TMS was recently featured in the Connecticut Bar Association's March 2014 tax newsletter.

TMS offered insight into how a Supplemental Unemployment Benefit (SUB-Pay) Plan can benefit employers and their displaced employees given the recent the U.S. Supreme Court's recent ruling in United States v. Quality Stores, Inc. case.

Published in Severance Strategies

The U.S. Supreme Court’s decision in United States v. Quality Stores, Inc. is the most significant payroll tax opinion issued in the last 30 years, if not ever.  Not only does it put an end to the thousands of Social Security and Medicare (FICA) tax refund claims filed by employers on their own behalf and on behalf of millions of terminated workers, but it also may impact and limit the extent to which future downsized workers are eligible to receive state unemployment benefits.

A recent article by Mary Hevener and David Fuller, partners at Morgan Lewis, provide 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 Morgan Lewis article.

This article was drafted by the attorneys of Morgan Lewis.  This information should not be relied upon as legal advice.

After months of negotiating, on Monday, April 7, 2014, the Senate passed House bill 3979 which contained an amendment to renew Emergency Unemployment Compensation (“EUC”) benefits to the long-term unemployed.  The bill passed by a vote of 59-38 and now heads to the House for a vote and final approval.

Published in Unemployment Benefits

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.

Today the US Supreme Court ruled in favor of the IRS in United States v. Quality Stores, Inc., the closely watched case involving whether employers are eligible for a refund of FICA taxes remitted on certain types of severance pay.

The Court unanimously rejected a $1 million refund bid by defunct agricultural specialty retailer Quality Stores, and said severance payments the company made to 3,100 people were subject to tax under the Federal Insurance Contributions Act (“FICA”).  In addition, more than $1 billion in FICA tax protective refund claims filed by employers across the country will not be paid by the IRS.

This case had broad implications on whether employers continue to provide Supplemental Unemployment Benefit (“SUB-Pay”) Plans, which are linked to the receipt of state unemployment insurance (“UI”) benefits which, pursuant to the IRS’s administrative position going back to the 1950s, is not subject to FICA or FUTA taxes.

SUB-Pay Plans and Total Management Solutions were featured in a recent Workforce Magazine article by Patty Kujawa.

In the article, "SUB-Pay Plans Could Ease Employer Severance Costs", Ms. Kujawa explains that severance packages, and their included taxes, can put pressure on a company's cash reserves.  However, a SUB-Pay Plan may be a better financial alternative to help companies lower severance costs.

Published in Severance Strategies

Exempt or Not Exempt?  That is the question in the landmark United States v. Quality Stores, Inc. case which will decide once and for all if certain severance payments made to employees whose employment is involuntarily terminated are taxable under the Federal Insurance Contributions Act (FICA).

On January 14, 2014, the Supreme Court of the United States heard oral arguments in the Quality Stores case.  While the case will not be decided until June 2014 at the latest, many legal experts are sharing their reaction to the opening arguments.

A recent blog post by Alan Horowitz, the head of the Supreme Court and Appellate Litigation Group at Miller & Chevalier, offers his thoughts on the oral arguments from the IRS and Quality Stores.

Click here for Alan's blog post.

Another blog post by Bradley Joondeph, the Inez Mabie Distinguished Professor and Associate Dean for Academic Affairs at the Santa Clara University School of Law, posted on the SCOTUSblog his thoughts on the oral arguments from the case as well.

Click here for Bradley's blog post.

This information should not be relied upon as legal advice.

Published in Severance Strategies

After a failed attempt to extend Emergency Unemployment Compensation (“EUC”) benefits on January 15, 2014, on February 6, 2014 Senate Democrats sought to once again move a short term EUC benefit extension bill through the Senate.  60 votes were needed to push the bill to further Senate consideration.

Senator Jack Reed’s (D-RI) latest proposal included provisions to pay for the $6.4 billion cost of the EUB benefit extension with a pension smoothing amendment which would reduce required pension contributions by employers.  While there was interest on the part of a number of Republicans in finding language that would attract 60 votes through the amendment process, Senate Majority Leader Harry Reid chose to bring the bill to the floor without further amendment.  The proposed bill attracted only two Republican votes and failed.

Published in Unemployment Benefits

With the expiration of Emergency Unemployment Compensation (“EUC”) benefits on December 28, 2013, Senate Majority Leader Harry Reid provided extension legislation to the Senate; however there were concerns that new “pay for” amendments may be necessary to gain approval in the House.

Senator Reid proposed voting on alternative legislation with the cost paid for with a provision that called for extending the defense sequester cuts beyond the 10 year budget window.  Unfortunately, the Senate lacked the votes to send the bill to the House, but there was a possibility that another EUC benefit extension bill could be considered in the future.

Senator Jack Reed (D-RI) has proposed a new amendment to the EUC benefit extension bill that would extend EUC benefits through March 31, 2014 and seek to “pay for” the extension largely through a pension smoothing proposal that would permit employers to reduce pension contributions, resulting in money available to be spent in the economy and presumably increase tax revenue.

Published in Unemployment Benefits

On January 14, 2014 the Supreme Court of the United States heard oral arguments in United States v. Quality Stores, Inc., a case on appeal from the Sixth Circuit Court of Appeals. A circuit court split had spurred the Court to hear the case to decide whether certain severance payments made to employees whose employment is involuntarily terminated are taxable under the Federal Insurance Contributions Act (FICA).

A recent article by Vicki Nielsen, Of Counsel, and Hera S. Arsen, J.D., Ph.D. at Ogletree Deakins provides more information on the oral arguments from the IRS and Quality Stores.

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.

Published in Severance Strategies
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