Top 5 Supplemental Unemployment Benefits Questions & Answers
We field many calls each week about Supplemental Unemployment Benefit (SUB) Plans. The following five are the most common. If you have additional questions please do not hesitate to contact us or download our whitepaper – “Harnessing the Power of Supplemental Unemployment Benefit Plans.”
Question: How does the receipt of SUB benefits effect state unemployment benefits?
Answer: If designed properly, SUB benefits have no effect on state unemployment benefits. It is a supplement or “in addition to” state benefits.
Question: How are SUB benefits taxed?
Answer: SUB benefits are not considered wages and therefore are exempt from FICA taxes. They are however subject to federal and state income tax with the exception of Pennsylvania. Pennsylvania exempts SUB from state income tax.
Question: How does an employee qualify for SUB?
Answer: An employee must be laid off by the employer and be eligible for state unemployment benefits to qualify for SUB. Benefits must stop when the employee returns to work (for any employer).
Question: How much does an employee receive from SUB?
Answer: This depends entirely on how the benefit formula in the plan is written. The law says that the amount of weekly benefits payable must be based upon state unemployment benefits, other compensation allowable under state laws, and the amount of regular weekly pay. These are very broad requirements that allows room for creative benefit formulas.
Question: Can a SUB plan be utilized to meet the fringe benefit requirements of the Davis-Bacon Act and/or state prevailing wage laws?
Answer: Yes, as long as the plan is funded. Irrevocable contributions of fringe benefit dollars paid to a trustee pursuant to a bona fide fringe benefit trust fund, plan or program on a regular basis by contractors engaged in public works qualify as a “funded plan”. Contributions to funded plans can be credited towards meeting the prevailing fringe benefit requirements of the Davis-Bacon Act, Service Contract Act and state prevailing wage laws.
How We Can Help:
DirectAdvisors, established in 2001 and located in Albany, New York provides bona fide benefit plan consulting and third party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act, Service Contract Act and state prevailing wage regulations. Our clients are located throughout the United States and range in size from 10 to 3000 employees.
In 2015, our construction company clients contributed tens of millions of dollars of prevailing wage fringe benefit contributions to The DirectAdvisors Trust (health & welfare benefits) and retirement plans managed by our team.