Holiday Club Payroll Savings Accounts
A holiday club is a payroll savings account that builds up during the year and pays out before the holidays. It is a convenience for employees, and the money stays theirs.
What to know.
Deductions need written consent, and the account should be held for the employee. State wage laws limit what can be deducted from pay, so check them first.
Do not treat the balance as company money. Pay out as promised, and explain what happens if the employee leaves.
Where to look next.
Emergency Savings Overview
How these accounts work.
Emergency Savings Accounts
A related payroll savings idea.
Financial Wellbeing
Related programs.
How a Holiday Club Works.
A holiday club collects a small amount from each paycheck into a separate account and pays it out before the holidays. The money belongs to the employee. The employer is administering a convenience.
Because it is a payroll deduction, state wage law may require written consent and set rules for how deductions are handled and refunded.
Employees should know when money pays out, what happens if they leave and who holds the funds.
Common questions on this topic.
Four questions to settle before you rely on it.
Is it taxable?
The employee’s own money saved through payroll is not new income, but any interest or employer addition may be. Ask your CPA.
When does it pay out?
On the date in the program terms, typically before the holidays.
What if the employee leaves?
The balance is generally returned. State the rule in writing.
Do we need consent?
Yes, in writing, and ask counsel about state requirements.
Where is the money held?
In a separate account. Make sure it is not mixed with company funds.
Can employees stop contributions?
Usually yes, with notice. Put it in the terms.
Does the employer pay anything?
Not by itself. Any employer contribution is a separate decision.
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General information, not legal or tax advice. Plan-specific questions belong with your counsel or CPA, and we will bring them in.
Related guides.
Emergency Savings and Holiday Club Accounts
The overview this page belongs to.
Compliance Services
How CFH supports the compliance side of your plans.
Payroll-Deducted Emergency Savings Accounts
A related question on the same program.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
Employer Wage Deduction Rule (29 CFR 531.35)
The rule that wages be paid free and clear.
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