UI Integrity Has Arrived…
Now What?
ETS Educational Webcast
Thursday December 12th 2013
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meet your presenter
Ross E. Henderson
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COO, Employment Technology Solutions (“ETS”)
President, Association of Unemployment Tax Organizations (“AUTO”)
Payroll / HRIS Advisory Board Member, HR.com
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ETS SOLUTIONS
Technology-based Solutions Driving Compliance, Convenience & Savings for Employers
HR Tools
• On-boarding
Services
• Online Job Portal
• Applicant
Tracking Systems
• Background
Checks
• Assessment
Tools
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Verification
• Electronic I-9
and E-Verify
Integration
• Verification of
Income and
Employment
(VOIE)
• OIG Exclusion
Processing
Unemployment
Claims
Tax Consulting
• UI Claims
Administration
• M&A Consulting
& Credits
• Hearing
Attendance
• Tax Advisory
• Bonded Service
• Training Tools
• Benefit Charge
Audits
• Hiring Credits &
Incentives
• Statutory
Account Review
• Protective Filings
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Presentation Agenda
UI Overview & National Trends
• Legislative Path to UI Integrity
• Key Definitions
• Best Practices for UCM: “A-C-T”
•
GOALS: Compliance, Efficiency &
Cost Savings!
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National UI Conditions
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Condition of UI: National Focus
Many States’ UI Reserves Still Insolvent
State Trust Fund Solvency as of Oct.
31, 2013. Map taken from
November 2013 SUCAP Report,
based on US DOL UI data quarterly
summary charts & SUCAP Reports.
Red = borrowing as of 10/31/13. Yellow = less than 6 mos. of positive
balances. Green = more than 6 mos. of benefits. Orange= ER-financed bond
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Key Conditions of the UI System
• Unemployment rate: 7% (November 2013)
• National average annual UI expense over $500 per EE
• National average cost per UI claim: roughly $7,703 (DOL).
• Assessments to UI rates
• StatesusingER-financedbonds:CO,ID,IL,MI, NV,PA,TX
• FUTA Credit Reduction for 13 states See states.
• UI named a “high-error” & “high priority” program
for governmental corrective action.
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Immediate Impetus:
Inefficiency & Systemic Abuse
•In 2011, the DOL estimated $14B, or 11% of all UI claim
payouts, result from overpayments.
• States like AZ, CO, IN, LA, VA pegged with 19-43%
improper payment rates.
•DOL estimates 19% of UI benefit overpayments stem
from ERs' untimely response and/or inaccurate info.
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Legislative Path to
UI Integrity
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2011 Federal “TAAEA” Law:
UI Integrity / “Section 252” Overview
•Follow-on to 2009 Executive Order 13520 to reduce
improper UI payments.
• Increased employer responsibility for claims
process & reporting.
• Unemployment Claims Administration now
focused on complete and compliant reporting.
•All states were required to enact UI Integrity
legislation by 10/21/13.
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UI Integrity: Sec. 252 of TAAEA
Federal Trade Adjustment Assistance Extension Act of 2011 :
States must not relieve employers (ERs) 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
ER’s failure to respond timely or adequately to the agency’s
request for claim detail.
2. ER has established a pattern of failure to respond timely or
adequately to agency requests for claims info.
*TAAEA mandates a minimum standard; states may go further.
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What Is Prohibit Relief of Benefit Charges?
• Employers’ unemployment accounts will be charged for unemployment claims
overpayments where applicable.
• Relief on appeal is not available in all states, depending on legislation (charging may
continue).
• Increase in benefit charges may influence ER experience rating and elevate UI taxes.
Initial Charges
Successful
Appeal
End of Benefit
Period
No charge relief…………………………………………Charges stop on appeal (where available)
Week 1
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Week 2
Week 3
Week 4
Week 5
Week 6
Week 7….
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..Week 17
and on
Financial Impact Example
Case Study:
• ER With 100 Separations/Yr; Classified with “Pattern of Failure.”
• Benefit$ paid to claimant prior to successful Appeal by ER.
FACTORS
FIGURES
Weekly benefit amount
Assume $300
Time to appeal
8 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 NONRECOVERABLE 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
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What Is Failure to Respond Timely?
• Timely is often specifically defined in state’s
UI Integrity legislation, or elsewhere by the
state workforce agency.
• It’s also frequently not defined.
• Where not defined, it’s often interpreted as
ballpark 7-10 days from agency
communication.
• If you cannot document your response
within that time frame, it may be counted
against you as failure to respond timely.
