Financial Services Resource Center for HR: Severance and Post-Employment Benefits

Employers in the financial services industry face unique challenges related to severance arrangements and other post-employment benefits. These challenges range from adhering to salary and benefit continuation arrangements typically found in employment contracts and/or change-in-control agreements, to ensuring compliance with the rules and tax implications surrounding deferred compensation plans. Longer term, the Affordable Care Act (ACA) may eventually affect how employers handle post termination health care benefits and subsidies. Severance pay is subject to withholding for federal income tax (FIT), Social Security and Medicare (FICA) taxes and federal unemployment insurance (FUTA) tax. For income tax withholding purposes, severance pay is treated as supplemental wages. As part of a severance pay package, employers may also provide supplemental unemployment benefits.

XpertHR provides the following resources to assist financial services employers with benefit plan administration: