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President Trump Issues Executive Orders on Employee FICA and Unemployment Benefits

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President Trump issued an Executive Order (EO) on August 8, 2020 to provide deferral of an employee’s share of FICA tax from September 1, 2020 through December 31, 2020. The EO directs the Department of the Treasury to defer withholding, deposit, and payment of the 6.2% FICA tax paid by employees during this period. No penalties, interest, or additions to tax would apply to these deferred amounts. While the CARES Act already allows employers and self-employed persons to defer their share of FICA through the end of 2020, this EO pertains specifically to employees.

The deferral is available to any employee whose gross pay is less than $4,000 in a bi-weekly pay period ($104,000 annually). As currently written, this amount is a “cliff,” meaning that individuals earning greater than $4,000 in a bi-weekly pay period are ineligible for the deferral. The following are additional pay period limits: weekly ($2,000) and semi-monthly ($4,333.33).

The EO requires the Department of the Treasury to issue formal guidance before September 1, 2020 – the date this deferral is scheduled to apply. This guidance will hopefully provide clarity on how employers will administer this EO.

The EO also directs Treasury Secretary Steven Mnuchin to explore avenues, including legislation, to eliminate employees’ obligation to pay the deferred FICA taxes in the future.

Additionally, the EO extends supplemental unemployment benefits, lowering the amount from $600 to $400 with one-quarter of this amount ($100) required to be paid by the states. These benefits would last until the week ending Sunday, December 6, 2020 or until the balance of the Department of Homeland Security’s Disaster Relief Fund, currently around $70 billion, falls to $25 billion – whichever comes first. It’s important to note that because this benefit was issued as part of an EO, there will likely be legal challenges to address before these funds are available to the unemployed. Forcing states to participate will require additional time to execute this part of the order. Congress is currently negotiating unemployment benefits and if it comes to an agreement, this component of the EO may not be necessary or applicable.

Berntson Porter will be monitoring these items closely and will provide additional guidance as news breaks.

Berntson Porter is here to help businesses navigate these unprecedented times. Visit our Resource Center for up-to-date information about COVID-19 legislation that impacts you and your business.