Because of closures related to the coronavirus (COVID-19) outbreak in the U.S., an increasing number of employees have been laid off. As a result, employers may be looking for options to better assist employees who have been negatively impacted. Although employees may apply for state unemployment benefits, those benefits may not be sufficient to cover their lost income. This is where both employers and employees can benefit from Supplemental Unemployment Benefit (SUB) plans.
Supplemental Unemployment Benefit plans allow employers to supplement state unemployment benefits by providing severance pay to workers who have been laid off because of a reduction in force, plant closing or similar conditions. Benefits under the SUB plan may also include sick and accidental benefits.
If an employee earned wages of $900 per week prior to being laid off and state unemployment benefits provide them $500 per week, the SUB plan would cover the difference and pay the remaining $400 per week to the employee.
SUB plans can be quickly and easily established as a means to supplementing state unemployment benefits and spreading severance costs over time. While SUB plans may make sense for many employers, they must be carefully crafted and require a written plan document.
For more information on how a Supplemental Unemployment Benefit plan could apply to you or your organization, or assistance in implementing one, please contact the authors or another member of Holland & Knight's Employee Benefits and Executive Compensation Group, including Partners Bob Friedman, Ari Alvarez, Kelly Bley, Gregory Brown, Christopher Buch, Kerry Halpern and Victoria Zerjav.
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact the author or your responsible Holland & Knight lawyer for timely advice.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.
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