UI Integrity Updates for Connecticut Employers

Connecticut is one of the latest states to enact UI integrity legislation, with SB 909 being signed into law on June 3. It will be effective October 1, 2013.

All states are required to enact UI integrity legislation this year by Section 252 of the 2011 Federal Trade Adjustment Assistance Act (TAAEA). Section 252 provisions pertain 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.

It’s up to each state to define what constitutes a “pattern of failure” (to respond timely or adequately), and Connecticut has not defined it in this legislation. Therefore, employers should assume the first instance could potentially constitute the “pattern.”

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Overview of Connecticut’s UI Integrity Legislation (SB 909)

1) Employer non-relief: If it is determined an overpayment results from an employer’s (or their agent’s) failure appear at a hearing or to timely or adequately respond in writing to a request for information regarding a UI claim for benefits “in a manner prescribed by the administrator,” then the employer’s proportionate share of UI benefits will be charged against the employer’s account.

2) UI benefit charge statements for combined wage claims now quarterly: the weekly UI benefit charge statements the Department of Labor has until now been providing on a weekly basis to employers with combined wage claims (for claimants who had worked in multiples states) will instead now be issued on a quarterly basis.

3) UI benefit fraud: In addition to the repayment of fraudulently-obtained UI benefits and losing up to 39 weeks of eligibility for unemployment benefits (already required under Connecticut law), SB 909 will impose a penalty on claimants who knowingly make false statements resulting in fraudulent UI benefit overpayments. The penalty will be 50% of the overpayment amount in the first instance, and 100% of the overpayment amount in any subsequent instances. It also allows the Department to seek recovery of payment through state and federal income tax refunds, as allowed by law.

4) Shared work program widens scope to include more employers: Previously available only to contributing employers (not reimbursable employers), all employers subject to UI law will be eligible to use Connecticut’s shared work program.

Read the entire text of SB 909 here.

Other legislative news for Connecticut employers:

SB 188 (more here) was signed into law on May 17, 2013. It authorizes the Department of Labor to conduct a study, the findings of which will be reported on or before October 1, 2014. The study is to explore:

  1. Allowing teachers who are currently eligible to receive unemployment compensation to pursue certain certifications, credentials, endorsements or specialized training without risk of losing their unemployment benefits; and
  2. Allowing individuals who are currently eligible to receive unemployment compensation to develop a new business without risk of losing their unemployment benefits.

Here is the most current available UI data for Connecticut:

  • Unemployment rate (as of March 2013): 8.0%
  • Taxable wage base in 2013: $15,000
  • Amount of state trust fund loans (as of June 2013): $728,688,241
  • Minimum weekly benefit: $15
  • Maximum weekly benefit: $573
  • Minimum tax rate: 1.90%
  • Maximum tax rate: 6.80%
  • Using employer-financed bond: No
  • Employer assessment provision: 0.13%
  • FUTA reduction: 0.6%
  • Net 2012 FUTA rate: 1.2%
(Sources: ETS Blog, U.S. Department of Labor, SUCAP Reports, NASWA, Congressional Research Service.)

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

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.

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 22, 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 22nd date.

There are only a few states currently at risk of not passing TAAEA-compliant UI integrity legislation by the October 22nd deadline, and those include Georgia and Vermont, in which their respective state legislatures have adjourned for the year without having passed the necessary legislation.

If you are an employer with operations in the state of Connecticut, 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, Connecticut joins the ranks of other states that have recently enacted UI Integrity legislation, including: AL, CA, CO, HI, IA, ID, IL, IN, FL, KS, KY, MD, MN, MS, MT, NC, NE, NH, ND, NY, OK, SD, TX, UT, VA, WV, and WY.

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.