The State of UI:
Condition,
Compliance and Cost Savings
SEPA Payroll Conference
Friday the 13th September 2013
meet
your presenter
Ross E. Henderson
r.henderson@employmenttax.com
COO, Employment Technology Solutions (“ETS”)
President, Association of Unemployment Tax Organizations (“AUTO”) Payroll Advisory Board Member, HR.com
ETS
SOLUTIONS
Technology-based Solutions Driving Compliance, Convenience & Savings for Employers
Tax Consulting
• M&A Consulting & Credits
• Tax Advisory • Hiring Credits &
Incentives • Statutory Account Review • Protective Filings Verification • Electronic I-9 and E-Verify Integration • Verification of Income and Employment (VOIE) • OIG Exclusion Processing Unemployment Claims • UI Claims Administration • Hearing Attendance • Bonded Service • Training Tools • Benefit Charge Audits HR Tools • On-boarding Services
• Online Job Portal • Applicant Tracking Systems • Background Checks • Assessment Tools
Presentation
Agenda
•
Condition of UI Nationally
• UI Conditions in PA
• New Legislation: UI Integrity
• UI Integrity in PA
• Best Practices for UI: “A-C-T”
Condition of UI:
National Focus
Many States’ UI Reserves Still Insolvent
State Trust Fund Solvency as of June 2013. Map taken from June
2013 SUCAP Report, based on US DOL UI data quarterly summary charts & SUCAP Reports.
Condition of the
UI System
•Taxable wage bases &/or UI tax rates continue to increase. •National unemployment rate: 7.4% (July 2013)
•National average cost per UI claim: roughly $7,703 (DOL). •Assessments to UI rates
• Bond expense, etc.
• States using employer-financed bonds: CO, ID, IL, MI, PA, TX
•New legislation & enforcement for UI integrity.
UI System
Outdated & Flawed
•Agency error and overcharging Employer (“ER”) accounts estimated at ~10-15%.
•Federal Sequester raises risk of improper accounting of benefit payments.
•History of ER and Employee (“EE”) abuse of the system (SUTA Dumping, excess collection).
•ER & Third Party Administrator (“TPA”) problems
with untimely or inadequate responses for claim info. •Inefficient communication & data exchange.
UI Conditions:
PA Focus
•July 2013 Unemployment Rate: 7.5%
•Trust Fund Balance as of 7/3/13: $649,762,149 •2013 Taxable Wage Base: $8,500
•Min / Max Weekly UI Benefits: $35 / $573 •Min / Max ER Tax Rate: 2.8010% / 10.8937%
•3-Year IPIA Improper Payment Rate for PA: 14.65% (up to
23.60% in 2012)
•FUTA Credit Reduction: No
•Employer-Financed Bond Tax Subsidy: 1.10% included in SUI rate, payable w/ quarterly wage reports.
Spotlight On:
UI Overpayment
2012 Estimated UI improper payments in PA
$715M
Increase in PA’s IPIA UI overpayment rate between 2011-2012
200%
Employer Role in Overpayment Error,
part or whole responsibility, calculated as %
16.37%
Data retrieved from DOL’s UI Improper Payment by State
Agency error estimated a cause in 21.15% of PA overpayments
New Legislation:
UI Integrity
State
UI Law & News
•2012 PA SB 1310, including:
•Increased taxable wage base, bond issuance for UI loan, UI amnesty program
•NJ pays off $400M Federal UI loan
•Likely will borrow again; ERs may still face 0.9% FUTA credit reduction for 2013.
•NJ SUI wage base increase to $31,500 for CY 2013.
•NJ SB 2404 freezes FY 2014 SUI tax rate at Sched. E.
•Same as FY 2013, rates ranging from 1.2-7.0% •Avoids 10% surcharge
•DE passes Section 252-compliant HB 91.
•Pending DE HB 168 may significantly increase
taxable wage base & repay Fed. UI loans.
Key Federal
UI Legislation
•2004 SUTA Dumping Act
•2009 UI Executive Order
•2011 TAAE UI Integrity (Sec. 252)
•2012 ATRA
o
EE SS tax return
2011 Federal “TAAEA” Law:
Sec. 252/UI Integrity
•Follow-on to 2009 Executive Order 13520 to reduce improper UI payments.
•Under TAAEA’s Sec. 252, states must not relieve
ERs of charges when they (or their TPA) are at fault for failure to respond timely or adequately to
agency request for info.
•States to develop their own definitions for “pattern of failure.”
•All states to enact UI Integrity legislation by 10/21/13
UI Integrity:
Sec. 252 Points
•Also provides ERs cannot collude with EE to misuse UC system.
•ERs and TPAs with established pattern of non-timely response
penalized more, but pattern can be as little as two instances!
•ERs may be held responsible for inaction and timeliness (or lack thereof) on the part of their TPAs. •Fault means in part or in whole.
States Respond With
UI Integrity Law
•Legislation already passed everywhere
except:
GA, NH, OH, OR, PA, PR, VI
•Download ETS’ “Section 252 Employer
Fact Sheet”
here
.
•Download ETS’ “UI Integrity Law
Compliance Tips”
here
.
