High Court Rules Severance Payments are Taxable

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On March 25, 2014, the Supreme Court of the United States held that severance payments are taxable under the Federal Insurance Contributions Act (FICA) when made to employees whose employment is involuntarily terminated.  The Court reasoned that FICA’s definition of wages encompasses severance payments and that the severance at issue in this case, which was not linked to the receipt of state unemployment benefits, was not exempt from FICA tax.

A recent article by Hera S. Arsen, J.D., Ph.D. and Vicki Nielsen, Of Counsel at Ogletree Deakins provides more information on the Court's decision, and how benefits made from a SUB-Pay Plan compliant with IRS Revenue Rulings are still FICA tax exempt.

Click here for the Ogletree Deakins article.

This article was drafted by the attorneys of Ogletree Deakins, a labor and employment law firm that represents management. This information should not be relied upon as legal advice.

This article was originally published on the Ogletree Deakins Employee Benefits blog.