State Unemployment Benefits

State Unemployment Benefits

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Although the U.S. Supreme Court disagreed with Quality Stores and held that regular severance payments are subject to Federal Insurance Contributions Act ("FICA"), there is an older type of separation pay plan that the IRS agrees is exempt from FICA. Establishing a supplemental unemployment compensation benefits ("SUB") plan to pay separation benefits may be advantageous for employers and their former employees. This article describes a typical SUB plan and explains how paying separation benefits pursuant to the plan may produce employment tax savings and other advantages. 

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