the state of ui: condition, compliance and cost savings under new ui integrity rules silicon valley...

The State of UI: Condition, Compliance and Cost Savings under new UI Integrity Rules Silicon Valley APA Thursday October 17 th 2013

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO meet your presenter Ross E. Henderson [email protected] COO, Employment Technology Solutions (ETS)Employment Technology Solutions President, Association of Unemployment Tax Organizations (AUTO) Payroll Advisory Board Member, HR.com Join ETS www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected]

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO ETS SOLUTIONS Technology-based Solutions Driving Compliance, Convenience & Savings for Employers Tax Consulting M&A Consulting & Credits Tax Advisory Hiring Credits & Incentives Statutory Account Review Protective Filings Verification Electronic I-9 and E-Verify Integration Verification of Income and Employment (VOIE) OIG Exclusion Processing Unemployment Claims UI Claims Administration Hearing Attendance Bonded Service Training Tools Benefit Charge Audits HR Tools On-boarding Services Online Job Portal Applicant Tracking Systems Background Checks Assessment Tools www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS NEW!

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Presentation Agenda www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Condition of UI Nationally Legislative Path to UI Integrity Understanding Section 252 Best Practices for UI Integrity : A - C - T GOALS: Compliance, Efficiency & Cost Savings! Plus: Raffle Gift!!! - $75 Sports Chalet Gift Card

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UI Conditions www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Condition of UI: National Focus www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Many States UI Reserves Still Insolvent Red = borrowing as of 8/30/13. Yellow = less than 6 mos. of positive balances. Green = more than 6 mos. of benefits. Orange= ER-financed bond State Trust Fund Solvency as of August 2013. Map taken from August 2013 SUCAP Report, based on US DOL UI data quarterly summary charts & SUCAP Reports.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Condition of the UI System www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Taxable wage bases &/or UI tax rates continue to increase. National unemployment rate: 7.3% (August 2013, BLS)BLS National average cost per UI claim: roughly $7,703 (DOL). Assessments to UI rates Bond expense, etc. States using employer-financed bonds: CO, ID, IL, MI, PA, TX New legislation & enforcement for UI integrity. FUTA Credit Reduction for 19 states (2012 tax year). See states.See states

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UI System Outdated & Flawed www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Agency error and overcharging Employer (ER) accounts estimated at ~10-15%. Federal Sequester raises risk of improper accounting of benefit payments. History of ER and Employee (EE) abuse of the system (SUTA Dumping, excess collection). ER & Third Party Administrator (TPA) problems with untimely or inadequate responses for claim info. Inefficient communication & data exchange. Image credit: cassettescassettes

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UI System Outdated & Flawed www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Agency error and overcharging Employer (ER) accounts estimated at ~10-15%. - Fed Sequester accounting challenges. - UI Agency IT system challenges (CA, MA etc.) History of ER and Employee (EE) abuse of the system (SUTA Dumping, excess collection). ER & Third Party Administrator (TPA) problems with untimely or inadequate responses for claim info. Inefficient communication & data exchange. 8 Track Image Credit: Phillip PessarPhillip Pessar

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Immediate Impetus: Financial Conditions & Systemic Abuse www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS In 2011, the DOL estimated $14B, or 11% of all UI claim payouts, result from overpayments. UI named a high-error program. DOL estimates 19% of UI benefit overpayments stem from employers' untimely response and/or inaccurate information. States like IN, LA, AZ, CO, VA pegged with 19-43% improper payment rates. Economic conditions since 08 have spiked jobless claims, drained states UI reserves, triggered Fed loans to states to cover UI costs. Growing U.S. deficit/political pressure to reign in budget.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Snapshot of California www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Unemployment Rate (Sept 13): 8.9% Trust Fund Loan (Sept 13); $9B 13 Taxable Wage Base: $7000 13 Tax Rates 1.5% min 6.2% max 13 Projected FUTA Credit Reduction 1.20% 13 Min/Max Weekly Benefit $40 - $450

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Spotlight On: UI Overpayment 2012 estimated UI improper payments in CA $403M Agency role in overpayment error, July 2009 June 2012 26.62 % Employer role in overpayment error, July 2009 June 2012 19.87% www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Data retrieved from DOLs UI Improper Payment by StateDOL Role in error = part or whole responsibility, calculated as % of total UI claims dollars overpaid in CA California as an Example

