New York Passes 2013-14 Budget; UI Impact & Changes for Employers

On March 28, 2013, the NY State 2013-14 Budget bill was signed into law.

(Read more details about the budget here).

photo credit: Laverrue

One of the goals of the new budget is to generate additional UI tax revenue to hasten repayment of New York’s federal UI loans. The new budget should allow repayment by 2016 rather than 2018, which will reduce the additional burden on employers for interest on the state’s UI loan balances. In 2012, for example, New York employers were charged as much as $12.75 more per employee just to cover interest on these loans.

Here is what employers need to know about the new legislation:

  • The Metropolitan Transportation Authority (MTA) business tax surcharge was extended through 2018. This is a controversial tax which is currently undergoing challenge in the courts (read more about filing a protective claim for the tax here).
  • It increases the minimum wage to $8.00/hr starting in 2014. In 2015 it will increase to $8.75/hr, and in 2016 it will increase to $9.00/hr.
  • It adds work search requirements to unemployment benefit requirements (minimum two weekly documented prospective employer contacts, subject to random audit).
  • Increases the state’s minimum/maximum UI weekly benefit on a graduated scale. Between October 2014 and October 2018, the weekly maximum benefit rises incrementally from $405 to $450. From October 2016 through October 2026, the maximum benefit increases incrementally from 36 to 50 percent of the average weekly wage. (Coincidentally, the New York Times reports this week that long-term or extended (EB) unemployment benefits in the state of New York are set to shrink as a repercussion of the federal sequestration, covered recently on our blog here.)
  • Despite the increase in weekly benefit amounts, its claimed that the new budget will ultimately save New York employers $400 million in collective SUI costs over the next decade.
  • The state’s UI wage base will increase to $10,300 for 2014, and incrementally thereafter until it reaches $13,000 in 2026, after which it will be annually adjusted to the state’s average annual wage.
  • Increased availability of hiring credits. New credits are built into the budget for hiring returning veterans and youth. $181 million is allocated over three years to hire youth, and the veterans hiring credit is to be permanent. We recently wrote about proposed veterans hiring credits in the state of New York here.
  • The budget includes UI integrity provisions to bring New York into compliance with 2011’s federal TAAEA (Section 252) requirements. When employers fail to timely and adequately respond to state requests for UI benefit information, non-charging of UI benefits cannot be permitted.
  • Nearly $800 million in tax relief to small businesses.
  • Modernization and simplification of the state UI and worker’s compensation systems, including mandatory e-filing and e-payment. This will drive an estimated $1.3 billion in savings without impacting workers’ benefits.
  • Facilitate wage garnishment for delinquent taxpayers without having to file a warrant with the Department of State or County Clerks. This would serve to protect employees from having a mark on their credit record for seven years.
  • Makes receipt of dismissal pay disqualifying for UI benefits.
  • Previous proposed budgets included other measures impacting employers such as the elimination of the six lowest tax brackets of the state UI tax table (effectively raising the tax rate from 0.9 to 1.5% for the most positively experience-rated employers). As of this writing, we cannot confirm whether that provision made it to the final budget bill as it was approved; we will update as that information becomes available.
image credit: EmaPhotos98

State of UI in New York

New York was one of 21 states facing a FUTA credit reduction in 2011 as a result of being unable to repay federal loans taken out in 2009 to cover the demand for unemployment benefits. In order to avoid a FUTA credit reduction, those loans would have had to been repaid by November 10, 2011. New York continues to carry a loan balance and is on track to face another incremental FUTA credit reduction in 2013 (the credit reduction effectively raises employers’ UI taxes). If this FUTA credit reduction increases, it will mean that employers will be paying $147 per employee in 2015 (versus $105 per employee in 2013).

 

With this budget bill, New York joins other states such as Virginia, North Dakota, Iowa, California,IllinoisMinnesotaNebraska, North CarolinaOklahoma, and West Virginia in passing UI integrity legislation to comply with Federal TAAEA Section 252 requirements.

Read more about Section 252 here.

Download our one page Fact Sheet on Section 252 to get a better understanding of key provisions that will directly impact employers.

Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS “Circular 230” rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.