As we approach the Labor Day weekend, if you East Coast folks are headed out to the shore, keep your eyes out for a giant wave coming your way. (No, nothing on the scale of Sandy or Irene….). However, if you have employees in the states of Maine, New Jersey, or Rhode Island, you need to be prepared for the new wave of UI legislation that is barreling in your direction.
Maine, New Jersey, and Rhode Island have passed Section 252-compliant legislation to conform with Federal TAAEA regulations which mandate them to enact UI integrity legislation before late October of this year. If you are unfamiliar with Section 252, UI integrity, or TAAEA, please go here to read more.
New York met UI integrity requirements with the passage of their state budget earlier this year, which you can read more about here. Connecticut also passed their UI integrity-compliant legislation recently which we wrote about here.
Here is what you need to know about the new legislation in Maine, New Jersey, and Rhode Island, along with a UI update for each state.
Maine’s UI Integrity (LD 1311, Chapter 314)
Signed by the governor on June 21, 2013, this bill applies to erroneous payments made after October 21, 2013. You may read the full text of the legislation here.
As with all the UI integrity legislation, LD 1311, Ch. 314 requires an employer’s UI experience-rated record and employer accounts to be charged for UI benefits made in error when the employer or the employer’s agent caused the erroneous error (cause being either in part or in whole).
“Pattern of failure” is defined as repeated documented instances of failure on the part of the employer or the employer’s agent to respond timely or adequately in two or more instances or 2% of written or electronic requests for detail from the Maine Dept. of Labor in the course of a year, whichever is greater.
Compared to other state UI integrity legislation, Maine’s is very brief and straightforward. Further definitions to offer clarity for employers are not included in the legislation. The law does state that employers are able to appeal a determination against them if they feel they have reason to be relieved of the charges.
Spotlight on overpayments in the state of Maine:
Overpayment data (DOL) is important for employers to notice, because it gives some insight into where responsibility lies for overpayments (agency vs. employer vs. employee, or some combination of those parties), in addition to the scope of the problem. If you are an employer in a state with high rate of documented employer error (say 5-20%), then you really want to pay extra attention to getting control over your UI operations before the UI integrity legislation takes effect and you end up taking a big financial hit.
- 2012 IPIA Estimated Improper Payments for Maine: $29,186,565
- Improper Payment Rate over 3 Years (2010-2012) in Maine: 15.73%
- Employer role in overpayments neither terrible nor great (7.9% in part or in whole)
- Agency role in overpayments quite high (25.59% in part or in whole). This is increasingly common as agency staff are spread beyond their means. Employers in Maine should pay extra attention to cross-checking their employer accounts for erroneous charges, duplicate charging, etc.
Get more legislative updates for Maine employers here.
Most current available UI data for Maine:
- Unemployment rate (as of July 2013): 6.9% (via NCSL)
- Estimated rate of UI improper payments (via DOL): 15.73%
- Taxable wage base in 2013: $12,000
- State UI Trust Fund Balance (as of July 2013): $277,320,906 (NCSL)
- Minimum weekly benefit: $65
- Maximum weekly benefit: $372
- Minimum tax rate: 0.95%
- Maximum tax rate: 8.27%
- Employer assessment provision: No
- FUTA reduction: No
(Sources: ETS Blog, Washington Employment Security Department, U.S. Department of Labor, SUCAP Reports, NASWA, Congressional Research Service, National Conference of State Legislatures.)
Signed by the governor on June 24th, 2013, these bills are very simple and add the minimum requisite language to comply with the Federal Section 252 mandate.
Effective October 1, 2013, Rhode Island employers will not be relieved of charges for UI benefit overpayments if the Department director establishes that the overpayment was due to employer or employer’s agent’s failure to respond timely or adequately to the Department’s request for UI claim detail. A similar addendum was made for reimbursing (nonprofit, government) employers.
There is no definition of “pattern of failure” or any other additional detail to guide employers.
