President Issues Memoranda on Payroll Taxes and Unemployment Insurance

By Eric Hemmendinger - Shawe Rosenthal LLP

August 8, 2020

President Trump issued, on August 8, 2020, Memoranda and Executive Orders concerning unemployment insurance, payroll tax withholding, evictions, and student loans.  Below, we discuss the two employment-related Presidential Memoranda (which have been incorrectly designated Executive Orders in the media, although there is little technical distinction between the two).  Neither requires immediate action by employers.

Payroll tax withholding.  The Presidential Memorandum on payroll tax withholding directs the Secretary of the Treasury to defer the withholding of the employee’s share of the 6.2 percent social security tax.  The deferral shall be made available to employees earning less than $104,000 per year.  The Secretary of the Treasury is directed to issue guidance to implement the Memorandum.  The Memorandum also directs the Secretary of the Treasury to explore ways, including legislation, to make the deferral permanent.  Absent such action, employees will still need to pay the deferred taxes when their 2020 income taxes returns are due.

For now, we suggest that employers wait for further developments, including guidance to be issued by the Secretary of the Treasury, the outcome of likely legal challenges, and the possibility that the Memorandum will be superseded by legislation, if the House of Representatives, Senate and White House can reach agreement on a new relief package.

Unemployment Insurance.   Under the Presidential Memorandum on unemployment benefits, participating states will administer an additional benefit of $400 per week, to people receiving at least $100 per week in unemployment benefits.  This additional benefit would partially replace the $600 per week additional benefit that expired July 30, 2020.  The additional benefit will last until December 6, 2020 or until the funding runs out.  The federal government will supply 75 percent of the funds for the program, while the state must supply 25 percent.  The federal share is funded by reallocating $44 billion from the CARES Act appropriation.  The Memorandum was plainly intended to spur legislation, as it specifically provides that the program will “terminate upon enactment of legislation providing, due to the COVID-19 outbreak, supplemental Federal unemployment compensation, or similar compensation, for unemployed or underemployed individuals.”

The Memorandum on employment benefits requires no action on the part of employers.  If it is not replaced by legislation, the additional benefit will be available in each state when it enters into a cost-sharing agreement with the Federal Emergency Management Administration and set up a program to process the benefits.