Several units have or are planning to initiate programs offering cash bonuses or other incentives to employees to encourage vaccination against the COVID-19 virus. Questions have arisen about these plans as follows:
- Can we offer such incentives? Generally speaking, yes you can. The EEOC has ruled these incentives are ok if the amounts are not coercive. State law gives cities and counties broad authority to offer fringe benefits to employees (if the benefit is not prohibited elsewhere in the statutes. Such is the case with giving employees free or reduced utility rates.)
- Can you use ARPA funds to pay for these incentives? As is typical with ARPA money, the answer is “it depends.” There are some scenarios that are likely to be acceptable uses of ARPA funds, and others that may or may not be. Please see Kara Millonzi’s detailed blog post for more discussion on this topic.
- Are these incentives taxable to employees? We believe they are and should be paid through payroll so that they are subject to the appropriate withholdings and reporting. We are watching for clarification from the IRS on this issue.
- Are these incentives reportable to LGERS? In order for a payment to be reportable to LGERS, it must be considered by the employer to be compensation for retirement purposes. This generally means that the employer must consider it to be pay for the performance of work in the employee’s full-time position. It is up to the employer to determine if these incentives are considered to be compensation. We believe that most employers would conclude that these incentives are not compensation, for example because the employee would be considered to be performing their work whether or not they qualify for the incentive. However, employers may reasonably reach a different conclusion based on their own facts and circumstances. Regardless of the decision of the employer, consistency in application is strongly recommended. (This section updated 9/24/2021)
Please let us know if you have further questions!
The SOG's Diane Juffras has posted a very detailed blog post on workplace issues with COVID vaccines and incentives. You can find that post here.