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What Is Adequate Response?
• More subjective term.
• In some cases, is specifically outlined in
state’s UI Integrity language or elsewhere.
• In many cases, not defined.
• ERs should pay attention to precedent and
agency practices where there is no existing
guidance.
• All questions should have responses.
• Responses should be accurate and
complete with supporting material where
appropriate.
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What Is Pattern of Failure?
• Some states have left this undefined in
their UI Integrity legislation; many will
develop definitions going forward.
• Roughly half the states have defined as:
“the greater of 2 instances or 2% of
claims in the past year.”
• Some states have more restrictive and
difficult-to-meet standards.
Example: Some do not take into account
larger number of claims for larger ERs.
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Additional Penalties
• Some states have assigned additional penalties
above and beyond that required by TAAEA.
• Additional penalties may include:
o Loss of appeal rights
o Fines per instance
o Fines based on false statements
o Fines as % of assessed overpayments
o Revocation of right to agent representation
• Problems may also lead to higher risk of exposure
to other audit areas (worker classification, other
agencies and jurisdictions).
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Best Practices
for
UI Compliance & Cost Savings
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Best Practices
“ACT.”
Provide information to UI agencies
that is:
Accurate
Complete
Timely
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UI Integrity Oversight Plan
Total UI Claims
(also by
state/location)
Find & fix
areas of
organizational
weakness.
Impact on
experience
rating?
Calculate cost
to organization.
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Designate a
Person or
Team
Track win/loss
for appeals.
Why? Who?
Which claims
failed to be
timely/
adequate? Why?
Who?
Track
win/loss for
protests.
For losses,
why? Who?
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Controllable Risk Factors
Contributing to UI Cost & Noncompliance
Challenge #1: Organizational Structure:
• Limited infrastructure committed to UI process
• Minimal or non-existent “inter-departmental”
technology for seamless, timely receipt &
“effective” follow-through for every claim
• Inconsistent expertise responsible for program
success (turnover) = inconsistent program delivery
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ETS’ Solution
• Empower your team with the tools they need to
be effective, and save money in the long run.
Deploy technology-based claims management for
automated cross-location, cross-department
communication and transparent, on-demand
account access.
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Controllable Risk Factors
Contributing to UI Cost & Noncompliance
Challenge #2: Training for Results
• Invested parties (C-level, HR, Payroll, ….) may not be educated
about relationship btwn. separation, discipline, documentation,
claims process, and cost / compliance impact to organization.
• Charge analysts may not be well-trained on all of the following:
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
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ETS’ Solution
• Implement training modules for all on-boarding and
exit staff (HR and managers).
• Clarify UCM risks and potential value in a language
C-Suite understands. Use advanced reporting
features to assign dollar values to:
o where you are at / current win-lose ratio, experience rating
o where you want to be / industry benchmarks
o worst case scenario / noncompliance penalties
• Secure support for additional resources
as needed.
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Controllable Risk Factors
Contributing to UI Cost & Noncompliance
Challenge #3: Breaking Old Response Habits
• In the past, many employers cherry-picked
claims to respond to, focusing on those
that held perceived benefit to the
employer (such as unwarranted claims).
• In the past, agency requests for claims
detail could be largely put off and
“perfected” after the initial claims
determination if necessary.
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ETS’ Solution
• Technology-based claims management supports
timely response of all claims, right from the start.
• “Follow-through” procedures support ongoing
agency compliance.
• Built-in “triggers” identify areas for improvement.
• Access records, notes, and claims detail on-demand
from anywhere, anytime.
• Transmit data electronically.
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Reporting Features: How They Help
• 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
Result: Constantly Improving Your Compliance & Cost-Savings
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UCM Plus Screenshot
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UI Integrity Prep Checklist
Done?
UI Prep Item
Organizational 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”
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ETS Resources
•UI Integrity State Legislation Tracker
•UI Integrity Compliance Tips
•How Nonprofit Employers Can Reduce UI Cost
•Tips on Choosing a UCM Vendor
ETS’
UITips
Go here to
download three
pages of UI Tips
from ETS.
IsYourUCM
Broken?
ETS
Blog
Go here to get ETS’ best
UCM blog posts and
resources in one place.
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Learnmore
aboutETS’
UCMPlus
Solution
Download this
one page checklist
to assess the state
of your UI Claims
Administration
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more, and here
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CONTACT ETS
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Q&A
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Presentation Slides:
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Ross Henderson-COO
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