July 25, 2014
July 24, 2014
Supreme Court Will Hear Quality Stores Case
On October 1, 2013, the Supreme Court of the United States agreed to hear United States v. Quality Stores, Inc. The case has been previously discussed on our blog. In 2001, Quality Stores entered bankruptcy and closed all of it doors to nearly three-hundred stores. The store challenged a requirement to pay FICA (Federal Insurance Contribution Act) taxes on the severance that it had paid its workers. FICA taxes help finance federal retirement and health care benefits.
The Sixth Circuit held that severance paid to employees on account of an involuntary reduction in force (i.e., bankruptcy) is not subject to FICA taxes because such payments are categorized as supplemental unemployment benefits, which are not taxable. Thus, under the Court of Appeals decision, both Quality Stores and former employees who took part in the suit could claim a refund.
Court papers filed in the case reveal that there are more than 2,400 pending administrative refund claims raising the same issue. The Supreme Court’s decision will obviously affect many employers; if it upholds the Appeals Court’s decision, employers who were previously taxed will be eligible for a refund.
The Court’s term starts on October 7 and ends in June 2014, so it may be a while before the decision is made.
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- The 2014 Forecast For Employers
- Treasury Department/IRS Issue Guidance Instructing Employers on How to Make Claims for FICA (Federal Insurance Contributions Act) Refunds or Credits Post-Windsor
- Final IRS Regulations Allow Retirement Plan Payments for Accident, Health and Disability Insurance
- The Affordable Care Act—Countdown to Compliance for Employers, Week 31: ERISA Section 510 and Limiting Employee Hours
- Despite Windsor, Federal Court Rejects Challenge to a Self-Insured ERISA Health Plan’s Denial of Coverage for Same-Sex Spouses
- Severance Payments Do Not Escape FICA (Federal Insurance Contributions Act)