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Mohr and White - Minimizing unemployment costs

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Minimizing Unemployment Costs

Minimizing Unemployment Costs

Presented by Michael Mohr and Matthew White

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    Mohr and White - Minimizing unemployment costs Mohr and White - Minimizing unemployment costs Document Transcript

    • Minimizing Unemployment Costs in 2011 and Beyond Presented by Michael Mohr and Matthew White 8/31/2011 Agenda• National Unemployment Economic Update• U.S. Unemployment System Solvency• Federal Unemployment Tax Act (FUTA) Review• President Obama’s Budget Proposal• U Unemployment C t M l t Cost Management t• Summary• Questions and Answers 1
    • National Unemployment Economic Update $ , $5,554 9.28% National annual benefit charge Average cost of an unemployment claim overpayment rate$40,047,009,239 30 Insolvent state trust funds Title XII loans outstanding $1,224,147,872 9.2% 9 2% 18.6 18 6 Title XII loans projected interest National Average weeks a person draws unemployment 24 unemployment rate States facing FUTA tax June 2011 increases in 2011Source: U.S. Department of Labor and TALX Corporation, as of 7/28/11 2
    • National Unemployment Trend 11.00% 9.8% 9 6% 10.0% 9.7% 9 7% 9.5% 9 5% 9.6% 9.5% 9.4% 10.00% 9.2% 8.5% 8.8% 9.00% 7.2% 8.00% 7.00% 6.1% 5.5% 6.00% 5.1% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% March June September December 2008 2009 2010 2011 Source: U.S. Department of Labor Four-week moving average of initial claims 700,000 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 , 100,000 50,000 0- - The four week moving average needs to drop below 450,000 and start moving towards 400,000 (or less) for the U.S. to start experiencing employment recoveryAs of 7/23/11Source: Based on data supplied by U.S. Department of Labor 3
    • U.S. Unemployment System Solvency Total Unemployment Rate First Quarter 2011 0.0% - 3.9% TUR (0 Jurisdictions) 4.0% 5.9% 4 0% - 5 9% TUR (4 Jurisdictions) 6.0% - 7.0% TUR (6 Jurisdictions) 7.1% - 9.9% TUR (28 Jurisdictions) 10% > TUR (14 Jurisdictions) The Total Unemployment Rate (TUR) Source: is the rate computed by dividing Total U.S. Department of Labor Unemployed by the Civilian Labor First Quarter 2011 Force (Bureau of Labor Statistics)* Jurisdictions include 50 U.S. States, DC (Orange) and PR (Red) 4
    • TALX Assessment – Revenue per $1 of Benefits Paid$1.30 $1.19 $1.20 $1.19 $1.19$1.20 $1.17 $1.10 $$1.10 $1.07 $1.03 $0.98$1.00 $0.91$0.90 $0.84$0.80 $0.74 $0.76 $0.68$0.70 $0.60 $0.61$0.60 $0.52$0.50 $0.47 $0.41 $0.39 $0.41$0.40$0 40$0.30$0.20$0.10 $- Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111Source: Compiled from U.S. Department of Labor UI Data Summary Unemployment Trust Fund Solvency TALX Assessment as of July 28, 2011 Solvent Trust Funds (23 Jurisdictions) Insolvent Trust Funds (30 Jurisdictions) At Risk Trust Funds (0 Jurisdictions)* Jurisdictions include 50 U.S. States, DC (Solvent), PR (Solvent), and VI (Insolvent) 5
    • U.S. Average Unemployment Taxable Wage Base Title U.S. Average Unemployment Taxable Wage Base $18,000 $15,718 $15 718 $16,000 $15,227 $14,481 $13,568 $13,836 $13,862 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $- 2006 2007 2008 2009 2010 2011  2011 - 18 states increased taxable wage base National Average Title Unemployment Tax Rate National Average Unemployment Tax Rate 4.00% 3.47% 3 50% 3.50% 3.02% 2.86% 2.82% 3.00% 2.68% 2.74% 2.77% 2.56% 2.62% 2.56% 2.40% 2.37% 2.50% 2.26% 2.26% 2.28% 2.16% 2.17% 2.00% 1.50% 1.00% 0.50% 0.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 TALX Projection USDOL ActualU.S. Department Of Labor 2010 average unemployment tax rate will not be finalized until 2011. All rates are expressed as a percentage of taxable payroll. 6
