Education disciplinary proceeding. To permit SCI to do so, said the court, would directly conflict with state law and “would eviscerate” relevant provisions set out in the Education Law §§3020(1) and 3020-a.

§§3020(1) and 3020-a govern disciplinary action taken against such tenured employees and establish procedures specifically designed to protect them at disciplinary proceedings. Indeed, noted the Appellate Division, Education Law §3020-a(3)(c)(i)(c) specifically provides that the tenured employee shall not be required to testify at any disciplinary hearing.

Citing Board of Education of City School District of City of New. York v Mills, 250 AD2d 122, leave to appeal denied 93 NY2d 803, the Appellate Division noted that “no local legislative body is empowered to enact laws or regulations which supersede State statutes, particularly with regard to the maintenance, support or administration of the educational system."

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2013/2013_08368.htm

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