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Key Legislation: UI Integrity www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Key Federal UI Legislation www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS 2004 SUTA Dumping Act 2011 TAAE UI Integrity (Sec. 252) 2012 ATRA o EE SS tax return o WOTC reauthorized

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO 2004 State Unemployment Tax SUTA Dumping Prevention Act www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS SUTA Dumping (a.k.a. unemployment tax avoidance) occurs by shifting EEs to a less-taxed entity to avoid paying a higher UI tax rate. Migration of EEs between legal entities (M&A, consolidation, etc.) may trigger time-sensitive mandatory compliance reporting often missed! Penalties for missing or incorrect reporting can include max UI ratings; civil &/or criminal penalties. Read Employers M&A To Do List.Employers M&A To Do List

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO 2012 ATRA (American Taxpayer Relief Act ) www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS EE SS tax rates return to 6.2% in 2013 from 4.2% in 2012 (i.e., 2% FICA payroll tax cut "payroll holiday" not extended). SS taxable wage limit up to $113,700 in 2013 (from $110,100 in 2012). Extension of Emergency Unemployment Compensation ("EUC"). Temp. extension of 100% federal reimbursement for states triggering on regular extended benefits ("EB"). Extension of over 30 business credits, including: R&D, WOTC, EZ

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO 2011 Federal TAAEA Law: Sec. 252/UI Integrity www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Follow-on to 2009 Executive Order 13520 to reduce improper UI payments. Under TAAEAs Sec. 252, states must not relieve ERs of charges when they fail to respond timely or adequately to agency request for info. States to develop their own definitions for pattern of failure (some states also defining non-timely response). All states to enact UI Integrity legislation by 10/22/13.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UI Integrity: Sec. 252 Points www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Also provides ERs cannot collude with EE to misuse UC system. ERs and TPAs with established pattern of non-timely response penalized more, but pattern can be as little as two instances! ERs may be held responsible for inaction and timeliness (or lack thereof) on the part of their TPAs. Fault means in part or in whole.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO State Legislation Snapshot www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Some State Legislation Goes Beyond the Federal Requirement: HI and CT legislation prohibits relief from charges after just one occurrence of late or inadequate response. IDs legislation prohibits relief after two occurrences. VA law widens scope of timeframe; pattern = 4 occurrences in 4 years. Download ETS: Section 252 Employer Fact Sheet here.here UI Integrity Law Compliance Tips here.here

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Pattern of Failure" Defined (Examples) www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS StateEnacted DateEffective DatePattern of Failure = WA5/8/1310/20/13Greater of 3 or more offenses in 2 years or 2% of total current claims. WV4/2/127/1/12Not defined WY3/13/137/1/13Greater of 2 or more offenses or 2% during the four most recent completed calendar quarters prior to current request MAPrior to TAAEA(in effect)First offense NC2/19/1310/21/132% during the past year SC6/7/1310/21/133 or more offenses OR 3% of agency requests within a year, whichever is greater.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Financial Impact Example www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Case Study: ER With 100 Separations/Yr; Classified with Pattern of Failure. Benefit$ paid to claimant prior to successful Appeal by ER. FACTORSFIGURES Weekly benefit amountAssume $300 Time to appeal8 weeks # of claims lost on initial determination & won by ER on Appeal 10 (out of 100 total separations) Charge to ER UI account$24,000 ($2,400 x 10 claims) now NON- RECOVERABLE due to Pattern of Failure. Additional Exposure / Negative Impact May raise AUDIT RISK for other UI areas, other state taxes, other jurisdictions May elevate ER experience rating

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Audit Alert: Inter-Agency Info Sharing www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Fed & state sharing info, data mining, creating cross-agency task forces. Questionable Employment Tax Practices QETP Initiative -37 states & IRS Facilitated by movement to electronic databases.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO QETP Results Through Mid-2012 www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Nearly 12,000 businesses examined. States reclassified $1.8B+ in wages and assessed $27M+ via federal data. IRS assessed almost $23M in taxes from state referrals. Over 107,000 workers reclassified. Significant incentives to agencies to aggressively evaluate and audit employers.

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Solutions & Best Practices for UI Compliance, Efficiency & Cost Savings www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS DOL & state agencies collaborate on secure, electronic, standardized-format platform for UI data transfer. SIDES E-Response: web-based for smaller ERs (limited claims). SIDES: direct data exchange for TPAs and larger ERs, requires internal IT & $$$ for setup. Aims to improve timeliness and completeness, reduce overpayments & erroneous charges, lower UI tax rates. 46 states in some stage of SIDES implementation (.not CA)

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UI Integrity Oversight Plan Designate a Person or Team Total UI Claims (also by state/location) Which claims failed to be timely/ adequate? Why? Who? Track win/loss for protests. For losses, why? Who? Track win/loss for appeals. Why? Who? Impact on experience rating? Calculate cost to organization. Find & fix areas of organizational weakness. www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS ACT. Provide information to UI agencies that is: Accurate Complete Timely Best Practices

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Controllable Risk Factors Contributing to UI Cost & Noncompliance www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Challenge #1: Organizational Structure: Limited infrastructure committed to UI process Minimal or non-existent intra-departmental technology for seamless, timely receipt & effective follow-through for every claim Inconsistent expertise responsible for program success (turnover) = inconsistent program delivery Lack of corporate recognition/support

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Controllable Risk Factors Contributing to UI Cost & Noncompliance www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Challenge #2: Training for Results Educate invested parties (C-level, HR, Payroll, Managers.) to recognize: Relationship between claim process & cost impact to organization Secure/train competent charge analyst: o Match benefit year wages vs. charges o Scrutinize reports for charge irregularity o Audit charge statement to ensure accuracy o Create effective contact process with agency o Follow-through on reversing inaccurate charges

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Controllable Risk Factors Contributing to UI Cost & Noncompliance www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Challenge #3: Initial Claim Protest- Strong From the Start Cost-effective elements in initial claim protest process: o Detailed system of records to collect/transmit required data o Mechanism to ensure timely response/all initial claims o Follow-through procedures to ensure agency compliance o Built-in triggers to determine needed process improvement

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Critical Report Audits & Tracking www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Track results/determine program compliance & process improvement initiatives Manage/scrutinize high cost contributors Identify strong program performers Charge impact driver by separation mix and charge amounts Electronic benefit charge audit system (cross-check all charges) Ensure charge accuracy against agency tables/formulas Tools for aggregate review & analysis of real time reports

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UCM Plus Screenshot www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Heres where an electronic solution can really help minimize your costs by delivering advanced reporting features and supporting Accurate, Complete & Timely responses to agency. This image has been redacted to protect the integrity of ETS UCM Plus UI Claims Management Solution. Should you wish to view a demo of the software, please contact ETS at [email protected].

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO UI Integrity Prep Checklist www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS Done?UI Prep Item Understanding of Issues (i.e. Costs & Audit Exposure) Internal Assessment of Readiness / Exposure Develop a Plan / Organizational Strategy Identify Responsible Parties (Individual or Teams) Establish Training for Key Staff (and/or strategy for TPA Partner) Regular Reporting and Measure Success / Areas for Improvement (Access to Real-time Reporting Tools) Rinse & Repeat

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Retro UI Review www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS General Evaluation Contact ALL UI jurisdictions Perform account balancing (per state records) Qtr. by Qtr. rearward review. Determine what credits found eligible for refund & if debits, found if correct. Research for any missing / incomplete or untimely reporting on the account. Review all M&A past 3 years. Help reduce source of potential penalty or increased UI tax expense. Photo credit: motonemotone

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO ETS Resources UI Integrity State Legislation TrackerState Legislation Tracker How Nonprofit Employers Can Reduce UI CostReduce UI Cost Tips on Choosing a UCM VendorChoosing a UCM Vendor Go here to download three pages of UI Tips from ETS.here ETS UI Tips DownloadDownload this one page checklist to assess the state of your UI Claims Administration Is Your UCM Broken? Go here to learn more, and here to contact ETS.here Learn more about ETS UCM Plus Solution www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS ETS Blog Go here to get ETS best UCM blog posts and resources in one place.here

www.domain.com Phone: +1(123) 456 78 90 | e-mail: [email protected] YOURLOGO Torrance, CA and Guilford CT (800) 518-3874 Connect with us on LinkedIn CONTACT ETS www.employmenttax.com Phone: +1(800) 518-3874 | email: [email protected] Join ETS thank you! Q&AQ&A Questions & Requests for Presentation Slides: : Ross Henderson-COO [email protected]

the state of ui: condition, compliance and cost savings under new ui integrity rules silicon valley...

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