Beginning July 1, 2013, Iowa employers will be subject to recently-enacted UI integrity legislation brought about by Section 252 provisions of the 2011 Federal Trade Adjustment Assistance Act (TAAEA).
Section 252 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. Read more about Section 252 and TAAEA below.
Iowa’s UI Integrity Legislation
Iowa’s new law (SF 110) conforms with Section 252’s mandate that states must require employers to respond timely and adequately to state requests for UI benefit information. Further, 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.
The new legislation was signed by the governor on February 28, 2013. The law also establishes a penalty on claimants who receive UI benefits fraudulently. The penalty is equal to 15% of the amount of the overpayment and is to be collected in the same manner as the UI benefit overpayment, but not from any future UI benefits.
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. Employers in Iowa need to be aware that the new Iowa state law has adopted a stricter standard by allowing employers to be charged on the first instance (i.e. without any pattern).
Read more about Section 252
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.
The TAAEA requires states to have UI integrity provisions in place by October 21, 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 21st date.
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.
Here is the most current available UI data for Iowa:
- Unemployment rate (as of March 2013): 4.9%
- Taxable wage base in 2013: $26,000 ($700 more than 2012)
- Minimum weekly benefit: $59
- Maximum weekly benefit: $486
- Minimum tax rate: 0.0%
- Maximum tax rate: 8.5%
If you are an employer with operations in the state of Iowa, now is an opportune time to ensure that your in-house and/or third party administrator is prepared to address the upcoming changes as a result of the newly-passed legislation. With this, Iowa joins the ranks of other states that have recently enacted UI Integrity legislation, including: AR, CA, CO, HI, ID, IL, KS, KY, MD, MN, MS, MT, NC, NE, NH, ND, NY, OK, SD, UT, VA, WV, and WY.
Employers in other states, be on the lookout for similar legislation soon headed your way.
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.