Signed by Governor Neil Abercrombie on April 3, 2013, HB 915 amends Hawaii’s employment security law (Sections 4088A, 4068A, 4058, and 4115).
image credit: Ron Ardis
Employers (or Their Agents) Must Not Be Relieved of Charges When Their In/action Contributes to Over-payments
As a result of Section 252 UI integrity requirements within the Federal Trade Adjustment Assistance Extension Act of 2011 (TAAEA), Hawaii has become the latest state to enact UI Integrity measures. 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.
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.
Changes to Section 4058 (Benefits charged to employer) of Hawaii’s Employment Security Law are as follows: Any redetermination issues on or after October 1, 2013, on the basis of information furnished by the employer or the agent of the employer after the prescribed period will be effective upon the date of the redetermination. In addition, the entire amount of benefits overpaid due to the employer’s or agent of the employer’s failure to respond timely or adequately to the agency’s request for information as required will be charged against the account of the noncomplying employer. ETS Note: there is no defined pattern of failure included in the legislation.
Changes to Section 4068A (Penalty assessments on overpaid benefits) of Hawaii’s Employment Security Law are as follows: Determinations or redeterminations dated on or after October 1, 2013, that an individual has been overpaid benefits under any state or federal unemployment compensation program and is disqualified under the Hawaii UI law will include a penalty assessment amount equal to 15% of the overpaid amount. Penalty assessments so collected will be deposited in the unemployment compensation fund.
Section 4115 (Withdrawals from trust fund) of Hawaii’s Employment Security Law now states: Monies requisitioned from the state’s account in the unemployment trust fund will be used exclusively for the payment of benefits, refunds of contributions, and for payment of fees authorized under IRC Section 6402(f), except that monies credited to the state’s account pursuant to Section 903 of the Social Security Act will be used for their specified purposes.
Finally, Sections 4088A and 4068A of Hawaii’s Employment Security Law (regarding Income tax refund offsets) now reads: Effective April 1, 2013, any employer in default of contributions, advance payments, or reimbursements may be subject to offset of its federal tax refund payments of the amount owed, including penalties, interest, costs, and administrative fees. In addition, and also effective April 1, 2013, any overpaid benefits amount, as well as the penalty assessment amount, costs, and administrative fees, may be deducted from a claimant’s federal income tax refund. Note that the penalty assessment amount will not be subject to recovery by deduction from future benefits payable and will be collectible without interest by civil action. Source: Wolters Kluwer’s IntelliConnect Tracker News.
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.
Hawaii has another significant piece of legislation pending which would retroactively lower state unemployment insurance (SUI) rates to January, 2013.
The bill, HB 1028 has passed the House of Representatives and has been referred to the Senate Committees on Judiciary and Labor, and Ways and Means. If enacted, this bill would freeze the SUI tax rate schedule at new Rate Schedule F, going back to the start of the year. Under Rate Schedule F, the rates range from 1.2% to 6.2%. Currently, Rate Schedule G is in effect, with rates that range from 1.8% to 6.4%. The bill also calls for an increase in weekly UI benefits and would raise the minimum wage incrementally until it reaches $9.00/hr on January 1, 2017.
image credit: Raphael Fauveau
Here is the most current available UI data for Hawaii:
- UI / Unemployment Rate (as of February 2013): 5.2%
- Trust Fund balance as of 4/2/13: $102,020.00
- Minimum / Maximum Weekly Benefit: $5 / $549
- UI Rates Range: 1.8% to 6.4%
- Taxable wage base in 2013: $39,600 (up from $38,800 in 2012)
- No FUTA offset credit penalty
If you are an employer with operations in the state of Hawaii, 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, Hawaii joins the ranks of other states that have recently enacted UI Integrity legislation, including: AR, CA, CO, ID, IL, IA, 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.