Federal Unemployment Compensation Program: New Employer Penalties
Posted by Ross Henderson on Mon, Jan 02, 2012 @ 06:28 PM
Federal Unemployment Compensation Program
New Penalties for Employers!
The Department of Labor ("DOL") just released their interpretation of the recent Federal Unemployment Compensation (UC) Program Integrity legislation that materially increases an employer's exposure to Unemployment Claims charges. In short, the federal government is mandating that the states have to apply new strict rules & practices that will place the employer at greater risk to be responsible for overpayments related to Unemployment Claims charges. This comes after the DOL has made claims that 19% of UI benefit overpayments stem from employer untimely response and/or inaccurate information provided by the employer.
Under the "Prohibition of Noncharging due to Employer" fault section in the Unemployment Compensation (UC) Program Integrity section of the October 2011 Trade Adjustment Assistance Extension Act of 2011 (TAAEA),
“….the state must not relieve an employer of the charges when the employer, or an agent of the employer, does both of the following:
- Was at fault for failing to respond timely or adequately to the request of the state agency for information relating to a claim for UC benefits that was subsequently overpaid; and,
- Has established a pattern of failing to respond timely or adequately to requests from the state agency for information relating to claims for UC benefits.”
For an employer, the DOL interpretation and state application of these changes are what opens up the exposure. First off, a "pattern" can be interpreted as "two or more" instances of failing to respond timely - which is a very low threshold, especially for larger employers. Secondarily, in many instances even where an employer has failed to respond timely, the core cause of an overpayment may still be related to "non-employer" events such as claimant error, fraud, and/or administrative error by the agency.
In response to this materially-changing UC environment, fundamental process improvements will be needed in your UC administration to help avoid penalty situation:
- Systems of checks & balances to measure and monitor all claims activity (real-time).
- Complete and timely flow of ALL applicable separation detail needed for unemployment claims on original separation as well as other requests.
At UCM+, our PLUS Platform provides the technology and services to support the fundamental processes needed for employers to navigate the expected upcoming changes.
Additional Background on the UC Program Integrity Measures
The UC Program Integrity measures, included as part of the October 2011 TAAEA, are part of a larger effort by the federal government to address the very large U.S. deficit. The UC Program Integrity measures have been specifically designed to help prevent the improper payments which have been a long-term problem and drain on the UC system. The employer impact piece of this legislation is tucked under Sec. 252 of Subtitle C - PROHIBITION ON NONCHARGING DUE TO EMPLOYER FAULT.
The Sec. 252 in the original Act was written broadly and open to much interpretation. As such, the DOL evaluated the language and provided their interpretation / guidance as per the Dec 20, 2011 letter from DOL Assistant Secretary Jane Oates. Of particular interest is item #5 starting on page 3 of this letter, which indicates that "states have some latitude in implementing the new requirement, including whether a pattern of behavior is required and, if so, the determination of the definition of a pattern of failure to respond timely or adequately to requests for information." Such wording in the DOL guidance appears to give states permission to exclude or minimize the requirement that a pattern of employer/employer agent failure to respond timely be established, thereby widening the scope of the original legislation.
The effective date of required state statutory changes is October 21, 2013 and states may opt to enact rules prior to this.
ETS will closely monitor the upcoming state regulations and agency practices once the new rules are implemented.
