UI Forum (ADP Unemployment Group)
Recovery Act Includes Unemployment Insurance Initiatives
The American Recovery and Reinvestment Act of 2009 was signed into law on February 17, 2009. The nearly $800 billion piece of legislation includes a number of economic stimulus provisions aimed at jobless workers and families. Employers and many state government officials are concerned about some of required permanent changes to the unemployment insurance program (UI) in order to obtain temporary stimulus funding.
UI-related highlights of the Recovery Act are as follows:
Federal Additional Compensation (FAC)
States will add $25 additional to an individual’s weekly unemployment benefit amount. FAC covers all programs – regular UI (full and partial unemployment benefits); EB (state extended benefits); EUC (federal Emergency Unemployment Compensation); UCFE (unemployment for federal workers); UCX (unemployment for military); DUA (Disaster Unemployment Assistance) and TRA (Trade Readjustment Allowance). This provision expires January 1, 2010 with no benefits being paid after June 30, 2010. It is 100% federally funded from general revenues.
Emergency Unemployment Compensation (EUC)
The EUC claim filing deadline is extended to December 31, 2009, with no EUC benefits paid after May 31, 2010. Up to 33 weeks of EUC can be paid – 13 weeks from the original EUC enactment in July 2008, plus 7 additional weeks from the EUC extension signed November 21, 2008. The November extension also includes a second tier of 13 weeks in high unemployment states – those with an unemployment rate of 6% or higher in the prior three months. EUC is 100% federally funded.
Temporary Full Federal Funding of State EB
This provision calls for 100% federal funding of state extended benefits (EB), beginning February 17, 2009 and ending January 1, 2010. Funding will come from the federal Emergency Unemployment Compensation Account (EUCA).
States that have currently triggered on extended benefits are: AK, CT, ID, IN, MA, MI, MN, MT, NC, NJ, NV, OR, PA, PR, RI, SC, VT, WA, and WI.
All state UI laws contain provisions for EB, which are tied to unemployment rate triggers. EB is normally 50% federally funded and 50% state funded. States normally charge their portion to employers (50% for tax contributing employers, but 100% for reimbursers, since they do not pay FUTA taxes). The temporary federal stimulus funding at a level of 100% essentially eliminates EB costs for most employers; government entities and Indian tribes are excluded.
This Recovery Act initiative provides for a $7 billion distribution to states if they enact benefit expansions to cover new groups. One-third of the distribution will be paid if states enact an Alternative Base Period – an earnings period used to establish an unemployment claim, which takes into account more recent wages than the standard base period. The other two-thirds will be paid to states for enacting two out the four following provisions:
Part-time Work Search – UI benefits will not be denied regarding work availability, work search or work refusal solely because a person seeks only part-time work. A state may hold a person ineligible, if the majority of weeks in the base period do not include part-time work.
Approved Training – Individuals exhausting regular weekly UI payments may continue to receive up to 26 weeks of benefits, if they are enrolled in and making progress in a state-approved training program or an authorized Workforce Investment Act (WIA) job training program. Training must prepare persons for entry into “high-demand” occupations. States may not allow continued UI benefits if an individual is receiving other training allowances or stipends.
Dependents’ Allowances – Persons with dependents may receive an allowance of at least $15 per dependent per week, with an aggregate limit of the lesser of $50 or 50% of an individual’s weekly unemployment benefit amount.
- Compelling Family Reasons – UI benefits cannot be not denied if the separation is due to compelling family reasons, which must include: 1) domestic violence; 2) illness or disability of an immediate family member; and 3) the need to relocate with a spouse to a place from which it would be impractical to commute and due to a change in the spouse’s employment location.
Additional UI elements in the Recovery Act are:
- Temporary Interest Free Loans to States
- Temporary Suspension of Federal Income Tax on Claimant UI Benefits
- Special Administrative Funding Transfer to States
It will be up to each state if, when and how any UI Modernization elements are implemented. It will also be up to each state if employers will be liable for associated costs. State legislatures, governors and UI agencies will ultimately decide. Right now, the “rub” for many states and employers is the special stimulus distribution is temporary, but benefit expansions to the unemployment program will be permanent, which will mean higher costs to maintain the expansions once the funding is gone.
Layoffs – A Reminder about Requirements and Options
The current recession has many employers facing the real possibility of reducing their workforce or even closing facilities. Businesses facing layoffs need to keep WARN requirements in mind and may also want to consider Shared Work Plans as an alternative to permanent workforce reductions.
The Worker Adjustment and Retraining Notification Act (WARN) was enacted by the federal government 20 years ago to protect workers and communities when many jobs were lost due to plant closures or mass layoffs. The WARN Act requires employers to provide notice at least 60 days in advance of a permanent facility closure or mass layoff. The notice must be provided to: 1) affected workers or their union representative; 2) the state dislocated worker unit; and 3) the appropriate local government agency.
While there are limited exceptions to the 60-day notice requirement – a plant closure due to a natural disaster, for example - WARN generally applies to any employer, who employs at least 100 full-time employees and:
- Permanently closes a single facility of 50 or more full-time workers, or
- Discontinues an operating unit of 50 or more workers, or
- Lays off 50 to 499 workers, and the layoffs constitute 33% of the total workforce at a single employment site, or
- Has a lay off, during any 30-day period, that affects 500 or more workers at a single employment site
- Implements a temporary layoff of less than 6 months, that meets any of the above criteria, and later decides to extend the layoff for more than 6 months
- Reduces the hours of work by 50% or more for each month in any 6-month period, which impacts 50 or more workers
An employer who violates the WARN requirement is liable for back pay and benefits for each worker, up to 60 days. However, if the employer pays wages in lieu of the notice period, the violation liability is reduced. In addition, an employer who fails to provide notice as required to the local government may be subject to civil penalties, not to exceed $500 for each day in violation. Enforcement of WARN requirements is through the United States district courts and all interested parties are entitled to bring individual or class action suits against any employer believed to be in violation of the WARN Act.
