The State of UI: Condition, Compliance and Cost Savings SEPA - - PowerPoint PPT Presentation

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The State of UI: Condition, Compliance and Cost Savings SEPA - - PowerPoint PPT Presentation

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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)

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SLIDE 1

The State of UI: Condition, Compliance and Cost Savings

SEPA Payroll Conference Friday the 13th September 2013

Join ETS

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SLIDE 2

www.domain.com

Phone: +1(123) 456 78 90 | e-mail: mail@domain.com

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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

Join ETS

www.employmenttax.com Phone: +1(800) 518-3874 | email: info@employmenttax.com

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SLIDE 3

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ETS SOLUTIONS

T echnology-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 www.employmenttax.com Phone: +1(800) 518-3874 | email: info@employmenttax.com

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Presentation Agenda

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  • 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!

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UI Conditions

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Condition of UI: National Focus

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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.

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Condition of the UI System

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  • 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.
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SLIDE 8

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UI System Outdated & Flawed

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  • Agency error and overcharging Employer (“ER”)

accounts estimated at ~10-15%.

  • Federal Sequester raises risk of improper accounting
  • f 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.

Image credit: cassettes

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UI Conditions: PA Focus

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  • 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.

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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 %

  • f total UI claims dollars overpaid in P

A

16.37%

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Data retrieved from DOL’s UI Improper Payment by State Agency error estimated a cause in 21.15% of PA overpayments

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SLIDE 11

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New Legislation: UI Integrity

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SLIDE 12

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State UI Law & News

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  • 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.

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Key Federal UI Legislation

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  • 2004 SUTA Dumping Act
  • 2009 UI Executive Order
  • 2011 TAAE UI Integrity (Sec. 252)
  • 2012 ATRA
  • EE SS tax return
  • WOTC reauthorized
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2011 Federal “TAAEA” Law:

  • Sec. 252/UI Integrity

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  • 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
  • f failure.”
  • All states to enact UI Integrity legislation by

10/21/13

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UI Integrity: Sec. 252 Points

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  • 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.
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States Respond With UI Integrity Law

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  • 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.

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2012 ATRA

(American T axpayer Relief Act )

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  • 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
  • n regular extended benefits ("EB").
  • Extension of over 30 business credits, including: R&D, WOTC, EZ
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Audit Alert: Inter-Agency Info Sharing

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  • Fed & state sharing info, data

mining, creating cross-agency task forces.

  • Questionable Employment

Tax Practices “QETP” Initiative

  • Facilitated by movement to

electronic databases.

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QETP Results Through Mid-2012

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  • 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.
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Solutions & Best Practices for UI Compliance & Cost Savings

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“A.C.T.”

Provide information to UI agencies that is: Accurate Complete Timely

Best Practices

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SLIDE 22

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  • 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
  • verpayments & erroneous charges, lower UI tax rates.
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Currently 46 States Implementing SIDES

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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 http://info.uisides.org/pubdocs/SIDES_EMap.pdf

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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

  • rganizational

weakness.

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Controllable Risk Factors

Contributing to UI Cost & Noncompliance

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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
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SLIDE 26

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Controllable Risk Factors

Contributing to UI Cost & Noncompliance

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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:
  • Match benefit year wages vs. charges
  • Scrutinize reports for charge irregularity
  • Audit charge statement to ensure accuracy
  • Create effective contact process with agency
  • Follow-through on reversing inaccurate charges
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Controllable Risk Factors

Contributing to UI Cost & Noncompliance

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Challenge #3: Initial Claim Protest- Strong From the Start

  • Cost-effective elements in initial claim protest process:
  • Detailed system of records to collect/transmit

required data

  • Mechanism to ensure timely response/all initial claims
  • “Follow-through” procedures to ensure agency

compliance

  • Built-in “triggers” to determine needed process

improvement

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Critical Report Audits & Tracking

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  • 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
  • Tools for aggregate review & analysis of “real time” reports
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SLIDE 29

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UCM Plus Screenshot

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Join ETS 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 responses to agency.

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Retro UI Review

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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
  • r increased UI tax expense.

Photo credit: motone

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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

  • ne page checklist

to assess the state

  • f your UI Claims

Administration

Is Y

  • ur UCM

Broken?

Go here to learn more, and here to contact ETS.

Learn more about ETS’ UCM Plus Solution

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ETS Blog

Go here to get ETS’ best UCM blog posts and resources in one place.

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Torrance, CA and Guilford CT (800) 518-3874

Connect with us on LinkedIn

CONTACT ETS

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thank you!

Q&A

Questions & Requests for Presentation Slides:

฀

Ross Henderson-COO

r.henderson@employmenttax.com