This document provides an overview and analysis of unemployment costs and systems in the United States in 2011. It discusses rising national unemployment rates and long-term unemployment. Many state unemployment trust funds are insolvent, requiring over $40 billion in federal loans. The document analyzes proposals to manage unemployment costs, including changes to the Federal Unemployment Tax Act that could increase taxes for employers in states with outstanding loan balances.

1. 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

2. 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 2011
Source: U.S. Department of Labor and TALX Corporation, as of 7/28/11
2

3. 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 recovery
As of 7/23/11
Source: Based on data supplied by U.S. Department of Labor
3

4. 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

5. 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 Q111
Source: 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

6. 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 Actual
U.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

7. 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
2011.4
All 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

8. 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

9. 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 7/1-12/311
Indiana $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, 2011
2 - 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 7/1-12/311
New 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 $40,047,009,239
1 - Reflects the expiration of the 0.2% “temporary” surtax on June 30, 2011
9

10. 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

11. Title
Long-standing State Financing Policies
have increased Risk of Insolvency
Long-standing State Financing Policies have
increased Risk of Insolvency
Source: 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 2013
Source: UWC – Strategic Services on Unemployment and Worker’s Compensation
11

12. 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 $13,000
What if
AZ $7,000 MS $14,000
State Unemployment Taxable
Wage 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

13. 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 Review
Source: NASWA State Unemployment Insurance Tax Survey, April 2011
13

14. 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 WA
Source: NASWA State Unemployment Insurance Tax Survey, April 2011
Unemployment Cost
Management
14

15. Unemployment Tax and Benefit Review
Unemployment Tax Cost – State Example
Florida 2011 Merit Rating
5.4% (2010: 5.4%)
$7,000
$378
Employer Rate
$
$72
R
$7,150
1.03% (2010: .36%)
15

16. 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 2011
Last 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 Period
earnings determine weekly benefit amounts and employers chargeable proportionate to wages paid.
16

17. Unemployment Claim Process
Separation 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

18. Voluntary Quit
The burden of proof is the responsibility of the former employee to
p p y p y
show 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
Discharge
The burden of proof is the responsibility of the employer to prove that
the employee was discharged for misconduct.
Misconduct
A deliberate and willful disregard of
employer’s interest or repeated
violations of a known company policy
18

19. 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 Billion
Source: U.S. Department of Labor – Benefit Accuracy Measurement Report: 2009 (most recent data available)
19

20. Merger-Acquisition-Reorganization Planning
Unemployment Cost Management
20

21. 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