UI Claims Management

Understanding UI Integrity Key Definitions

12.19.2013

Author

Jeff Aleixo

unemployment insurance compliance key definitions

The deadline for states to enact UI Integrity Legislation passed in late October, 2013. From a high level overview, this legislation increases the employer’s responsibility for claims processing and reporting. Likewise, the legislation shifts the unemployment claims process away from a decision whether or not to protest and/or respond to a unique claim but instead to focus on complete and compliant reporting for all claims.

This article focuses on the specific language of the rules and provides UI Integrity key definitions to the terms all employers should now understand. 

Key Terms in UI Integrity Legislation

The key UI Integrity language from Section 252 of the Federal Trade Adjustment Assistance Extension Act of 2011 is explained in the following excerpt:

States must not relieve employers of benefit charges to their unemployment tax account when both conditions exist:

  1. UI benefits were improperly paid due (in part or in whole) to employer’s failure to respond timely or adequately to the agency’s request for claim detail.
  2. Employer has established a pattern of failure to respond timely or adequately to agency requests for claims info.

Real World Costs for Employers 

This raises the question what does the legislative language mean for employers in real terms. For prohibiting the relief of benefit charges, this means employers’ unemployment accounts will be charged for unemployment claims overpayments where applicable. This typically is associated with charges paid from an employer’s UI account up until the claim is won by the employer on appeal. This would commonly reflect around 4 to 6 weeks of benefits charges. Assuming a weekly payout of $300 per claim, the additional charges to a UI account may be around $1,200 to $1,800 for each claim fitting this profile.

Handling unemployment insurance can be complex and time-consuming but this detailed guide includes every key definition and regulation that employers need to know.

Prohibition from the Relief of Benefit Charges

Together with UI integrity key definitions, employers need to know the key elements that may cause an employer to be prohibited from the relief of benefit charges:

Failure to Respond Timely

Failure to respond timely is often specifically defined in a state’s UI Integrity legislation, or elsewhere by the state workforce agency. Typically, as it applies to responding to initial requests for information, it is interpreted to mean 7-10 days from agency communication.

Adequate Response 

Adequate response is a more subjective term. In some cases, it is specifically outlined in a state’s UI Integrity language or elsewhere. However, in most cases it is not clearly defined or is awaiting agency definition based upon the new UI Integrity rules. Generally, it is fair to assume that adequate means an employer needs to respond to all specific questions and requests for information. Likewise, responses that are detailed and directly related to the specific question or request will have a greater likelihood of meeting the adequate threshold.

Pattern of Failure 

Finally, what is a pattern of failure? In roughly half the states a pattern of failure is defined as the greater of 2 instances or 2% of claims in the past year. However, many states have more restrictive and difficult-to-meet standards, such as 2 instances period, regardless of a small or large business. Other states have left this undefined in their UI Integrity legislation, while many will develop definitions going forward.

Understanding UI Integrity Key Definitions Is a Must

Employers need to understand the UI Integrity legislation and it is definitions in their state(s) of operation. Based upon this new movement to higher levels of reporting and compliance thresholds, they need to determine if their organization has the processes, people and reporting in place to handle unemployment claims in this new environment. Additional ongoing costs associated with non-compliance are also at risk.

Preventing Violations of the 2011 UI Integrity Act

The UI Integrity Act, signed in 2011, was designed to reduce the overpayment of benefits to claimants and to incentivize employers to participate in the process of improving the UI system. The Act required each state to pass legislation to demand employers to respond in a timely and accurate manner to information requests by state UI agencies. It also required the states to impose penalties on employers who demonstrated a pattern of not responding to these requests.

Although the penalties for violating the UI Integrity Act vary greatly by state, what is important to remember about this law is that all states have imposed some form of penalty to offending employers. However, the issue with the UI Integrity Act is that there are so many laws and penalties regarding employer responses, that many of them find these requirements confusing.  Apart from understanding the UI Integrity key definitions, employers should take into consideration the following tips to stay in compliance with the law:

  • Even though the time deadline for responding to a state request for additional information is included with the request, employers should be informed about requirements in each state in which they operate;
  • The best course for employers is to document as much as possible because documentation is the best defense against an unwarranted unemployment insurance claims;
  • Employers’ first protest or response is usually their best opportunity to win. Therefore, they need to make sure that the first response includes all available evidence to support the protest.

The most important thing employers need to understand about the UI Integrity Act is that they cannot ignore UI claims or the UI process. Doing nothing or not responding to requests for information from state agencies or hearing officials is not an option unless they want to face non-compliance. Hence, employers need to use a proactive approach to unemployment claims management and make sure to fully understand UI Integrity key definitions. In addition to this, automated unemployment claims software ensures comprehensive management of the entire process and allows employers to save valuable time and prevent unemployment costs.

Automate and simplify unemployment claims management to minimize risks, reduce administrative burden, and optimize state unemployment insurance tax savings.

Editor’s Note: This post has been updated for accuracy and comprehensiveness.

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.