Supplemental pay versus separation pay

[ramjet430]

What is the name of your state (only U.S. law)? Califormia/Colorado

I was recently laid off from my job. I worked in Ca but the company is based on CO. When I signed a separation agreement, I was informed I would receive 4 more weeks of pay. When I received my first pay, they taxed it at 43%. When I questioned it, they stated that the pay was "supplemental" and that is the tax rate. Nothing in the separation agreement mentioned supplemental. Can they do this? Do I have any recourse?

Also, what is the time frame where I am suppose to receive information regarding Cobra? My last day of work was 9/30.

[pattytx]

Was the severance pay a lump sum payment? It's not separation pay VS supplemental pay. Separation pay (severance) is how the pay is characterized. Supplemental pay is a tax withholding calculation concept.

Relative to COBRA notification, there is still plenty of time.
[url]http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html[/url]

[ecmst12]

Don't worry about the tax rate. If it was too high, then it will work itself out when you file your taxes at the end of the year. It just means you'll get a bigger refund.

They have 44 days to send you the cobra information.

[pattytx]

I was just trying to get the details, but let's say this payment DID qualify as "supplemental wages".

The rates are:
6.2% FICA
1.45% Medicare
25% FIT
6% (or 9.3) SIT
1.1% SDI

Total 39.75% or 43.05%

So, there ya go.

[Zigner]

Originally Posted by pattytx

I was just trying to get the details, but let's say this payment DID qualify as "supplemental wages".

The rates are:
6.2% FICA
1.45% Medicare
25% FIT
6% (or 9.3) SIT
1.1% SDI

Total 39.75% or 43.05%

So, there ya go.

The amount would be taxed based on California's tax rates. It's where you work, not where the company is based (think Walmart, etc)

[pattytx]

Yep, those are the California supplemental wage withholding rates.