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.
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.
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.
With the expiration of Emergency Unemployment Compensation (“EUC”) benefits on December 28, 2013, President Obama had indicated support for an extension of the EUC benefit program. In response, Senate Majority Leader Harry Reid scheduled extension legislation for a cloture vote in the Senate on January 6, 2014. The bill would extend EUC benefits for three months through March 31, 2014.
While the United States Senate did successfully vote 60-37 to avoid cloture on January 7th to further consider the passing of legislation to extend EUC benefits, there were concerns by the Senate that new “pay for” amendments may be necessary to gain approval in the House.
With the signing of the “American Taxpayer Relief Act of 2012” in January 2013, legislation was passed to further extend the Emergency Unemployment Compensation (“EUC”) benefit program through December 28, 2013. EUC benefits allow qualified states to provide up to 47 additional weeks of federally funded unemployment insurance (“UI”) benefits to people who have exhausted their regular state UI benefits.
In recent years, the economic downturn has led to widespread involuntary reductions in workforces across many diverse industries. Because these staff reductions are costly, Fortune 1000 companies have struggled to control severance costs while providing reasonable severance benefits at the same time. Consequently, there has been renewed interest among large companies in an alternative severance program known as a Supplemental Unemployment Benefit (“SUB-Pay”) Plan.
On October 1, 2013, the U.S. Supreme Court agreed to hear arguments in the landmark United States v. Quality Stores, Inc. case to resolve the issue of whether companies and employees must pay FICA taxes on severance payments. The case has implications for many companies that paid FICA taxes on severance to workers laid off in the 2007-2009 recession.
A $1.8 billion pharmaceutical company with 10,000 employees in eight states asked Total Management Solutions (“TMS”) to implement a Supplemental Unemployment Benefit (“SUB-Pay”) plan for its planned staff reduction. The SUB-Pay Plan needed to be implemented within 30 days.
With over 25 years of experience implementing SUB-Pay Plans for Fortune 1000 companies, TMS was able to guide the company through the custom design and implementation of their plan within the required 30 days.
Introduced by the IRS in 1956, a SUB-Pay Plan is a unique type of severance plan designed to assist employees engaging in an involuntary termination due to a reduction in force, job elimination, reorganization, or similar circumstance. SUB-Pay Plans save payroll tax dollars and enable a company to utilize their paid-in asset of state unemployment taxes to supplement state unemployment insurance (“UI”) benefits with separation pay. When combined, these benefits can provide the laid-off worker with up to 100% of their pre-layoff wage.
With the prolonged effects of a troubled economy, a state’s ability to keep its unemployment insurance (“UI”) trust fund solvent is a challenge. When states exhaust their UI trust funds and borrow from the federal government to pay UI benefits, the results can extend to decreased UI benefits, a decreased amount of UI benefit weeks and an increase to the rate by which employers are taxed for federal and state unemployment taxes.