Earlier this month, the US Department of Labor (DOL) issued guidance to the state workforce agencies regarding details of how the federal sequester will impact unemployment insurance (UI) program benefits and operations.
Read the DOL guidance for yourself here.
The federal sequester funding reductions were effective March 1, 2013. According to the DOL, the following programs will be affected:
- UI state administrative grants under Title III, Social Security Act
- UI national administrative activity funding
- The federal share of extended benefit (EB) reimbursement
- Emergency Unemployment Compensation (EUC) benefits and administrative funding
- Administrative funding for UCFE, UCX, and administrative funding for TRA, ATAA, and RTAA benefits under the Trade Adjustment Assistance Act.
- Reemployment and Eligibility Assessments (REAs) for regular UI program claimants
- EUC-related Reemployment Services and Reemployment and Eligibility Assessments
- Federal reimbursements of state Short Time Compensation benefit costs
Unemployment Benefit Cuts (EUC & EB) Reductions
Impact of the Budget Cuts and Takeaways for Employers:
Employers should be aware that changes in federal funding to UI programs may result in employers being charged more, either in error, or through the states asking employers to assume additional costs to make up the missing funds.
Already-spread thin state workforce agencies may be ill-equipped to implement the programming and administrative changes required by the federal sequester. The reductions in administrative funding included in the federal sequester will only compound the problem. If employer UI accounts were before prone to error (estimated at 10-15% even before the recent recession put tremendous strain on state workforce agency resources) they will be even more so now.
Doug Holmes, of the UWC– Strategic Services on Unemployment & Workers’ Compensation, has indicated that the federal sequester is likely to result in significant instances of overpayments.
Employers should monitor their UI benefit charges even more closely than usual. It is also recommended that employers keep tabs on how the states and state workforce agencies plan to keep EB federal sequester reductions from being paid out of UI trust funds and erroneously charged to employer accounts.
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.