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Split Funding Separation Pay

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Split Funding Separation Pay

When employees separate from service, they often have accumulated unused sick and vacation pay. When paid in cash to the employee, both the employer and the employee must pay the applicable payroll tax of up to 7.65% each and the employee pays federal income tax.

Special Pay Plans are popular tools for employers to save payroll taxes and to allow employees to defer income taxes. Now, some employers are creating both Special Pay and HRA Plans.

For more information, read this article on the Split Funding approach. [PDF]

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Securities and investment advisory services are offered by VALIC Financial Advisors, Inc., member FINRA and an SEC-registered investment advisor.

Securities and investment advisory services are offered by VALIC Financial Advisors, Inc., member FINRA and an SEC-registered investment advisor.

VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries VALIC Financial Advisors, Inc. and VALIC Retirement Services Company.

This information is general in nature and may be subject to change. Neither VALIC nor its financial advisors or other representatives give legal or tax advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S., federal, state or local tax penalties. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor.

www.valic.com/hra

Last Updated: 12/31/2007