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Employee Achievement Awards Policy

You can exclude employee achievement awards from the employee's income only if the employer can deduct them on its tax return. To be deductible by your employer, and excluded from employee wages, the award must meet all the following requirements:

1. Be given for length of service or safety achievement.
2. Be tangible personal property (cannot be cash, gift certificate, or equivalent items).
3. Be given under conditions and circumstances that do not create a significant likelihood of the payment of disguised compensation.
4. Be given as part of a meaningful presentation.
5. Be no more than specified dollar amounts

In the case of an employer exempt from taxation, such as governmental employers, references made as amounts which would be allowable as a deduction to the employer are amounts that would have been deductible if the employer were not exempt from taxation. (Governmental employers must follow the same rule applicable to non-governmental employers.)

Length of service awards for service less than 5 years are not excludable if received within the first 5 years of employment or if the employee received a similar award during the current or preceding four years.  Safety awards cannot be excluded from income if they are presented to more than 10% of the employees, or were granted to a manager, administration, clerical employee or other professional employee.

Dollar Limits
There are limits to the total awards you can exclude in one year. Awards from non-qualified plans are limited to $400, and total awards, from both qualified and non-qualified plans, are limited to $1,600. The cost to the employer is the determining factor for these limits. Amounts over the limits cannot be deducted by the employer and must be included in the employee's income.

Qualified Plan Award
A qualified plan award is one you are awarded as part of an established written plan by your employer that does not discriminate in favor of highly compensated employees. An award will not be considered a qualified plan award if the average cost of all employee achievement awards given by your employer is more than $400. In determining average cost, awards of nominal value are not taken into account.