The State of UI: Condition, Compliance and Cost Savings SEPA Payroll Conference Friday the 13 th September 2013 Join ETS
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 www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
ETS SOLUTIONS T echnology-based Solutions Driving Compliance, Convenience & Savings for Employers Unemployment HR Tools Verification Tax Consulting Claims • On-boarding • M&A Consulting • Electronic I-9 • UI Claims & Credits Services and E-Verify Administration Integration • Online Job Portal • Tax Advisory • Hearing • Verification of Attendance • Applicant • Hiring Credits & Income and Tracking Systems Incentives • Bonded Service Employment (VOIE) • Statutory • Background • Training Tools Checks Account Review • OIG Exclusion • Benefit Charge Processing • Assessment • Protective Filings Audits Tools www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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” GOALS: Compliance & Cost Savings! www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
UI Conditions www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. Red = borrowing as of 6/30/13. Yellow = less than 6 mos. of positive balances. Green = more than 6 mos. of benefits. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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, P A, TX • New legislation & enforcement for UI integrity. • FUTA Credit Reduction for 19 states (2012 tax year). See states. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
UI System Outdated & Flawed • Agency error and overcharging Employer (“ER”) accounts estimated at ~10-15%. Image credit: cassettes • 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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
Spotlight On: UI Overpayment Data retrieved from DOL’s UI Improper Payment by State $715M 200% 2012 Estimated UI improper 16.37% payments in PA Increase in PA’s IPIA UI overpayment rate between 2011-2012 Employer Role in Overpayment Error, Agency error estimated a cause part or whole responsibility , calculated as % in 21.15% of PA overpayments of total UI claims dollars overpaid in P A www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
New Legislation: UI Integrity www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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 o WOTC reauthorized www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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 www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
2012 ATRA (American T axpayer 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"). • Extension of over 30 business credits, including: R&D, WOTC, EZ www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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. www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
Solutions & Best Practices for UI Compliance & Cost Savings www.employmenttax.com www.domain.com YOUR LOGO Join ETS Phone: +1(800) 518-3874 | email: info@employmenttax.com Phone: +1(123) 456 78 90 | e-mail: mail@domain.com
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