Emerging Issues In Unemployment

1
Emerging Issues In UnemploymentThat Was Then,
This is Now

• Jared Vale/Matt Kaufer
• Barnett Associates, Inc.

2
Overview of the System

• Established in 1935
• Facilitate Economic growth
• State Specific laws
• Abundance of information

3
ESTIMATED UI TAX COST
4
TAX RATE CALCULATIONS

• All states have an experience rating system which
  determines the employers state contribution tax
  rate.
• RESERVE RATIO 31 states
• BENEFIT RATIO 17 states
• COMBINED 2 states

5
RESERVE RATIO
RESERVE RATIO RESERVE BALANCE (CONTRIBUTION
BENEFIT CHARGES)
__________________________________________________
_________________ TAXABLE PAYROLL avg.
3yr, 5yr or fiscal

• 31 states use the reserve ratio calculation
• Tax rate is based on an employers cumulative
  experience
• Higher ratio lower tax rate
• Calculation

6
RESERVE RATIO SAMPLE
Look up on chart
7
OHIO RATE SCHEDULE

• (a) A negative balance of  (c) A positive
  balance of
• 20.0 or more ..............................
  6.5 01.0 or more, but less
  than 01.5 ......... 4.6
• 19.0 but less than 20.0 ..................
  6.4 01.5 or more, but less
  than 02.0 ......... 4.5
• 17.0 but less than 19.0 ..................
  6.3 02.0 or more, but less than
  02.5 ......... 4.3
• 15.0 but less than 17.0 ..................
  6.2 02.5 or more, but less than
  03.0 ......... 4.0
• 13.0 but less than 15.0 ..................
  6.1 03.0 or more, but less than
  03.5 ......... 3.8
• 11.0 but less than 13.0 ..................
  6.0 03.5 or more, but less than
  04.0 ......... 3.5
• 09.0 but less than 11.0 ..................
  5.9 04.0 or more, but less than
  04.5 ......... 3.3
• 05.0 but less than 09.0 ..................
  5.7 04.5 or more, but less than
  05.0 ......... 3.0
• 04.0 but less than 05.0 ..................
  5.5 05.0 or more, but less than
  05.5 ......... 2.8
• 03.0 but less than 04.0 ..................
  5.3 05.5 or more, but less than
  06.0 ......... 2.5
• 02.0 but less than 03.0 ..................
  5.1 06.0 or more, but less than
  06.5 ......... 2.2
• 01.0 but less than 02.0 ..................
  4.9 06.5 or more, but less than
  07.0 ......... 2.0
• More than 0.0 but less than 1.0 ..........
  4.8 07.0 or more, but less than 07.5
  ......... 1.8
• 07.5 or more, but less than 08.0
  ......... 1.6
• 08.0 or more, but less than 08.5
  ......... 1.4
• (b) A 0.0 or a positive balance of less than
  1.0 ..... 4.7 08.5 or more, but less
  than 09.0 ......... 1.3
• 09.0 or more, but less than 09.5
  ......... 1.1

8
BENEFIT RATIO
BENEFIT RATIO BENEFIT CHARGES ___________
__________________________________________________
_ TAXABLE PAYROLL avg. 3yr, 5yr or fiscal

• 17 states use the benefit ratio calculation
• Tax rate is based on up to five years of
  experience of the employer (most common, 3 years)
• Higher ratio higher tax rate
• Calculation

9
BENEFIT RATIO SAMPLE
10
TAX COST TECHNIQUES

• Voluntary Contributions
• Joint Accounting
• Audits / Protests

11
VOLUNTARY CONTRIBUTIONS

• Offset benefit charges or increase reserve
  balance to reduce the SUI tax rate
• Deadlines differ from state to state
• Calculations differ from state to state
• Restrictions differ from state to state
• 26 states currently permit voluntary
  contributions

12
VC SAMPLE
13
V/C CALCULATION
14
VC SAMPLE
15
V/C SAMPLE CONTINUED
16
JOINT ACCOUNTING

• Combines SUI tax experience of multiple entities
  in one state into a single account
• Duration differs from state to state
• Restrictions differ from state to state
• Deadline for application differs from state to
  state
• Title differs from state to state (Unity of
  Enterprise, Common Rate Group)
• Twelve states currently permit joint accounting

17
JOINT ACCOUNT SAMPLE
 
 
18
AUDIT

• Annual Contribution Rate Notice
• Contributions / Charges
• Penalty Tax Rates / Appeals
• Quarterly Reports
• 1st qtr. Largest Tax Cost
• Annual Federal 940
• Tax Ledger Analysis

19
UI Audit Example

• A large financial institution received the
  following rate notice from the state of NJ. The
  client proceeded to pay the associated tax
  amount.
• When Barnett conducted an initial audit for this
  client a state error was found, and investigated.
  The corrected error resulted in the following
  refund

20
Claims Control
21
Benefit Charge Statements

• The state agencies issue benefit charge
  statements by legal entity listing the names of
  claimants and amount of unemployment benefits
  being collected against the account.
• Benefit Charge Statements are issued to the
  Employer weekly, monthly, quarterly, or annually
  depending on the state by State Unemployment
  Account Number (not by division).

• Employer should audit the Benefit Charge
  Statements to ensure there are no incorrect or
  fraudulent charges against unemployment accounts
  errors are protested to recover credits due.

22

• How Are Benefits Charged To The Employer?
• In most states, benefits are charged to all
  employers in the claimants base period
  proportionately to the wages paid.
• A few states charge all benefits to the
  claimants most recent employer.
• In others, the employer who furnishes a specific
  number of days or weeks of continuous employment
  is liable for all charges.
• If an employee is not qualified to meet the
  standards which they were hired, you should make
  the separation as soon as possible. A prompt
  decision will reduce the amount of benefits that
  may be charged to your account.

23
LAW CHANGES IN PROGRESS

• NEW HIRE REPORTING -
• Mandatory or Optional
• Multiple Worksite Reports
• Mandatory or Optional
• Benefit Wage Audits
• Mandatory or Optional

24
LAW PROCEDURE CHANGES

• Address of Record / Worksite
• Electronic Benefits
• Direct Deposit / Debit Card
• Mandatory or Optional
• Best Practices NASWA
• www.naswa.org

25
RESULTS

• Fraudulent Claims Reduced
• Inaccurate / Incorrect Payments Reduced
• BAM Benefit Accuracy Measurement
• 2005 89.41
• 2006 95.46
• Trust Funds Plush
• Average Rate Lower 3.1 2.9

26
SYSTEM IMPROVEMENTS -ELECTRONIC

• ITSC INITIATIVE UI SIDES
• Separation Information Data Exchange System
• Standardized system to exchange separation
  requests for multistate employers and TPAs
• 6 States (CO, GA, ID, IA, UT WI)
• Beta Testing October 2008
• Projected to be fully operational by 2009
• PORTAL
• Web based entry for smaller regionalized firms

27
ELECTRONIC IMPROVEMENTS Cont

• STATE INITIATIVE
• IL- Live (WOW!)
• MN- Developing batch process and portal
• PORTAL web-based interface for smaller regional
  firms
• NC, OH

28
BENEFITS OF UI SIDES

• Cost savings
• Reduced postage and handling costs
• Easier/better control and management of
  separation information request workload
• Improves timeliness
• Improves completeness and accuracy of information
  supplied to state UI agencies

29

• Thank You For Attending!
• Jared Vale/Matt Kaufer
• Barnett Associates, Inc.