Cathay Pacific Halts U.S. Benefits Contributions
Jennifer Billock October 27, 2016
More than 400 Cathay Pacific employees in the U.S. are facing a loss of benefits.
Cathay Pacific cabin crew employees in the U.S. are not happy. Without notice, the company has stopped paying into Social Security and Medicare programs, saying—three weeks after the payments were stopped—that it’s illegal for the airline to make those payments. Now, more than 400 employees based in New York, Los Angeles, and San Francisco will lose retirement payouts health insurance protection after retirement.
The airline has told employees that because they are not a U.S.-based company and they are not flying U.S.-registered planes, they are legally not allowed to contribute to the programs.
“We understand that we have no alternative but to comply with the U.S. tax law and regulation,” Cathay Pacific said in a letter to staff, reported by the South China Morning Post.
The airline said it had mistakenly paid into those programs for several years. Employees who made contributions may be able to get a refund, but it would eliminate their chance at getting those benefits paid out once they retire. Plus, employees likely can’t draw benefits unless they’ve paid contributions for ten years or more.
The U.S. Association of Flight Attendants told the Post that Cathay is showing it has no sense of responsibility.
“There is no reason that Cathay could not have continued withholding and paying payroll taxes,” Mary Lou Savage, employee benefits attorney for the association, told the Post. ‘The company unilaterally, without notice, made this decision for the cabin crew, permanently jeopardizing their retirement.”
[Photo: Cathay Pacific]
This is the applicable regulation presumably implied in Cathay's letter (note that it ONLY applies to non-resident aliens in certain circumstances) Crew members of a ship or aircraft may be exempt if the vessel is a foreign vessel and the employer is a foreign employer, or if the services are performed outside of the United States.
This is NUTS. These are not "welfare benefits." Cathay, like dozens and dozens of other overseas airlines, must pay these withholding and payroll taxes. I'm sure others who know more about the laws will chime in. You cannot employ people in the U.S. without complying with laws.