Supplemental Unemployment Benefits (SUB)

Supplemental Unemployment Benefits (SUB) is Supplemental Unemployment Benefits (SUB) : Supplemental Unemployment Benefits (SUB): Supplemental Unemployment Benefit.

Summarise this post with:

What supplemental unemployment benefits (sub)?

Supplemental Unemployment Benefits (SUB) is a type of benefit provided to employees who are temporarily laid off or on strike
These benefits are intended to provide a source of income for the employees during the period of unemployment
They are usually paid by the employer
They are usually calculated as a percentage of the employee’s regular salary
They may be paid for a limited period of time
Some organizations also provide SUBs in addition to state unemployment insurance benefits
These benefits are supplemental and not a replacement for state unemployment benefits
The terms and conditions for receiving SUBs vary from employer to employer
The terms and conditions can be found in the employee handbook or through the human resources department.

How long are supplemental unemployment benefits (sub) paid for?

The duration of Supplemental Unemployment Benefits (SUBs) payments depends on the employer’s policy. It can vary by company and by the specific circumstances of the temporary layoff or strike. In some cases, it may be for a set period of time, such as a specific number of weeks or months. In other cases, it may be determined based on the length of the layoff or strike. It’s important to refer to the company’s policy or contact the human resources department for more information about the specific duration of SUBs payments. SHRM’s SUB plan guidance

Image showing the meaning of supplemental unemployment benefits

How long do supplemental unemployment benefits (sub) last?

The duration of Supplemental Unemployment Benefits (SUB) depends on the employer’s plan.
It may be for a specific period of time, such as 13 weeks.
It may be until the employee returns to work.
Some plans may also have a maximum duration for which benefits can be received.
Specific details of how long an employee can receive SUB benefits can be found in the employer’s plan or by speaking with a human resources representative.

SUB plans provide meaningful income support to laid-off employees while managing employer tax treatment : a valuable benefit in industries with cyclical workforce fluctuations. Using objective assessments and a structured hiring plan drives improvement, helping organizations attract and retain top talent.

Frequently asked questions

A Supplemental Unemployment Benefit (SUB) plan is an employer-funded benefit program that supplements state unemployment insurance (UI) payments to laid-off employees : bridging the gap between the UI benefit and the employee’s former salary for a defined period. SUB plans allow employers to provide more meaningful income replacement during layoffs than state UI alone, which typically replaces only 40-50% of prior wages.

SUB mechanics: the employer establishes a trust fund or pay-as-you-go arrangement. When an employee is laid off, the employer supplements the state UI benefit : the total of state UI + SUB payment typically equals 60-80% of prior weekly wages, up to a maximum weekly benefit. The SUB benefit continues until: the employee returns to work, finds other employment, exhausts the benefit period (typically 26-52 weeks), or no longer qualifies for state UI.

Critical tax advantage: under IRS Revenue Ruling 90-72, properly structured SUB payments are not subject to FICA (Social Security and Medicare) taxes because they are tied to state unemployment compensation and contingent on the employee’s entitlement to state UI. This can save the employer 7.65% on each SUB payment vs. treating layoff pay as supplemental wages. To qualify for this treatment, the plan must be a formally documented written plan with a trust or other formalized structure and meet IRS requirements.

SUB plans are most common in: manufacturing (auto industry : the UAW negotiated SUB plans as early as 1955), construction (seasonal layoff cycles), aerospace and defense (project-based employment with periodic layoffs between contracts), and cyclical industries with regular workforce fluctuations. They are less common in service industries where layoffs are less predictable or less cyclical. Union contracts frequently include SUB plan provisions as a negotiated benefit.

Most states treat SUB payments differently from regular severance when calculating UI experience ratings. Properly structured SUB plans may be structured as separate from UI wages : potentially reducing the employer’s UI experience rating impact compared to extended salary continuation. However, treatment varies by state : HR should consult with state UI experts and legal counsel to understand the experience rating implications of SUB plan structure in each applicable state.

Key requirements: the plan must be in writing with formal documentation; must be funded through a trust or otherwise formalized to qualify for FICA exclusion; payments must be tied to the employee’s entitlement to state UI (if state UI is denied, most SUB plans also deny or reduce benefits); ERISA may apply to SUB plans (depending on structure), triggering plan document, SPD, and reporting requirements; and IRS guidelines on the FICA exclusion must be strictly followed. HR should work with employee benefits counsel to structure and document any SUB plan.