Spotlight on overpayments in Rhode Island:
- 2012 IPIA Estimated Improper Payments for Rhode Island: $18,055,163
- Improper Payment Rate over 3 Years (2010-2012) in Rhode Island: 5.97% (not bad, comparatively speaking)
- Employer role in overpayments (6.82% in part or in whole; not too bad)
- Agency role in overpayments quite high (27.06% in part or in whole). This is increasingly common as agency staff are spread beyond their means. Employers in Rhode Island should pay extra attention to cross-checking their employer accounts for erroneous charges, duplicate charging, etc.
Get more legislative updates for Rhode Island employers here.
Most current available UI data for Rhode Island:
- Unemployment rate (as of July 2013): 8.9% (via NCSL)
- Estimated rate of UI improper payments (via DOL): 5.97%
- Taxable wage base in 2013: $20,200 (RI employers with the max rate of 9.79% have a higher wage base of $21,700 for 2013).
- State UI Trust Fund Balance (as of July 2013): $2,107,514 (NCSL)
- Minimum weekly benefit: $43
- Maximum weekly benefit: $566
- Minimum tax rate: 1.69%
- Maximum tax rate: 9.79%
- Employer assessment provision: Job Development Fund surcharge
- FUTA reduction: Yes, projected 1.50% effective FUTA tax rate
New Jersey UI Integrity Law (SB 2739, P.L. 2013, c.148)
Signed into law by the governor on August 2013, and effective October 22, 2013, New Jersey’s UI integrity law has no big surprises as far as UI integrity legislation goes.
A “pattern of failing” is defined as repeated documented failure on the part of the employee or the employer’s agent to respond to requests from the NJ Dept. of Labor and Workforce Development for UI claim detail. If the number of failures to respond during the previous 365 calendar days is fewer than three or the number of failures represent less than 2% of the Department’s requests (whichever is greater), then the employer “shall not be determined to have engaged in a pattern of failing.”
Further, as with the Maine legislation, employers are reminded that determinations made against them are subject to appeal.
Other UI News for New Jersey
This UI integrity legislation is only the latest in a string of recent UI-related announcements for New Jersey employers. Other major recent news include:
- New Jersey has repaid its $400 million Federal UI loan (although it will likely have to borrow again which means NJ employers may still face the 0.9% FUTA credit reduction for 2013).
- In calendar year 2013, the NJ SUI wage base increases to $31,500.
- NJ SB 2404 freezes the fiscal year 2014 SUI tax rate at Schedule E (same as FY 2013, with rates ranging from 1.2-7.0%. This allows employers to avoid a 10% surcharge).
- There is pending legislation that would require monthly UI wage reports, giving them just 10 days to file the reports. This increased reporting effort is closely related to the state’s overall UI integrity initiative. In 2012, Illinois also enacted a monthly UI reporting requirement.
Spotlight on overpayments in New Jersey:
- 2012 IPIA Estimated Improper Payments for New Jersey: $283,571,029
- Improper Payment Rate over 3 Years (2010-2012) in New Jersey: 12.56%
- Employer role in overpayments (31.29% in part or in whole; this is definitely a red flag and NJ employers should pay extra attention here.)
- Agency role in overpayments is also somewhat high, though to their credit probably less than expected (14.67% in part or in whole). Employers in New Jersey should also pay extra attention to cross-checking their employer accounts for erroneous charges, duplicate charging, etc.
Get more legislative updates for New Jersey employers here.
Most current available UI data for New Jersey:
- Unemployment rate (as of July 2013): 8.6% (via NCSL)
- Estimated rate of UI improper payments (via DOL): 12.56%
- Taxable wage base in 2013: $30,900
- State UI Trust Fund Balance (as of July 2013): $188,538,900 (NCSL)
- Minimum weekly benefit: $60
- Maximum weekly benefit: $611
- Minimum tax rate: 1.20%
- Maximum tax rate: 7.00%
- Employer assessment provision: 0.73% FLINT Assessment
- FUTA reduction: Yes, projected 1.50% effective FUTA tax rate
In order to prepare for the coming onslaught of tighter UI regulations, employers should take preventative measures now. If you need some help getting started, download our UI Integrity Compliance Tips here
Get this two-page tipsheet outlining ETS’ best practices for employers in light of UI Integrity legislation in 2013 that raises the bar on employer response to agency requests for unemployment claims detail.
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.