Depositing Vacation Dollars into 401(k) Funds

Given that the citizens of the United States are allowed less vacation time than comparable workers in other parts of the world, it is an odd problem that there is a lot of unused vacation time floating around in the workforce. After all, one would think that the labor force would take advantage of what little vacation time is allowed for them. That is not the case, though. So what is to be done with all of that unused vacation time that is stacking up? One option is for the dollar value of that time to be deposited into 401(k)'s.

The option of putting unused vacation dollars into 401(k) accounts has been around for years, but many employers have not chosen to put it into effect. The Pension Protection Act focuses on the design features of 401(k) accounts - such as automatic enrollment - and when this act went into effect, it got employers wondering what else they could do to encourage participation in the savings program.

Choosing to put vacation dollars into a 401(k) account may not appeal to high-paid employees, because many of them already max out on the $15,500 per year contribution allowance. The average employee, though, would benefit from being able to contribute their vacation dollars into the account.

Companies that have the 'use it or lose it' policy could set it up so that vacation hours that are not used within the allotted time would automatically be deposited into the 401(k) account. For companies that allow vacation time to be cashed-out, employees could be allowed to deposit that money into their 401(k) account rather than taking the cash value. Either way, the employers would be reducing the number of unused vacation hours that have been accumulated by their employees without taking anything away from their workers.