Charitable Contributions

[Guest Lisa-Beth]

Does anyone know if it's legal to allow an employee to make charitable contributions using pretax dollars?

In other words we would withhold funds pretax and submit them directly to the charity on behalf of the employee.

We plan to match all voluntary charitable contributions made by our employees but would like to offer them some tax advantage if it's possible to do.

Anyone heard of such a thing?

[E as in ERISA]

Possibly through a cafeteria plan -- e.g., if the plan provides that the money leftover at the end of the year will go to charity. This might also make participants feel a little bit better about the "use it or lose it rule. " I haven't actually seen it done -- but it's something to consider. I have even seen discussion suggesting that the employees can designate which charity their money goes to....

[david rigby]

I hope the participant does not expect to claim this as a deduction on a 1040 Schedule A.

[Kirk Maldonado]

Katherine:

I'm skeptical that would work; giving the participant the right to direct the disposition of the forfeited amounts doesn't seem consistent with the 125 plan rules.

[mbozek]

I thought the 125 rules restricted the use of forfeited amounts to either paying plan expenses, reducing premiums or returning the premium to the employees. Prop. regs. 1.125-2 Q-7(b)(7)

[david rigby]

Not wanting to speak for Katherine, but I read her post to mean the employer tells plan participants:

- the leftovers will be returned to the company and

- the company will give them to charity, and

- please suggest what charity(ies) you think would be appropriate.