Indiana – Can severance payment affect your unemployment benefits?

by Anonymous

My plant in Indiana closed their doors March 24th. We did receive a severance package but that can’t disrupt our unemployment benefits can it ? I was watching Suzi Orman on Oprah several weeks back and she stated that it couldn’t. Would much appreciate your comment.

Thank You
Dawn

Hi Dawn,

Suzi did, did she?

Severance, buyouts, and any other kind of dismissal payment can have an effect on your unemployment benefits, but here I go again .. sounding like a broken record .. This can and does vary from state to state. Entitlement to unemployment benefits is not equal in these United States.

The very best (I’m not kidding) starting place for getting the basics about unemployment FOR ANY STATE is the United States Department of Labor. It’s easy to access and it’s laid out very well.

And lucky for us, it addresses this very issue of severance payments and unemployment benefits.

It’s found by going to this page then clicking on the current year and then clicking on Non-Monetary Eligibility and the STATE by STATE information about severance or dismissal payment is found in TABLE-13.

Other tables in that very same PDF can let a person know about the effect of vacation pay, holiday pay, back pay, retirement payments, social security benefits, and worker’s comp payments on their unemployment benefits.

You’ll notice that Indiana has a regulation which excludes greater of $3 or one-fifth your WBA (weekly benefit amount) from other than BP (base period) employer. It is this last little bit of information that would prompt me to find the Indiana regulation, especially since most people who have been laid off from long term employment will have only the one employer in their base period.

You can research Indiana unemployment law from this page. Take a look at IC 22-4-15-4 and what it says under (c).

If severance is considered wages, a state usually wants to know how many weeks of wages it represents. It can be advatageous to know this because you can file for unemployment when this period of time has passed and the severance pay will be in your base period still. You do not have to file immediately after losing a job.

Most people never look at anything, but whether they can get it or not .. I think one should also be concerned with how much unemployment pay you can expect and when is the optimal time to file.

Hope this helps you to figure it out.

Chris

Comments for Indiana – Can severance payment affect your unemployment benefits?

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Dec 18, 2014
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To your question about what an employer can do .. I don’t know.

by: Chris

Sorry, the table about severance pay for the year 2014 is now found at 5-18.

Generally speaking, when I think about severance pay, I think of it as per a severance agreement made by the employer with the leaving employee, regardless of any future employment not involving them as the employer.

As far as unemployment departments go my impression is most states, (excluding IN) are concerned with base period employers only.

Most states do limit consideration of a severance agreement to whether the money being paid (lump sum, weekly, or monthly) qualifies as “covered wages” from a base period employer.

If that’s where the severance came from, then the money is usually subject to unemployment taxes (paid by an employer) and a reduction in weekly benefits .. possibly using the partial benefit calculation of a state.

As for Indiana encouraging people to file ASAP .. they aren’t twisting anyone’s arm, but the concern to encourage promptness is real for some if they would only go to the extent of taking into consideration it’s the amount of wages in a base period that are used to calculate a benefit amount if totally unemployed .. and sometimes, holding off until the next quarter to apply for benefits can increase the WBA .. or just monetarily qualify for any benefit at all.

Most people I’ve talked to usually don’t have stories to tell about getting more than three months severance. But even if they hold off filing for three months most of those people also worked long enough to not worry much about the wages in their base period, or whether their high earning quarter is the thing that will affect the amount of the WBA.

Dec 18, 2014
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Indiana – severance

by: Anonymous

This brings up an issue where Indiana Workforce Development encourages you to file for unemployment ASAP but if you have severance pay coming that delays your unemployment benefits until the severance has completely paid out. In the meantime every week you need to file a voucher stating you are looking for work. Can an employer not pay out entitled severance if the worker accepts a new position prior to the end of severance benefits?

his seems like a very strange situation and one that argues you should not file for unemployment UNTIL all or nearly all your severance has been paid out.