UI Forum (ADP Unemployment Group)

July 2010



UI Integrity – Employers’ Role Critical to an Efficient Unemployment Insurance Program

While the nation is beginning a slow journey back to a strong economy, the times are quickly changing for government programs, including Unemployment Insurance (UI). Fueled by a recent presidential Executive Order to eliminate error, waste, fraud, and abuse in major programs administered by the federal government, as well a Senate Finance Committee hearing on increasing quality in the UI system, employer participation in the process – or the lack thereof – is under scrutiny by the U.S. Department of Labor and state unemployment agencies. UI Integrity, an initiative to reduce improper benefit payments and increase program efficiency, is a high priority. At federal and state levels, lack of sufficient information from employers is seen as a roadblock to UI Integrity. Now, more than ever, it is critical for employers to consistently provide full details in UI claim matters.

State unemployment agencies have always required full details be provided at the initial level of the unemployment claim, and employers have always been obligated to provide complete, accurate, and timely separation and wage information at the beginning of the UI process. Because of UI Integrity demands for improved efficiency and reduced costs, agencies are increasingly less tolerant of insufficient claim responses. From a UI agency’s perspective, the employer is the knowledgeable party to a claimant’s employment and separation history, and should have the facts at hand. When an employer fails to provide complete information, the agency must rely on the available information to make a determination of benefits. If that determination of eligibility is later overturned at an unemployment hearing, based on details that weren’t provide by the employer at the front end of the UI claim process, it creates an overpayment, which often cannot be recouped. Unrecoverable benefit overpayments drive up UI program costs for all.

A federal proposal was introduced in April 2010 to help address overpayment and quality issues. The proposal contains language and consequences directly aimed at the business community by prohibiting non-charging when an employer or the employer’s agent fails to provide sufficient information in UI matters. The language contained in the UI Integrity proposal is as follows:

3BSEC. 4. PROHIBITION ON NONCHARGING DUE TO EMPLOYER FAULT.

(a) IN GENERAL.—Section 3303 of the Internal Revenue Code (26 U.S.C. 3303) is amended by striking subsections (f) and (g) and inserting after subsection (e) the following new subsection—

“(f) A State law shall be treated as meeting the requirements of subsection (a)(1) only if such law provides that an employer’s account shall not be relieved of charges relating to a payment from the State unemployment fund if the State agency determines that the payment was made because the employer, or an agent of the employer, was at fault for failing to respond timely or adequately to the request of the agency for information relating to the claim for compensation and if the employer or agent has established a pattern of failing to respond timely or adequately to such requests.”.

(b) EFFECTIVE DATE.—The amendment made by this section shall be effective for erroneous payments established after the end of the 2-year period beginning on the date of the enactment of this Act.

Although the UI Integrity Act is still just a proposal, states agencies are already administering consequences for insufficient employer responses, including: loss of appeal rights or interested party status, loss of noncharging to an employer’s UI account and monetary penalties. Employers must keep in mind a “sufficient response” isn’t simply the reason a worker was separated from employment; it is complete, accurate, and timely details, including pertinent supporting documentation and earnings information.

Employers should consistently provide detailed responses at the initial UI claim level as a best practice, rather than an avoidance measure to consequences and penalties. Doing so has the added benefit of reducing costs and saving time, especially if good information prevents unnecessary unemployment appeals and hearings. Information that state UI agencies typically require, depending on whether the separation is voluntary, a dismissal, or a lack of work includes:

  • Dates of employment
  • Rate of pay
  • Copy of the resignation letter
  • Date of the final incident that caused the separation
  • Facts and details that led to the final incident
  • Pertinent warnings
  • Copy of the applicable company policy
  • Terminal payments such as severance, pension, etc.

The role of the ADP Unemployment Group is to partner with employer clients to provide guidance, assist in preventing unmerited claim costs, and help meet state UI agency requirements for complete, accurate and timely information. This partnership is essential for the UI Integrity initiative to successfully reduce benefit overpayments and improve the unemployment insurance program.

Federal Legislation to Extend Unemployment Benefits Fails

The U.S. Senate failed to pass a bill on June 24, 2010, to further extend unemployment insurance (UI) benefits. The House may consider moving stand-alone UI extension legislation, but action is unlikely until after the July 4th Congressional Recess.

It is estimated that since the expiration of the current extension on June 2, 2010, as many as 200,000 individuals a week, nationally, are exhausting all available state and federally funded UI assistance. By the end of July, experts predict 3.2 million unemployed will be without benefits. However, legislators are concerned about the impact of another extension on the federal budget deficit—the failed bill would have added another $33 billion over the next 10 years.

Despite the Senate’s failure to pass legislation, workers in the middle of their extension claims are not immediately cut off from those benefits. Last year’s Recovery Act provisions for EUC, federal funding of state Extended Benefits (EB) and Federal Additional Compensation (FAC), and the subsequent extensions of these programs has phase out provisions. Eligible persons who applied for EUC prior to June 2, 2010, may continue to be paid through the week ending prior to November 6, 2010. The phase-out period for FAC, the additional $25 added to weekly benefits ends December 7, 2010. Full federal funding of state EB will also be completely phased out as of November 6, 2010.

EUC is not available to individuals who exhausted regular UI benefits on or after June 2, 2010, but they may be eligible for additional benefits in states that are triggered on for EB. Only the following 13 states are triggered on, as of the week ending June 27, 2010:

Alaska

Minnesota

North Carolina

Washington

Connecticut

New Hampshire

Puerto Rico

Kansas

New Jersey

Rhode Island

Michigan

New Mexico

Vermont

As the federal funding of state EB continues to be phased out between June 2, 2010 and November 6, 2010, employers will see increased charges for extended benefit payments.

State Updates

District of Columbia

Legislation was recently enacted which increases the length of time to file a timely appeal to the initial unemployment determination from 10 days to 15 days. In addition, benefits will be allowed for separations due to compelling family reasons, including leaving to care for an ill or disabled family member, and a voluntary quit to follow a spouse or domestic partner, where it is not practical to commute. Also, “UI training extension benefits” will be available to claimants who have exhausted regular benefits and enroll in approved training.

Florida

Effective July 1, 2010, the law is amended with regard to a timely response on form UCB-412, Notice of Unemployment Compensation Claim Filed. Previously, this form did not contain a deadline date. Now, an employer must respond to the claim within 20 days from the mailing date or their unemployment account will be subject to benefit charges.

South Carolina

Governor Mark Sanford recently signed legislation aimed at restoring solvency to the state’s unemployment insurance (UI) trust fund, repaying the nearly $900 million in federal loans and avoiding a reduction to the FUTA tax credit that employers currently receive. The bill provisions include placing businesses in one of 20 categories based on layoff activity, and new rate calculations. The UI agency is currently analyzing computations and is working with business organizations to prepare employers for the impending changes. Employers should expect to see increased tax costs. The agency will notify employers on how their UI accounts will be impacted, as information becomes available. The bill goes into effect January 1, 2011.

Wisconsin

The Appeals Tribunal recently increased the travel distance requirement from 40 miles to 60 miles for there to be “good cause” to grant a request to conduct an unemployment hearing via telephone. Although this change is not statutory or regulatory, in accordance with policy, an Administrative Law Judge may not approve telephone participation if parties to the hearing are within the 60 mile radius of the hearing location.

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THE U.I. FORUM® IS PUBLISHED BY ADP UNEMPLOYMENT GROUP, P.O. BOX 66744, ST. LOUIS, MO. 63166. ©ADP, INC. 2010. ALL RIGHTS RESERVED

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