2012
ATRA
(American Taxpayer Relief Act )
•EE SS tax rates return to 6.2% in 2013 from 4.2% in 2012 (i.e., 2% FICA payroll tax cut "payroll holiday" not extended).
•SS taxable wage limit up to $113,700 in 2013 (from $110,100 in 2012). •Extension of Emergency Unemployment Compensation ("EUC").
•Temp. extension of 100% federal reimbursement for states triggering on regular extended benefits ("EB").
Audit Alert:
Inter-Agency Info Sharing
•Fed & state sharing info, data
mining, creating cross-agency
task forces.
•Questionable Employment
Tax Practices “QETP” Initiative
•Facilitated by movement to
electronic databases.
QETP Results Through
Mid-2012
•QETP Initiative: MOU between 37 states & IRS = UI focus •Nearly 12,000 businesses examined.
•States reclassified $1.8B+ in wages and assessed $27M+ via federal data.
•IRS assessed almost $23M in taxes from state referrals. •Over 107,000 workers reclassified.
Solutions & Best Practices
for
“A.C.T.”
Provide information to UI agencies
that is:
Accurate
Complete
Timely
•DOL & state agencies collaborate on secure, electronic, standardized-format platform for UI data transfer.
•SIDES E-Response: website-based for smaller employers with fewer claims.
•SIDES: direct data exchange for TPAs and larger ERs, requires internal IT & $$$ for setup.
•Aims to improve timeliness and completeness, reduce overpayments & erroneous charges, lower UI tax rates.
Currently 46 States
Implementing
SIDES
Jurisdictions that do NOT yet plan to use SIDES:
Alaska Arkansas California Connecticut Indiana Minnesota Montana
PA working on implementation; to be in production by March 2014.
As of 7/24/13; source: http://info.uisides.org/pubdocs/SIDESMap.pdf and
UI Integrity
Oversight Plan
Designate a Person or Team Total UI Claims (also by state/location) Which claims failed to be timely/ adequate? Why? Who? Track win/loss for protests. For losses, why? Who? Track win/loss for appeals. Why? Who? Impact on experience rating? Calculate cost to organization.Find & fix areas of organizational
Controllable Risk Factors
Contributing to UI Cost & Noncompliance
Challenge #1: Organizational Structure:
•Limited infrastructure committed to UI support
process
•Minimal or non-existent “intra-departmental”
technology for seamless, timely receipt &
“effective” follow-through for every claim
•Inconsistent expertise responsible for program
success (turnover) = inconsistent program delivery
•Lack of corporate recognition/support
Controllable Risk Factors
Contributing to UI Cost & Noncompliance
Challenge #2: Training for Results
• Educate invested parties (C-level, HR, Payroll, Managers….) to recognize:
• Relationship between claim process & cost impact to organization • Secure/train competent charge analyst:
o Match benefit year wages vs. charges o Scrutinize reports for charge irregularity
o Audit charge statement to ensure accuracy o Create effective contact process with agency o Follow-through on reversing inaccurate charges
Controllable Risk Factors
Contributing to UI Cost & Noncompliance
Challenge #3: Initial Claim Protest- Strong From the Start
•
Cost-effective elements in initial claim protest process:
o
Detailed system of records to collect/transmit
required data
o
Mechanism to ensure timely response/all initial claims
o
“Follow-through” procedures to ensure agency
compliance
o
Built-in “triggers” to determine needed process
improvement
Critical Report
Audits & Tracking
• Track results/determine program compliance & process improvement initiatives
• Manage/scrutinize high cost contributors • Identify strong program performers
• Charge impact driver by separation mix and charge amounts
• Electronic benefit charge audit system (cross-check all charges) • Ensure charge accuracy against agency tables/formulas
UCM Plus
Screenshot
This image has been redacted to protect the integrity of ETS’ UCM Plus UI Claims Management Solution. Should you wish to view a demo of the
software, please contact ETS at info@employmenttax.com.
Here’s where an electronic solution can
really help minimize your costs by
delivering advanced reporting features and
supporting Accurate, Complete & Timely
Retro UI
Review
General Evaluation
•Contact ALL UI jurisdictions
•Quarter by quarter rearward review up to statute
•Perform account balancing (per state records).
•Determine what credits found eligible for refund & if debits, found if correct. •Research for any missing / incomplete or
untimely reporting on the account.
•Help reduce source of potential penalty or increased UI tax expense.
ETS
Resources
•UI Integrity State Legislation Tracker
•PA Legislative Updates for Employers
•How Nonprofit Employers Can Reduce UI Cost
•Tips on Choosing a UCM Vendor
Go here to download three pages of UI Tips from ETS. ETS’ UI Tips Download this one page checklist to assess the state of your UI Claims
Administration
Is Your UCM Broken?
Go here to learn more, and here
to contact ETS. Learn more about ETS’ UCM Plus Solution
ETS
Blog
Go here to get ETS’ best UCM blog posts and resources in one place.
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ETS
thank
you!
Q
&
A
Questions & Requests for Presentation Slides:
:
Ross Henderson-COO
