Latest Legislation Temporarily Decreases Social Security Rate; Prolongs State Unemployment Insurance Benefits
March 16, 2012 - NORTON, MA - On February 22, 2012, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012. This latest legislation extends the duration of the expiring “Temporary Payroll Tax Cut Continuation Act of 2011” and the “Unemployment Compensation Act of 2010”. In addition to other provisions, the passing of this latest legislation includes:
Social Security Tax Rate Extension
Under former legislation, a temporary payroll tax cut in the employee Social Security rate from 6.2% to 4.2% was only in effect from January 1, 2012 to February 29, 2012. The latest legislation extends the temporary decrease through December 2012.
What does this mean for SUB-Pay Plans? Companies will still receive an immediate and guaranteed 7.65% FICA savings on each payment made to their separated employees (6.2% of the Social Security tax up to the 2012 taxable wage base of $110,000, and no limit on the 1.45% Medicare portion of the tax). Plan participants will save 4.2% of their Social Security tax up to the taxable wage base and save 1.45% of their Medicare portion.
Extended Emergency Unemployment Compensation (“EUC”) Benefits Through 2012
While total state unemployment rates, employment numbers and initial state unemployment insurance (“UI”) claim rates have been recovering with variation among states, these differences from state to state and the changing economy led to a reduced overall number of weeks for EUC benefits.
The overall total number of EUC weekly claims for the states with highest unemployment rates beginning in September 2012 will be cut with the combined maximum number of EUC, EB and state UI weeks changing from 99 to 73 weeks. In addition, the EUC program and EUC benefits will stop after December 31, 2012.
Regular Extended Benefits (“EB”)
The special “trigger” provisions that enabled states to continue paying EB weeks were continued along with the 100% federal reimbursement of EB claims paid. In extending this provision it was noted that the number of EB claimants would be relatively small because 1) the legislation required that states pay EUC first; and 2) most states are projected to trigger off of EB during 2012.
About Total Management Solutions
Total Management Solutions has pioneered the next generation of corporate severance solutions known as Severance 2.0. These custom solutions can be implemented within 3-4 weeks. TMS provides a dedicated client services team for every corporation with support services available to the separated employees who have any questions about their transition benefit plan. This dedicated TMS Client Services team is staffed with experienced professionals who know first-hand what separated employees are experiencing during reductions-in-force. This team helps ensure that the separated employee population is cared for and treated with the utmost respect, understanding and compassion while providing companies with more effectiveness, efficiency, and empathy; and less hassles, costs, and risks.