SSR 62-63: Rescinded 1984

SSR 62-63

The X Corporation permits its employees on request, under certain

circumstances, to be paid earned vacation allowances for a period during

which they are unable to work because of sickness or accident. Held , such allowances are vacation pay rather than sick pay and are

wages within the meaning of section 209 of the Act.

The X Corporation has a written sick-pay plan or system for its salaried

employees, which provides for payment of certain amounts because of

absence due to sickness or accident for a maximum period of 26 weeks. For

its hourly-paid employees, the corporation makes payments to a private

insurance company for a group insurance policy which provides for the

payment to such employees of weekly benefits for sickness or accident

disability for a maximum period of 26 weeks, beginning after the first 7

days of such disability.

Both salaried and hourly-paid employees are also eligible for a vacation

allowance in any calendar year if they meet certain requirements involving

length and continuity of service in the previous year. An employee meeting

the requirements thus has an earned right to a vacation with pay or a

vacation allowance at any time after January 1 of the vacation year.

Ordinarily, vacations are scheduled for a definite period between April 15

and December 31 of the vacation year. However, on request both salaried

and hourly-paid employees may, while absent from work because of sickness

or accident, be paid any vacation allowance for which they are then

eligible. When so requested, the vacation allowance may be paid during the

7-day waiting period of hourly-paid employees or after an employee's sick

leave is exhausted, or prior to his retirement on a disability pension.

r, on request both salaried

and hourly-paid employees may, while absent from work because of sickness

or accident, be paid any vacation allowance for which they are then

eligible. When so requested, the vacation allowance may be paid during the

7-day waiting period of hourly-paid employees or after an employee's sick

leave is exhausted, or prior to his retirement on a disability pension.

Section 209 of the Social Security Act provides, in pertinent part, that

the term "wages" means remuneration for employment, with certain specified

exclusions. Subsection (b) of section 209 excludes from wages any payments

made on account of sickness or accident disability to or on behalf of any

employee under a plan or system established by an employer providing for

such payments. This exclusion also applies to amounts paid by an employer

for insurance to provide such payments. Vacation pay, however, is not

excluded from wages by any provision of the Social Security Act; and

Regulations No. 4. §404.1026(b) expressly provides that vacation

allowances are wages.

Thus section 209(b) of the Act excludes from wages the payments made to

employees of the X Corporation under either its sick-pay plan for salaried

employees or the group insurance policy for hourly-paid employees, and

excludes also the payments made by the X Corporation to the insurance

company. On the other hand, vacation allowances paid to employees for

regularly scheduled vacations are wages.

tion 209(b) of the Act excludes from wages the payments made to

employees of the X Corporation under either its sick-pay plan for salaried

employees or the group insurance policy for hourly-paid employees, and

excludes also the payments made by the X Corporation to the insurance

company. On the other hand, vacation allowances paid to employees for

regularly scheduled vacations are wages.

The question to be decided is whether a payment for earned vacation leave

which is paid during or for a period in which the person is unable to work

because of sickness or accident is an extended sick leave payment (i.e.,

sick pay excluded from wages) or an accelerated vacation payment (i.e.,

vacation pay which is wages). If such payment is wages, it may be used in

determining a person's eligibility for, and the amount of, benefits under

the old-age, survivors, and disability insurance program. Also, if it is

wages, it must be counted as earnings for deduction purposes under section

203 of the Act. On the other hand, if such payment is not wages, it may

not be counted for either benefit or deduction purposes.

Under the vacation plan of the X Corporation, an employee who meets the

eligibility requirements has an earned right to a vacation with pay or a

vacation allowance at any time after January 1 of the vacation year. The

fact that the employee elects to receive such pay for a period during

which he is unable to work because of sickness or accident disability does

not change its nature as vacation pay. Moreover, the payment is not made

because the employee is sick and therefore absent from his work, but

because he is entitled to the payment as a vacation allowance without

regard to his sickness. Thus, the payments in question are vacation pay

and, therefore, wages.

during

which he is unable to work because of sickness or accident disability does

not change its nature as vacation pay. Moreover, the payment is not made

because the employee is sick and therefore absent from his work, but

because he is entitled to the payment as a vacation allowance without

regard to his sickness. Thus, the payments in question are vacation pay

and, therefore, wages.

Accordingly, it is held that vacation allowances paid to an

employee of the X Corporation, even though paid for periods in which he is

unable to work because of sickness or accident disability, are wages

within the meaning of section 209 of the Act.