    • TALX Unemployment Insurance (UI) Trust Fund Review $60,000,000 4.0% 3.47% 3 47% 3.5% $50,000,000 3.0% 2.86% 2.82% 2.68% 2.77% $40,000,000 2.56% 2.5% 2.26% 2.28% 2.17% $30,000,000 2.0% 1.80% 1.5% $20,000,000 1.0% $10,000,000 0.5% $0 0.0% 1998.4 1999.2 1999.4 2000.2 2000.4 2001.2 2001.4 2002.2 2002.4 2003.2 2003.4 2004.2 2004.4 2005.2 2005.4 2006.2 2006.4 2007.2 2007.4 2008.2 2008.4 2009.2 2009.4 2010.2 2010.4 2011.2 2011.4All Values in $000 Revenue TF Balance UI Benefits Avg. UI Rate Footnotes:  2011 Average Unemployment Tax Rate is a TALX estimate Source: U.S. Department of Labor Federal Unemployment Tax Act (FUTA) Review 7
    • Federal Unemployment (FUTA) Tax Review FUTA Tax Rate FUTA Taxable Wage Base FUTA Tax 6.2% $7,000 $434 Per Employee• If employer pays state SUI taxes timely and in full, a 5.4% credit is granted FUTA Tax Rate FUTA Tax Credit FUTA Tax Rate FUTA Tax (less credit) 6.2% 5.4% 0.8% $56 Per Employee• If Federal Title XII loan remains outstanding for two years (as of January 1st), employers in the affected state lose 0.3% of the 5.4% credit (or $21 per employee)• 0.3% FUTA credit loss continues for every year the Federal Title XII loan remains unpaid (Example: Year 1 = 0.3%; Year 2 = 0.6%, etc.) Federal Unemployment (FUTA) Tax Review FUTA Tax Rate FUTA Taxable Wage Base FUTA Tax 6.0% $7,000 $420 Per Employee• If employer pays state SUI taxes timely and in full, a 5.4% credit is granted FUTA Tax Rate FUTA Tax Credit FUTA Tax Rate FUTA Tax (less credit) 6.0% 5.4% 0.6% $42 Per Employee• If Federal Title XII loan remains outstanding for two years (as of January 1st), employers in the affected state lose 0.3% of the 5.4% credit (or $21 per employee)• 0.3% FUTA credit loss continues for every year the Federal Title XII loan remains unpaid (Example: Year 1 = 0.3%; Year 2 = 0.6%, etc.) 8
    • Potential FUTA Credit Reductions Loan Balance Actual Potential FUTA Effective Tax Rate State 2011 2011 July 28, 2011 2010 20121 20131 20141 1/1-6/30 7/1-12/311Indiana $1,924,907,528 1.10% 1.40% 1.20% 1.50% 1.80% 2.10%Michigan $3,268,029,017 1.40% 1.70% 1.50% 1.80% 2.10% 2.40%South Carolina2 $966,613,654 1.10% 1.40% 1.20% 1.50% 1.80% 2.10%Alabama $65,664,209 1.10% 0.90% 1.20% 1.50% 1.80%Arkansas $359,989,601 1.10% 0.90% 1.20% 1.50% 1.80%California $8,583,102,056 1.10% 0.90% 1.20% 1.50% 1.80%Connecticut $809,875,582 1.10% 0.90% 1.20% 1.50% 1.80%Florida $1,667,200,000 1.10% 0.90% 1.20% 1.50% 1.80%Georgia $721,080,472 1.10% 0.90% 1.20% 1.50% 1.80%Idaho $202,401,700 1.10% 0.90% 1.20% 1.50% 1.80%Illinois $2,218,027,944 1.10% 0.90% 1.20% 1.50% 1.80%Kentucky $948,700,000 1.10% 0.90% 1.20% 1.50% 1.80%Minnesota $485,842,962 $485 842 962 1.10% 1 10% 0.90% 0 90% 1.20% 1 20% 1.50% 1 50% 1.80% 1 80%Missouri $725,446,730 1.10% 0.90% 1.20% 1.50% 1.80%Nevada $773,160,968 1.10% 0.90% 1.20% 1.50% 1.80%1 - Reflects the expiration of the 0.2% “temporary” surtax on June 30, 20112 - Expected to make a payment large enough to qualify for a credit reduction exemption in 2011. If made timely and the USDOL approves, the FUTA effective rate would be reduced to 0.8% for the first half and 0.6% for the second half of 2011. Potential FUTA Credit Reductions Loan Balance Actual Potential FUTA Effective Tax Rate State 2011 2011 July 28, 2011 2010 20121 20131 20141 1/1-6/30 7/1-12/311New Jersey $1,617,749,499 1.10% 0.90% 1.20% 1.50% 1.80%New York $2,992,252,308 1.10% 0.90% 1.20% 1.50% 1.80%North Carolina $2,615,494,220 1.10% 0.90% 1.20% 1.50% 1.80%Ohio $2,611,387,131 1.10% 0.90% 1.20% 1.50% 1.80%Pennsylvania $3,761,835,374 1.10% 0.90% 1.20% 1.50% 1.80%Rhode Island $236,527,552 1.10% 0.90% 1.20% 1.50% 1.80%Virgin Islands $24,052,719 1.10% 0.90% 1.20% 1.50% 1.80%Virginia $210,344,000 1.10% 0.90% 1.20% 1.50% 1.80%Wisconsin $1,338,903,054 1.10% 0.90% 1.20% 1.50% 1.80%Arizona $268,710,143 .90% 1.20% 1.50%Colorado $325,998,253 .90% 1.20% 1.50%Delaware $62,523,367 .90% 1.20% 1.50%Hawaii $12,635,911 $12 635 911 .90% 90% 1.20% 1 20% 1.50% 1 50%Kansas $170,821,412 .90% 1.20% 1.50%Vermont $77,731,860 .90% 1.20% 1.50%Total Title XII Loans $40,047,009,2391 - Reflects the expiration of the 0.2% “temporary” surtax on June 30, 2011 9
    • Federal Title XII Interest Provisions Special Assessment (8 Jurisdictions) Surcharge, part of the rate (11 jurisdictions) No additional tax to employers (9 jurisdictions) No Provisions (5 jurisdictions) Solvent Trust Fund (20 jurisdiction)•Jurisdictions include 50 U.S. States, DC (Solvent), PR (Solvent), and VI (No Provision) President Obama’s Budget Proposal 10
    • Title Long-standing State Financing Policies have increased Risk of Insolvency Long-standing State Financing Policies have increased Risk of InsolvencySource: U.S. Government Accountability Office (GAO), April 2010 Federal 2012-2013 Budget Proposal • Title XII loan interest waiver for 2011 and 2012 – 2011 estimated tax relief $1.22 billion (interest rate 4.0869%) ( ) – 2012 estimated tax relief $1.79 billion – ARRA waived interest charges for 2009 and 2010 • FUTA Credit Reduction Suspension for 2011 and 2012 – 2012 estimated tax relief $2.14 billion – 2013 estimated tax relief $4.54 billion • FUTA wage base increase to $15,000 (from $7,000) in 2014 – 34 states would be required to raise SUI wage bases – FUTA wage base also permanently indexed on yearly basis – In 2014, the FUTA rate would decrease to 0.38% • Extension of 0.2% FUTA surtax for 2011, 2012, and 2013Source: UWC – Strategic Services on Unemployment and Worker’s Compensation 11
    • Federal Unemployment (FUTA) Taxable Wage Base $ 6,000 $16,000 $15,000 $14,000 $12,000 $10,000 $8,000 $7,000 $6,000 $6,000 $4,200 $4,000 $3,000 $2,000 $- 1940 1972 1978 1983 2014* * Proposed change in FUTA wage base based on President Obama’s 2012-2013 budget proposal State 2011 Wage Bases State 2011 Wage Bases AL $8,000 MI $9,000 AR $12,000 MO $13,000What if AZ $7,000 MS $14,000State Unemployment TaxableWage Bases = $15,000? CA $7,000 NE $9,000 CO $10,000 NH $12,000 DC $9,000 NY $8,500 DE $10,500 OH $9,000 FL $7,000 PA $8,000 GA $8,500 PR $7,000 IL $12,740 SC $10,000 IN $9,500 $9 500 SD $11,000 $11 000 KS $8,000 TN $9,000 KY $8,000 TX $9,000 LA $7,700 VA $8,000 MA $14,000 VT $13,000 MD $8,500 WI $13,000 ME $12,000 WV $12,000 12
    • JOBS Act of 2011 Title HR 1745 JOBS Act of 2011 - HR 1745 Sponsored by Rep. Camp, R-MI  Chair of House Ways & Means Subcommittee on Social Security States can elect to continue payment of Emergency Unemployment Compensation & Extended Benefits after 7/1/11 or spend funds on:  Title XII loan balances  Title XII interest payments  FUTA credit reduction  Jobs training programs Cost of EUC & EB already budgeted, no expansion of federal deficit Allows 0.2% “temporary” FUTA tax to expire 6/30/2011 TALX 2011 Title Unemployment Tax Review TALX 2011 Unemployment Tax ReviewSource: NASWA State Unemployment Insurance Tax Survey, April 2011 13
