Severance pay received by a claimant that exceeds 40 percent of Pennsylvania's average annual wage* is deducted from the claimant's UC if the claimant's application for benefits (AB) date is on or after Jan. 1, 2012, and the severance pay agreement between the employer and the claimant is entered into on or after Jan. 1, 2012. The deductible portion of a claimant's severance pay is allocated to the weeks immediately following the claimant's separation based on the claimant's full-time weekly wage. Severance pay means one or more payments made by an employer to an employee on account of separation from the service of the employer.
A claimant receives $28,000 in severance pay. Forty percent of Pennsylvania's average annual wage ($65,878.80 for 2024) is $26,351.52 Therefore, $26,351.52 is subtracted from $28,000 equaling $1648.48, which is the amount of the claimant's deductible severance pay. The claimant was earning $500 per week at the time of the separation. Accordingly, the deductible amount of severance pay is allocated at $500 per week to the first 3 weeks, and $149 will be allocated to the third week the claimant is unemployed. Because $500 exceeds the claimant's maximum weekly UC benefit rate, the claimant would not receive any benefits for the first three-week period. The 4th week would be calculated by taking the remaining severance pay amount of $149 to determine eligibility.
The average annual wage, for unemployment compensation purposes, is based on the most recent three fiscal years, or 36 months of data (July 2020 through June 2023.) The severance pay calculations will change effective with the Base Year Begin (BYB) date of January 7, 2024, and claim week ending date of January 13, 2024, in accordance with the new average annual wage.
EXAMPLE: You received severance pay of $28,000. For Benefit Years that begin in 2024, 40% of Pennsylvania's average annual wage is $26,351.52. $28,000 -$26,351.52= $1648.48 in deductible severance pay. Your regular full-time weekly wage is $500. Therefore, $500 will be attributed to each of the first three weeks following your separation, and $149 will be allocated to the fourth week.
When filing for unemployment compensation (UC) benefits, you are required to report all pensions, including retirement, retired pay, annuities or other similar periodic payments and lump-sum pension payments. See Pensions on the Potential Reducations page for further information.