Buy Vacation programs

[CEB]

With the recession really taking hold of my current employer plans and requiring us to cut back on benefits offered to the employees, we are thinking about adding a buy (no selling) vacation policy for the employees.

Where in the world do I start with developing one of these type of programs? What are the risks to the employer and employee?

I think it will look something like all employees can buy up to one week of vacation. The vacation bought time would than be pretax(?) and the entire week would be available (not accrued like our normal vacation time) the first day of January. When the employee takes it, I would imagine that it becomes a taxable benefit and that pay check the employee would be taxed? At the end of the year, could this be some kind of "use it or loose it benefit" If they loose it, than does the employee pay taxes on it if it was never distributed to the employee? I would assume this week would be used first before any normal vacation time. Is it still ok for them to have a rollover in place for days that are company paid. It sound very complicated. Does it become a section 125 plan or subject to 5500 & SPD? As complicated as it may sound on the record keeping side, at least we could provide a benefit, that hopefully would not be a lot of additional cost to the employer and still add some work/life balance for employees. I guess this does leave some exposure that if an employee leaves in Feb, would we have to pay out that vacation time? One last question, is this subject to discrimination testing? Could we excluded section 16 officers or maybe a group of employees at a different location that work shifts (like one week on and one week off). Is this worth the administrative work?

Thanks!