Navigating Economic Uncertainties: The CFO's Guide to Supplemental Unemployment Benefit Plans

Posted by Lana Mellis on May 6, 2024 1:39:23 PM


In the dynamic realm of financial leadership, Chief Financial Officers (CFOs) are navigating further challenges in 2024, marked by an election year, high inflation rates, and persistent market uncertainties. As stewards of financial strength, CFOs must chart a course that not only shields their organizations from the volatility ahead but also drives the financial strength of their company. Against this backdrop, the implementation of a Supplemental Unemployment Benefit (SUB) Plan emerges as a strategic gem, offering a lifeline for both employees and employers in the unpredictable seas of economic fluctuations.

Understanding Supplemental Unemployment Benefit (SUB) Plans

A SUB Plan acts as a financial resilience mechanism, serving as a safety net for employees facing job loss while providing organizations with a strategic blueprint for efficient layoffs.

The SUB Plan structure first emerged in the 1950s union environment supported by both employers and the unions, as well as approved by the IRS. The SUB Plan structure allows employers to supplement the income of employees while they are receiving state unemployment benefits so that the individual’s total take-home pay equals up to 100% of the regular wage prior to being laid off or furloughed. Payments through a SUB Plan are considered benefits, not wages, and therefore are FICA non-taxable. SUB Plans are allowable in all 50 states in connection with permanent separations and temporary layoffs.

Breaking it down further, if someone were paid a weekly wage of $1,000 per week prior to their involuntary separation from the company and was eligible to receive State unemployment compensation of $400 per week, their weekly SUB Plan benefit would be $1,000 - $400, i.e., a weekly benefit of $600. The SUB benefit of $600 would not incur the 7.65% FICA tax for either the employee or employer. Compound these savings over a number of weeks for a furloughed workforce, and the savings to the company are significant.

Employers utilizing a SUB Plan typically save 30-50% compared to the cost of their traditional severance programs and most importantly, employee income is kept whole during the unemployment period.

Navigating 2024

SUB plans, although rarely in the limelight, serve as a valuable tool for companies which must achieve operational efficiencies during turbulent times.

In this election year with ongoing economic volatility, having a SUB Plan in place can provide a highly efficient structure for managing workforce change. SUB plans serve as a proactive measure, providing a layer of financial security for employees in case of unforeseen workforce adjustments resulting from political shifts. This not only fosters goodwill among the workforce but also positions the company to adapt swiftly to changing economic conditions.

In the current economic climate characterized by inflationary pressures, there is a real concern over rising costs. Implementing a SUB plan allows companies to demonstrate a commitment to their employees' well-being while managing costs effectively. Moreover, the uncertainty that permeates the business environment necessitates innovative solutions to anticipate and address challenges. SUB plans, when integrated into a comprehensive risk management strategy, can provide a safety net that enables companies to navigate through unforeseen disruptions with resilience.


As the financial landscape continues to evolve, CFOs must be attuned to the dynamic interplay of economic forces. The strategic implementation of SUB plans emerges as a prudent decision in 2024, offering financial protection for both employees and the organization at large. By embracing these supplemental benefits, CFOs can fortify their companies against the uncertainties of an election year, high inflation, and the inherent challenges that come with navigating through uncharted economic waters. In doing so, they position their organizations for agility, resilience, and sustained financial well-being.