How to Manage UI Cost Effectively
Q & A 
Edition 4

February 06, 2014

Have the unemployment benefits ended for those who were granted the emergency unemployment  compensation?


A.  As of late January, the bill lacked the necessary votes to further extend the program.  Moreover, there appeared no proposed alternatives to be found acceptable to the Senate majority.  A new amendment had, in the last several days, been proposed extending EUC to 3-31-14, paying for the extension through reduced employer pension contributions, thereby increasing money to be spent in the economy and increasing tax revenue, but we are informed through UWC that it did not pass.  

It had also been proposed that for those individuals earning $1,000,000 annually or more, unemployment benefits will not be available.


My company has received a wage audit letter.  Why?


Wage audits are done to help prevent unemployment fraud. If the company receives a notice asking for wage verification, it is likely the claimant has received both wages and benefits in the same quarter and the agency wants to verify that there is no concurrent receipt of both.


How often is an Unemployment Insurance Tax rate computed?

A new Tax rate is calculated annually.  The new tax rate is applied to all taxable wages from January 1st through December 31 in all but four States.  The annual tax rate computation date is calculated June 30 of the year prior to the new rate year. This gives the state enough time to gather all remaining components before determining the final rate. 

The new tax rate notice shows a higher tax rate than the previous year. However, there were less unemployment claim files this year than last. What other aspects determine the tax rate?

It is always good to see fewer claims filed.  Nonetheless, there are several other factors that contribute to the tax rate determination. The company's total taxable wages over the last three years are one of the first calculations taken into account. The average annual payroll, cumulative taxes paid, and the tax reserve account balance and ratio help determine the final tax rate.


Is there more than one method to fund Unemployment Insurance benefit payments?

Traditionally, employers pay a tax to fund UI.  States use various formulas to levy that tax (reserve ratio, benefit ratio, etc.), but the methodology is generally the same - to fund benefit payout through employer taxes or contributions.  The group not participating in the tax program is the non-profit, 501(C)(3) employer comprised of cities, counties, municipalities, hospitals, educational facilities and other similarly designated employers.  This group may elect reimbursable financing, an option allowing agencies to pay on a dollar for dollar reimbursement method.  They pay no quarterly tax, but rather reimburse the State agency on a quarterly basis for any actual benefits paid to former employees.

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