Is a SUB-Pay Plan right for my company?
Many considerations are involved in determining the effect a SUB-Pay Plan could have on your company. These include corporate culture, population sizes, states involved, pay amounts, etc.
Total Management Solutions can work with your company to determine the approach that best suits your company's objectives.
Who is Total Management Solutions?
For 25 years, Total Management Solutions has been a trusted partner for mid-size companies and Fortune 1000 companies during challenging times by providing alternatives to traditional approaches for layoffs, severance, and reductions in force.
What are “Alternative Severance Programs”?
Today’s challenging economic times require rethinking traditional approaches to how severance pay is handled. Alternative programs and bold strategies need to be considered.
For example, Supplemental Unemployment Benefit ("SUB-Pay") Plans provide companies with the opportunity to reduce severance costs, increase the benefit for their separated employees and reduce the administrative burden associated with involunatry layoffs.
How does SUB-Pay work?
SUB-Pay is intended to supplement state unemployment insurance benefits. When combined, these payments can equal up to 100% of a separated employee's pre-layoff wage.
Separated employees are eligible for state unemployment insurance benefits because SUB-Pay is not considered disqualifying wages against unemployment insurance.
What are the benefits of having a SUB-Pay Plan?
SUB-Pay is not considered wages for employer FICA, SUTA and FUTA tax purposes, and employee FICA tax purposes, so both the company and separated employee can save tax dollars.
In addition, the company may only pay the difference between what an individual receives in state unemployment insurance benefits and their pre-layoff wage (pre-layoff wage – state unemployment insurance benefit = SUB-Pay).
By outsourcing this process, the burden associated with plan administration is reduced.
Are there any special requirements or rules for SUB-Pay?
Yes. Separated employees must be eligible for state unemployment insurance benefits in order to receive SUB-Pay. Plus, they must update their ongoing eligibility for state unemployment insurance benefits.
SUB-Pay benefits must be made on a periodic basis and cannot be made in form of a lump sum.
SUB-Pay plans are governed by the IRS as well as federal and state laws. TMS specializes in these laws and will help guide you through the process.
For more information see IRS Publication 15-A (page 11): www.irs.gov/pub/irs-pdf/p15a.pdf
SUB-Pay Plans sound complex...are they?
SUB-Pay Plans can be based on a number of factors including plan design and the number of states the plan will be used in.
For 25 years Total Management Solutions has specialized in helping its clients set up and administrate SUB-Pay Plans. We know what needs to be done – and do it for you.
Are SUB-Pay Plans only for one time reductions in force?
Clients often consider a SUB-Pay Plan in advance of an upcoming reduction in force. Many of our clients started this way. Once established, most adopt a SUB-Pay Plan as part of their formal ongoing separation pay plan – saving money and increasing the benefits to their separated employees for years to come. Some of our cleints have had their SUB-Pay Plan in effect for as long as 25 years.
I have never heard about SUB-Pay Plans. Why?
SUB-Pay Plans were first introduced by organized labor and the Department of Labor in the early 1950's. For many years they were looked at as a “union only” way of handling reductions in force.
Total Management Solutions was the first company to introduce the SUB-Pay Plan concept to “main stream” Corporate America over 25 years ago. Today the concept is gaining in popularity with Total Management Solutions as the leader in the industry.
How long does it take to set-up a SUB-Pay Plan?
Total Management Solutions utilizes a structured methodology for guiding our clients in developing and implementing their SUB-Pay Plan, typically within 3-4 weeks, including identifying unique state filing requirements and monitoring state regulations and applicable laws to ensure that the SUB-Pay Plan not only meets the goals and objectives set forth by the client, but is compliant in the states and US territories where the plan must be active.