SUB Plan: How Essential Is It for Prevailing Wage Contractors?
SUB Plan as a Prevailing Wage Fringe Benefit Plan
A Supplemental Unemployment Benefit Plan is a tax exempt plan or trust established to provide severance pay to prevailing wage workers who are laid off due to a reduction in workforce or plant closing. A SUB Plan supplements state unemployment insurance benefits.
Prevailing wage contractors need the extra cash during this periods. However, it also has some benefits to you, the employer. For one, creating a tax qualified plan which allows you to pay weekly severance payments for unemployment benefits not just lowers your payroll tax obligation, but also lessens the impact of lump sum payments on your company’s cash flow. It also reduces your expenses for worker’s compensation liability.
How did SUB Plans come around?
Supplemental Unemployment Benefits Plans have been around since the late 1950s. Union groups were concerned with mechanization and cyclical industries where seasonal and permanent layoffs were frequent. In addition to this, unemployment benefits were not enough to support laid off workers. Strongly fuelled by the auto and metal industries, supplemental unemployment benefits were used in collective bargaining agreements. Later on, because these plans can lessen employers’ tax burden, SUB plans are getting more attention from corporate America.
How does a SUB Plan work?
SUB Plans can be funded by employers only, employees only, or both. In non-union environments, these plans are generally funded by the employer only. These funds are placed into a trust and are exempted from hat FICA, FUTA, and SUTA taxes. Investing in these plans then saves your company from paying these taxes, which translates to savings for the company.
The plan’s payment scheme must take into account state unemployment benefit rates. To compute, payments for unemployment and SUB plans must be equal to the worker’s wage before the layoff.
SUB plans require a documented plan and timely IRS filings. It must be used only by workers that are laid off or with reduced work hours due to a RIF or operation closing.
SUB plans can also cover medical and health expenses, to provide further savings in RIF packages.
Hire ARCHER JORDAN to manage your employees’ fringe benefits
A great deal of time is needed in administering supplemental unemployment benefits for your prevailing wage workers. Save time, effort, and money by working with ARCHER JORDAN!
Our insurance and benefits experts will help create the ideal SUB plans, catered to the needs of your prevailing wage workers. We have helped many contractors and companies save thousands of dollars. Give us a call at +1 888-745-0754 and we will show you how your company can save more, by doing more for your employees.