The Solution to the Traditional Severance Plan
The TSI Program
Under a Supplemental Unemployment Benefits Plan, SUB pay integrated with State Unemployment benefits is characterized as a “benefit” rather than as “wages,” thus eliminating employment tax obligations.A recent Supreme Court Ruling in United States v. Quality Stores, Inc. deemed that all traditional severance payments are subject to payroll taxes, that payments made under a Supplemental Unemployment Benefits osishe only way to pay separation benefits without paying employment taxes. This same tax benefit is provided to the employees who receive benefits under a SUB Plan, effectively increasing their income during their unemployment period (see example).
Supplemental Unemployment Benefits are paid in conjunction with State Unemployment Insurance (UI) benefits. The displaced employee’s income is maintained, but now comes from two sources, the state and the employer, thus reducing the benefit cost for the employer and insuring income stability during a period of unemployment for the former employee; As part of its services, TSI manages this integration process.
Because SUB-pay benefits are tied to State UI benefits, SUB benefit payments cease when employees return to work, creating another opportunity for savings referred to as “duration savings.”
Duration savings may be utilized in a variety of ways by the employer. Some employers use the savings to fund a “re-employment bonus,” an award consisting of some portion of the remaining benefit provided as a taxable bonus to the displaced employee. A reemployment bonus incents a displaced employee to actively search for new employment and rewards them for having found it, while still creating savings for the employer.
TSI is a full-service SUB Plan administration firm dedicated to making your challenging, transitional time as efficient and straightforward as possible. After implementation is complete, we assume the bulk of administrative responsibilities for your Plan, and work diligently to ensure a seamless and compassionate experience for your displaced employees.
Our services include:
- Communicating with Plan Participants; TSI’s Customer Service Call Center with 24 hour web and voice-automated support is available to participants around the clock.
- Calculating and reporting the individual Benefit amounts to be paid each pay period in conjunction with State UI.
- Monitoring eligibility and unemployment status of participants.
- Legal and regulatory compliance support.
- Quarterly Reporting on Participant satisfaction and Plan savings achieved.
Contact us today for a complimentary analysis of potential savings available for your organization through the TSI Program.