Closing the severance pay loophole to cut UI costs

A loophole in state law is allowing some Missourians to access unemployment benefits that double up on compensation they received from their employer upon termination.

The loophole relates to severance pay packages that help support terminated workers.

More and more employers are providing severance pay, with one recent study showing that 64% of employers now provide severance pay, up from 44% in 2019.

The growing prevalence of severance pay is causing the state to pursue a revision to unemployment laws.

Currently, Missouri law accounts for termination payments of vacation and holiday pay when determining a worker’s unemployment compensation — but severance payments are not considered.

This leads to some Missourians today being able to receive unemployment checks even while also being supported by a severance payment from a former employer.

Senate Bill 1114 would change this. The legislation would require the state’s unemployment system to consider severance payments the same way it already factors in vacation and holiday payments.