Earlier this year we wrote about the DOL’s guidelines for the 2011 TAAEA (Trade Adjustment Assistance Extension Act of 2011). The Federal TAAEA legislation requires all states to implement Section 252 of the Act, which would prevent employers from receiving relief from erroneous UI benefit charges if they failed to respond timely to requests for information. Specifically, Section 252 of TAAEA requires states to NOT relieve an employer of charges when the employer or an agent of the employer is at fault and is partially or wholly responsible for overpayment of UI benefits.
Per Federal law, states MUST charge the employers, and they must do so effective on or before October 21, 2013.
Minnesota has stepped up to enact related legislation which meets that requirement, with the recent passage of SF 2224. SF 2224 penalizes employers whose failure to respond properly to Unemployment Insurance Minnesota’s request for information on the claimant results in improper UI payment. SF 2224 also penalizes UI benefit recipients who make fraudulent claims.
In direct response to the Federal TAAEA legislation, Minnesota’s SF 2224 states that when an employer’s failure to respond timely and adequately to information requests results in overpaid UI benefits, and where the employer has established a pattern of such failures, the employer must repay the state either the amount of overpaid UI benefits that will be used to compute the future SUI tax rate of contributory employers or the amount that was charged to the reimbursable account of a nonprofit or government employer.
SF 2224 defines a “pattern of failing to respond timely or adequately” as either prior failure to respond to two or more requests, or two percent of all requests in the past six months, whichever is greater. As per earlier DOL guidance interpreting Section 3303(f)(2), states are free to penalize employers even on the first instance of failure to respond timely and adequately (i.e. in absence of any pattern), so in this regard Minnesota’s legislation is not as stringent as it could be. Presently, it is unclear how the state will be able to accurately track employers’ response ratings, which may allow Minnesota employers some more time to get their unemployment claims management systems in optimal order.
SF 2224 also prohibits employers, their officers, and agents from making agreements with employees not to contest their UI claims or to not provide timely information as requested by the state in exchange for the employee quitting, taking a leave of absence, leaving employment temporarily or permanently, or withdrawing a grievance or appeal of a termination. The penalty for such collusion is $500 or the amount of unemployment benefits determined to be overpaid, whichever is greater.
Under SF 2224 employers must also be penalized if they or their employee, officer, or agent knowingly makes a false statement or failed to disclose a material fact, the penalty for which is the greater of $500 or 50% of the either the amount of any overpaid unemployment benefits to the applicant or the amount of unemployment benefits not paid to an applicant that would otherwise have been paid.
While SF 2224 is specific to Minnesota employers, it is something that should be on the radar of employers in any state, since similar legislation will be taking hold soon in your home state, as per TAAEA’s Section 252.
Please contact ETS at (800) 518-3874 with any questions about how to prepare for the new regulations and optimize your UI processes in order to avoid the penalties associated with Section 252-related legislation.
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.
How Will Section 252 Impact You?
Download our one page Fact Sheet on Section 252 to get a better understanding of key provisions that will directly impact employers.