Because of a recent clarification by the Internal Revenue Service (IRS), a moratorium has been placed on the practice of exchanging medallions for cash value certificates as part of the UNMC Thank ‘U’ Program.
Up until the IRS clarification, certificates valued under $50 that were given to employees were exempted from tax action through a “di minimus” rule. The clarification from the IRS indicated that any cash value certificate provided to employees is subject to taxation and withholding.
If the program would continue as is, UNMC would need to withhold taxes on each medallion that was redeemed. UNMC will look at the administrative costs associated with that option, as well as many other possible alternatives, said John Russell, assistant vice chancellor and executive director of Human Resources.
“We’ve placed a moratorium on exchanging the medallions for cash value certificates, until we determine what course of action to take,” Russell said. “We’re studying many alternatives to deal with the situation.”
“We should, within another month or so, have a pretty good plan of what we’ll do,” he said. “The Thank ‘U’ Program has been tremendously popular, and we will continue it. We must, however, comply with the law and not run a program that is cost-prohibitive.”
There are no plans to tax certificates that already have been redeemed, Russell said.