Complete details regarding WARN can be found at: http://www.doleta.gov/layoff/warn.cfm.
About Shared Work Plans
The intent of Shared Work Plans is to provide a practical alternative to layoffs, beneficial to both employers and workers. Hours of all participating workers are reduced, but lost wages are then supplemented by partial unemployment insurance (UI) benefits. These plans enable businesses to keep their skilled workforce intact, and eliminate costs associated with recruiting, hiring and training new employees. Participating workers are able to avoid hardships associated with total unemployment. Both are able to quickly return to full operational status, once the economic climate rebounds.
Employers interested in participating in a Shared Work Plan must apply for plan approval with the state unemployment insurance agency. Each state agency’s plan will specify:
- Plan duration (generally 6 months to a year)
- Range of reduced hours allowed (normally10%-40%)
- Number of partial UI benefit weeks allowed (usually 26 or 52 weeks)
- Amount of UI benefits payable
Eighteen states currently offer Shared Work Plans. They are AZ, AR, CA, CT, FL, IA, KS, LA, MD, MA, MN, MO, NY, OR, RI, TX, VT and WA. Plan details can be found on each state’s UI website.
Alabama – In a February 27, 2009 press release, Governor Bob Riley said he would not recommend state legislators change the law in order to get the special economic stimulus distribution, pointing out that while the funding would end, the required unemployment insurance (UI) law changes tied to it would remain, resulting in an annual $17 million tax increase to employers to continue supporting the UI benefit expansions.
Michigan - On March 11, 2009, Governor Jennifer Granholm signed HB 4239 to amend the unemployment insurance (UI) law, which suspends the Solvency Tax that was set to be assessed in April against employers with a negative UI tax account balance.
The Solvency Tax went into effect January 1, 2009, for the purpose of paying interest on a federal loan. Michigan is one of several states faced with borrowing from the federal government for continued payment of unemployment benefits. Michigan’s UI trust fund loan currently exceeds $1.6 billion.
The federal Recovery Act, enacted February 17, 2009, contains interest waiver provisions for 2009 and 2010. The signing of HB 4239 allows Michigan to take advantage of this waiver, and also saves around 34,000 employers from having to pay nearly $43 million in solvency taxes.
The loan is required to be paid by November 9, 2009, or employers will lose 0.3% of the FUTA tax credit. If this occurs, employers’ FUTA costs will increase from $56 to $77 per employee.
New Hampshire – The Employment Security Department recently announced there will be no fund balance tax rate reductions for any employer in 2009, due to continued high unemployment claim volumes brought on by the recession. New Hampshire’s UI trust fund balance has fallen below the level required for the reduction to be applied. Revised rate notices will not be issued. More information about this year’s elimination of the fund balance reduction can be found at http://www.nh.gov/nhes/tax_rate_info.htm.
Tennessee – An emergency unemployment insurance (UI) rule was recently implemented, requiring use of the Automated Partial Claims System (APS). Employers who file 50 or more partial unemployment claims on behalf of workers must use this electronic filing method. Mandatory use of APS has become necessary in order to more efficiently process increased claims activity brought on by the recession. A penalty of $50 may be assessed against any employer for failure to utilize APS. The Department of Labor & Workforce Development mailed a letter to employers on February 12, 2009, about the emergency rule and APS requirements. Questions can be directed to email@example.com.
Texas – Governor Rick Perry recently indicated he would reject nearly half a billion in federal stimulus funds, because the money has strings attached which would result in higher unemployment insurance (UI) costs to employers. At issue, in part, is that in order to receive special federal incentives, the long-standing UI requirement for full-time work search and availability must be amended.
UWC’s 2009 UI Issues Conference to be Held in May
The 28th Annual Unemployment Insurance (UI) Issues Conference presented by UWC – Strategic Services on Unemployment & Workers’ Compensation will be held May 12-14, 2009, at the Hilton Wilmington Riverside Hotel in Wilmington, NC.
Today’s economic recession makes unemployment insurance matters more important than ever. Current topics of interest range from federal extensions of unemployment benefits included by Congress as economic stimulus, to the list of states incurring federal loans in order to continue paying benefits, to the unemployment tax increases being felt by employers as the nation makes its way through the economic downturn.
UWC’s conference is for employers and will explore the major unemployment insurance issues facing businesses today. Conference sessions include the economy, trust fund solvency, tax increases, administrative finance reform, legislative updates, the new President’s first budget proposal and reemployment best practices to reduce unemployment duration.
Known as the “voice of business,” UWC, Inc. is the only national organization serving the interests of employers on Unemployment Insurance and Workers’ Compensation matters.
Conference registration information can be found at www.uwcstrategy.org, so plan to attend this important national UI event.
THE U.I. FORUM® IS PUBLISHED BY ADP UNEMPLOYMENT GROUP, P.O. BOX 66744, ST. LOUIS, MO. 63166. ©ADP, INC. 2009. ALL RIGHTS RESERVED