News & Views

Breaking Benefits News

Supreme Court Holds That Severance Pay is Subject to FICA.

The U.S. Supreme Court recently held, in United States v. Quality Stores, that severance payments are taxable wages for purposes of the Federal Insurance Contributions Act (FICA), except in very limited circumstances not present in that case. The Supreme Court’s decision overturned an earlier ruling by the Sixth Circuit Court of Appeals that held that supplemental unemployment compensation benefits were not subject to FICA. This Supreme Court decision effectively disallowed an estimated $1 billion of potential employer refund claims that were pending based on the Sixth Circuit court’s earlier ruling.

Printable PDF