On May 17, 2013, the governor of Florida signed HB 7007 into law. It goes into effect on July 1, 2013.
image credit: Pete Markham
Florida’s HB 7007
A massive, 102-page piece of legislation addressing a range of economic development issues, HB 7007 includes language that will subject Florida employers to UI integrity legislation as required by Section 252 provisions of the 2011 Federal Trade Adjustment Assistance Act (TAAEA).
The new legislation amends section 443.151(3) of Florida’s unemployment insurance (UI) law to conform with TAAEA’a Section 252 requirements, pertaining 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.
HB 7007 includes provisions relating to a range of activities, including:
- Economic Development Reporting
- Florida Small Business Development Network
- Economic Development Incentives
- Florida Small Cities Community Development Block Grant (CDBG) Loan Guarantee Program
- Reemployment Assistance
- Gulf Coast Economic Corridor Act
To comply with Section 252, Florida’s new law:
- Assesses a 15% penalty on individuals fraudulently collecting reemployment assistance benefits and deposits those funds into the Unemployment Compensation Trust Fund.
- Prohibits the Department of Economic Opportunity (DEO) from relieving an employer of benefit charges if the employer or its agent fails to timely and adequately respond to a notice of claim or request for information. Note: There is no mention or definition of pattern of failure, which may be interpreted to mean Florida is taking a stronger stance than is required by Section 252 and employers may not be eligible for relief of charges on the first instance of failure to timely and adequately respond.
- The legislation includes a provision that “the department may adopt rules as necessary to implement the processes described in this paragraph relating to notices of claim,” therefore its fair to expect more specific information on compliance may be forthcoming.
- Regarding timeliness, the law states that “the employer must respond to the notice of claim within 20 days after the mailing date of the notice, or in lieu of mailing, within 20 days after the delivery of the notice.”
Additionally, excess payments collected from employers to pay interest on federal loans must be applied first to federal interest payments due before any additional assessments are made on employers. If the amount on deposit is at least 80% of the estimated interest due on federal loans, then further collection of assessments is prohibited. This provision will sunset on July 1, 2014, and may already be moot as Florida has very recently repaid its federal UI loan and related interest.
Florida Federal Unemployment Loans / FUTA Update
According to the U.S. Department of Labor, as of May 15, 2013, the state of Florida has repaid its federal UI loan. Yesterday an article in the Tampa Bay Times announced the state of Florida has made the final interest payment due on its (now repaid) $3.5 billion total unemployment loan balance, accrued since 2009. The last payment of $9.2 million was a fraction of the total $99.5 million in interest alone the state of Florida and its employers have had to pay on federal unemployment loans. According to the Tampa Bay Times, the debt was repaid with a combination of funds collected through employer taxes ($3.1 billion) and tax credits from the Federal Unemployment Tax Act ($390 million).
Based on a recent (May 20, 2013) Payroll NewsFlash from Ernst & Young, because of the loan repayment, there is no FUTA credit reduction anticipated for 2013. They say the state of Florida will assume the cost of federal loan interest, and if the state is able to make it through 2013 without borrowing from Federal UI loan funds again, employers’ net FUTA tax will again be at the minimum 0.6%, which is great news for Florida employers.
Employers may also be interested to know that the HB 7007 legislation includes provision for a sales tax exemption for certain industrial machinery and equipment used at a fixed location in the state of Florida. The provision is effective 4/30/14 through 4/30/17, and was strongly supported by the Manufacturers Association of Florida (MAF), who state the bill “will help grow Florida’s economy and allow manufacturers to be more competitive.”
HB 7007 also provides for the widening of certain enterprise zones (by 3-5 square miles).
Here is the most current available UI data for Florida:
- Unemployment rate (as of March 2013): 7.5%
- Taxable wage base in 2013: $8,000
- Amount of state trust fund loans: now ZERO
- Minimum weekly benefit: $32
- Maximum weekly benefit: $275
- Minimum tax rate: 1.02%
- Maximum tax rate: 5.40%
- Assessment provision: 0.092% (potentially waived)
- 2012 FUTA rate (paid in 2013): 1.20% (potential return to 0.6%)
- Projected 2013 FUTA rate (paid in 2014): 1.50% (potential return to 0.6%)
About Section 252
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 posthere.
If you are an employer with operations in the state of Florida, 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, Florida joins the ranks of other states that have recently enacted UI Integrity legislation, including: CA, CO, HI, IA, ID, IL, IN, KS, KY, 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.