UI Integrity Law Updates for North and South Dakota Employers

South Dakota’s New UI Integrity Legislation

South Dakota’s HB 1055 was signed by the Governor on February 12 of this year, and became effective 90 days thereafter, which means it’s now been in effect since mid-May.

South Dakota’s new legislation does not define what constitutes a “pattern of failure” to respond to the state agency requests, stating simply that if the improper benefit payment occurs due to employer (or their agent’s) failure to respond timely and/or adequately to the state agency’s request for information, they will not be eligible to receive credit back to their account. On the claimant side, the law also removes the one-year limitation period for enforcing administrative fraud penalties, and establishes a 50% (of the amount of overpayment) fine for the first offense, and 100% fine for any subsequent offenses. Read the full text of HB 1055 here.

Read more about new legislation impacting South Dakota employers here. 

image credit: nicholasputz

North Dakota’s New UI Integrity Legislation

In North Dakota’s case, HB 1111 was signed by the Governor on March 27th, and will not go into effect until October 21st of this year. Like South Dakota, North Dakota fails to define what constitutes a “pattern of failure” for the purposes of their TAAEA-conforming UI integrity law. In such a case, employers should assume it could apply potentially on the first instance. The signing of HB 1111 follows a related bill, SB 2111, which was signed into law on March 21st, and which instates a penalty of 15% (of the amount of overpayment) against claimants who have made false statements in order to fraudulently obtain UI benefits.

In other news of interest to North Dakota employers, on May 7th, the Governor signed SB 2156into law which revises income tax withholding rates retroactively to January 1, 2013. The newly-revised rates and instructions for income tax withholding are now available here.

Read more about new legislation impacting North Dakota employers here.

Here is the most current available UI data for North Dakota:

  • Unemployment rate (as of June 2013): 3.2%
  • Taxable wage base in 2013: $31,800
  • Amount of state trust fund balance (as of June 2013): $157,762,000
  • Minimum weekly benefit: $43
  • Maximum weekly benefit: $516
  • Minimum tax rate: 0.17%
  • Maximum tax rate: 9.78%
  • Using employer-financed bond: No
  • Employer assessment provision: No
  • FUTA reduction: No

Here is the most current available UI data for South Dakota:

  • Unemployment rate (as of June 2013): 4.0%
  • Taxable wage base in 2013: $13,000
  • Amount of state trust fund balance (as of June 2013): $51,696,000
  • Minimum weekly benefit: $28
  • Maximum weekly benefit: $333
  • Minimum tax rate: 0.00%
  • Maximum tax rate: 10.03%
  • Using employer-financed bond: No
  • Employer assessment provision: No
  • FUTA reduction: No
(Sources: ETS Blog, U.S. Department of Labor, SUCAP Reports, NASWA, Congressional Research Service.)
 
 
image credit: nicholasputz

About UI Integrity

UI Integrity 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.

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.

The immediate impetus for the flood of state legislation is Section 252 of the 2011 Federal Trade Adjustment Assistance Act (TAAEA). 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.

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. In short, it raises the bar for employers and TPAs and introduces a new level of accountability to the UI cycle.

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.

Regardless of which state(s) you do business in, right now there is a critical window of opportunity to ensure that your in-house and/or third party administrator is prepared to address the upcoming changes resulting from the newly-passed legislation.

Read about UI integrity legislation in other states on the ETS Blog 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.