Employers in South Carolina and Nevada Face New UI Integrity Laws

There have been multiple new developments related to unemployment insurance costs for employers in South Carolina and Nevada. For Nevada updates, scroll down.

South Carolina UI updates for employers

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1) The state of South Carolina recently made an early voluntary repayment of $144M towards their federal unemployment insurance loan, which (according to a news release from the South Carolina Dept. of Employment and Workforce, hereafter the “Department”) has saved the state over $1.7M in related interest. South Carolina is still facing a FUTA credit reduction for calendar year 2013, but this early repayment was one of the steps required to avoid the FUTA reduction. Representatives in South Carolina are hoping to secure approval from the U.S. Department of Labor (as they did successfully for calendar year 2012) that will allow them to again avoid the FUTA credit reduction. See Associated Press coverage of the early repayment on SC.now for additional information.

2) HB 3751 UI integrity legislation was signed into law on June 7th, and will take effect on October 21, 2013, just in time to comply with TAAEA’s Section 252 mandate.

The main things employers need to know about South Carolina’s UI integrity legislation are:

  • A “pattern of failure” (to respond timely or adequately to Department request for information) has been defined as either 3 or more occasions OR 3% of Department requests made within a single year, whichever is greater.
  • Inadequacy has been further described as: failing to provide sufficient facts to enable the Department to make an accurate determination of benefits that does not result in an overpayment. However, if the Department fails to request the necessary information, a response may not be considered inadequate.
  • The charging of overpaid UI benefits to an employer’s account will be waived if the Department finds the employer had good cause for failure to respond timely or adequately. Examples given may include error on the part of the Department, natural disaster or emergency, illness of the employer, employer staff or agent, or similar. The burden of proof lies with the employer to establish good cause.
  • Individuals who obtain UI benefits through fraudulent means will be subject to a penalty equal to 25% of the amount of UI benefit overpayment, also effective October 21, 2013.
  • South Carolina’s definition of “new hire” has been broadened and now conforms with federal law. It now includes individuals who have been rehired after being separated for at least 60 consecutive days, returning after a layoff, furlough, separation, leave without pay, or termination from employment.
  • The Department must also take steps towards implementing an online program for employers to address potential claims for UI benefits.
  • Read the entire text of the legislation here.

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

  • Unemployment rate (as of June 2013): 8.1%
  • Taxable wage base in 2013: $12,000
  • Amount of state trust fund loan balance (as of July 2013): $531,557,413
  • Minimum weekly benefit: $42
  • Maximum weekly benefit: $326
  • Minimum tax rate: 0.095%
  • Maximum tax rate: 7.855%
  • Employer assessment provision: Yes, included in SUI rate; it varies depending upon base rate (0.035- 0.445%) and is payable with quarterly wage reports.
  • FUTA reduction: Yes; net FUTA rate in 2012 is 0.6%
  • Benefit Cost Reduction (BCR) Penalty: SC is one of two states this may apply to in 2013; if triggered, it could add 1% to the standard FUTA credit reduction.
(Sources: ETS Blog, U.S. Department of Labor, SUCAP Reports, NASWA, Congressional Research Service.)

Nevada UI updates for employers

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Nevada employers will be impacted by a number of new laws signed by their state Governor in May and June.

 

1) NV AB86, which creates a system for verifying that licensed contractors are in compliance with UI law. Read the full text of the law here.

 

2) NV AB482, which imposes a temporary special assessment on employers to pay interest on Title VII loans. Read the full text of the law here. Reimbursing employers are exempt from the assessment.

 

3) NV SB35, which requires the state of Nevada to charge an employer fee to defray recording, copying, certification costs related to UI proceedings. Read the full text of the law here.

 

4) NV SB515, which authorizes the issuance of bonds to pay UI loans and a temporary assessment on employers to pay. Read the full text of the law here. Reimbursing employers are exempt from the assessment.

 

5) NV SB36, which prohibits the non-charging of employer accounts when the employer or employer agent is at fault. Read the full text of the law here.

 

Key points about Nevada’s UI integrity law (NV SB36):

  • It establishes a 1 week waiting period to be eligible for unemployment benefits.
  • It requires employers in some cases to withhold income in order to satisfy a judgment against individuals who have collected UI benefits fraudulently.
  • Section 25 of the legislation states that if an employer has been given notice of a claim for benefits and “fails to submit timely to the Division all relevant facts which may affect the claimant’s rights to benefits…or has established a pattern of failing to submit timely such facts,” then the employer’s account must be charged, even if overcharging occurs.
  • There is no definition of what constitutes a “pattern of failure” of inadequate or untimely response.
  • Read the entire legislation here.

Here is the most current available UI data for Nevada:

  • Unemployment rate (as of June 2013): 9.5%
  • Taxable wage base in 2013: $27,400 (increases from $26,400 in 2012)
  • Amount of state trust fund loan balance (as of July 2013): $573,869,562
  • Minimum weekly benefit: $16
  • Maximum weekly benefit: $404
  • Minimum tax rate: 0.25%
  • Maximum tax rate: 5.40%
  • Employer assessment provision: Yes, surcharge of 0.08854% will be applied to total taxable wages paid for the calendar year 2012.
  • FUTA reduction: Yes; net FUTA rate in 2012 is 1.2%
(Sources: ETS Blog, U.S. Department of Labor, SUCAP Reports, NASWA, Congressional Research Service.)

Check out ETS’ new page dedicated to tracking Section 252-compliant UI integrity legislation in the states 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.