On March 21, 2013, Governor Steve Beshear signed Kentucky HB 102, Chapter 45 into law, subjecting Kentucky employers to UI integrity legislation as required by Section 252 provisions of the 2011 Federal Trade Adjustment Assistance Act (TAAEA).
image credit: David Paul Ohmer
Kentucky’s HB 102, Chapter 45
The new legislation amends Kentucky’s unemployment insurance (UI) law to conform with Section 252 requirements. This pertains to the overpayment of UI benefits caused either by an employer’s failure to respond timely or adequately, or by fraud on the part of the claimant.
Kentucky’s law defines a “pattern of failure” as at least six failures within a calendar year, or the failure to respond to 2% of such requests in a calendar year, whichever is greater.
Additionally, when it has been determined that an employer’s action (or inaction) has met the requirement of a pattern of failure, communication of such will be transmitted to the last known physical or electronic address provided by the employer. The employer will then have 15 days from the mailing date to appeal the determination.
The new law also includes a penalty assessment of 15% of the amount of improperly paid benefits upon any recipient of UI benefits deemed to be paid as a result of their false statement, misrepresentation, and/or concealment of material information.
Here is the most current available UI data for Kentucky:
- Unemployment rate (as of March 2013): 8.0%
- Taxable wage base in 2013: $9,300
- Amount of state trust fund loans: $837,065,000.00
- Minimum weekly benefit: $39
- Maximum weekly benefit: $415
- Minimum tax rate: 1.0%
- Maximum tax rate: 10.00%
- Assessment provision: 0.22% in 2014
- 2012 FUTA rate (paid in 2013): 1.20%
- Projected 2013 FUTA rate (to be paid in 2014): 1.50%
Section 252 measures are part of a larger effort by the federal government to address the growing U.S. deficit, and are specifically designed to help prevent the improper payments which have long been a drain on the unemployment insurance system.
Section 252’s mandate is that states must require employers to respond timely and adequately to state requests for UI benefit information. Accordingly, when employers (or their agents) fail to respond timely and adequately and are responsible (in part or in whole) for improper payments being made to claimants, the employer’s UI account must not be relieved of charges. The prohibition against relief of benefit charges applies to for-profit and non-profit employers alike.
Federal TAAEA law requires employers to be charged for UI benefit overpayments when there is a pattern or practice of failure to adequately and timely respond to state requests for information about UI benefit claims.
Read more about UI Integrity
With TAAEA’s Section 252, the federal government has mandated the states to apply new, stricter rules and practices which place a greater burden on employers to respond quicker, respond better, be more on top of what their third party administrator (TPA) is doing on their behalf, and to be financially responsible for overpayments on unemployment claims charges whenever they hold any blame for the overpayment.
The TAAEA requires states to have UI integrity provisions in place by October 21, 2013, or risk losing the 5.4% maximum federal unemployment insurance (FUTA) credit for their state’s employers. Many of the states’ new laws are going into effect before the October 21st date.
Past DOL claims that 19% of UI benefit overpayments stem from employers’ untimely response and/or inaccurate information were a major impetus to hold employers accountable for these overpayments. In 2011, the Department of Labor estimated that $14 billion dollars, or 11% of all UI claim payouts, were a result of overpayments. For more information, see our earlier blog post here.
image credit: David Paul Ohmer
If you are an employer with operations in the state of Kentucky, now is an opportune time to ensure that your in-house and/or third party administrator is prepared to address the upcoming changes as a result of the newly-passed legislation. With this, Kentucky joins the ranks of other states that have recently enacted UI Integrity legislation, including: CA, CO, HI, IA, ID, IL, KS, MD, MN, MS, MT, NC, NE, NH, ND, NY, OK, SD, UT, VA, WV, and WY.
Employers in other states, be on the lookout for similar legislation soon headed your way.
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.