    • Expected Change in UI Tax Revenue From 2010 to 2011 Title Expected Change in UI Tax Revenue - From 2010 to 2011 140.0% 135.0% 130.0% 130 0% 120.0% 110.0% 98.0% 100.0% 90.0% 80.0% 70.0% 60.0% 54.0% 50.0% 50.0% 40.0% 40 0% 40.0% 29.0% 32.0% 30.0% 20.0% 22.0% 20.0% 10.0% 10.0% 4.7% 2.0% 0.0% CO IL IN NV NY OH OK PA SC TX VA WASource: NASWA State Unemployment Insurance Tax Survey, April 2011 Unemployment Cost Management 14
    • Unemployment Tax and Benefit ReviewUnemployment Tax Cost – State ExampleFlorida 2011 Merit Rating 5.4% (2010: 5.4%) $7,000 $378 Employer Rate $ $72 R $7,150 1.03% (2010: .36%) 15
    • Unemployment Cost Management Effective Unemployment Cost Management • Establish an organized process for initial claim responses • Evaluate each individual determination • Ensure timely appeals and proper hearing preparation • Audit benefit charge statements by individual claim and protest overpayments Unemployment Claim Eligibility and Liability 2Q 3Q 4Q 1Q 2Q 3Q 2010 2010 2010 2011 2011 2011Last Employer Claim – The claim notice sent to the most recent employer from which the employee has separated.Base Period Claim – The claim notice sent to each employer for which the claimant worked during the base period. Base Periodearnings determine weekly benefit amounts and employers chargeable proportionate to wages paid. 16
    • Unemployment Claim ProcessSeparation Claim Response Ideal place to end process! • Complete claim responses save time and money • Reduce follow-up requests • Claim Adjudicator can make fully informed decision • Avoid unnecessary appeals • Improve win % substantially Types of Separations Voluntary Quit • “I quit” • No show/No Call for Lack of Work three or more days • Completed Assignments • Plant closing • Position li i t d P iti eliminated Discharge • Misconduct • Attendance • Violation of Policy 17
    • Voluntary QuitThe burden of proof is the responsibility of the former employee to p p y p yshow there was good cause to quit attributable to the employer. Good Cause  A change in the condition of  employment or compelling reasons.  Continued employment must be  available. available Forced resignation = DISCHARGE ALWAYS ask for a signed letter of resignation DischargeThe burden of proof is the responsibility of the employer to prove thatthe employee was discharged for misconduct. Misconduct  A deliberate and willful disregard of  employer’s interest or repeated  violations of a known company policy 18
    • Lack of Work • Not Disqualifying – Intent of Unemployment • Job Eliminated – No positions available • Reduced hours – Full‐time to Part‐time • Job Offers and Refusals National Annual Benefit Charge Overpayment Rate 12.00% 9.92% 9.99% 10.06% 10.00% 9.20% 9.31% 9.52% 9.28% 9.10% 9.13% 8.54% 8.19% 8.00% 6.00% 4.00% 2.00% 0.87% 0.85% 0.86% 0.66% 0.63% 0.67% 0.66% 0.67% 0.65% 0.62% 0.63% 0.00% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 % of Underpayments % of Overpayments 2009 Estimated Underpayments - $484.9 Million 2009 Estimated Overpayments - $7.124 Billion 2008 Estimated Underpayments - $259.3 Million 2008 Estimated Overpayments - $4.192 BillionSource: U.S. Department of Labor – Benefit Accuracy Measurement Report: 2009 (most recent data available) 19
    • Merger-Acquisition-Reorganization Planning Unemployment Cost Management 20
    • Summary• National Unemployment Tax Rate - Key metric for employers p y y p y• Total Unemployment Rate (TUR) - Impacts state trust funds• Trust Fund Solvency - Impacts Title XII loan activity• Title XII Loans - Impacts employer FUTA taxes• Economic Conditions - Impacts employer unemployment costs• Budget and Forecasting - Planning initiatives 2011 and 2012 Questions and Answers For more information please contact: p Michael Mohr Vice President TALX Corporation (314) 684-2299 Cell: (314) 369-4143 mmohr@talx.com @ 21