The national unemployment rate is currently 9.8%. The number of individuals claiming unemployment has placed a substantial strain on state unemployment trust funds. In January 2008 the national unemployment rate was 4.9%. Unemployment benefit payments have more than doubled while tax revenues have decreased. Given this scenario, many states are finding it difficult to maintain solvent trust fund balances and have been forced to take Federal Title XII loans. In response to the current economic situation, states have passed legislation to increase tax revenues to replenish depleted trust fund balances.

The following states have passed legislation in order to boost revenues:

Florida – SB 810 increases the taxable wage base from $7,000 to $8,500 for tax years 2010 through 2014 and changes the rules for calculating the final and variable adjustment factors used in tax rate calculations.

Indiana – HB 1379 increases the taxable wage base from $7,000 to $9,500 and institutes a new set of rate schedules to be used beginning in 2010. The penalty rate has also increased from 5.6% to 12.0% in 2010.

New Hampshire – SB 129/LSR 998 increases the taxable wage base from $8,000 to $10,000 for 2010, $12,000 for 2011 and $14,000 for 2012 and beyond. In addition, another 0.5% surcharge, on top of the 0.5% mentioned below, will be added to all employers’ rates and a 1.5% fund balance increase will be added to all negative balanced employers’ rates effective for at least the first and second quarters, 2010.
Due to a low state trust fund balance, an emergency 0.5% unemployment tax surcharge will be applied for the remainder of 2009.

South Dakota – Due to a low state trust fund balance, an emergency 1.5% unemployment tax surcharge will be applied to employers on taxable wages paid 10?1?09 through 12?31?09. This surcharge is expected to remain in effect through at least the second quarter, 2010.

Tennessee – HB 2324/SB 2315 increased the taxable wage base from $7,000 to $9,000 retroactive to January 1, 2009 and increased unemployment tax rates by 0.6% effective January 1, 2009. The 0.6% increase is expected to remain in effect through at least the second quarter, 2010.

Vermont – HB 442 increased the taxable wage base from $8,000 to $10,000 for tax year 2010.

West Virginia – SB 246 increased the taxable wage base from $8,000 to $12,000 effective second quarter, 2009.

TALX has a team dedicated to track and monitor pending and new unemployment tax legislation. Our tax experts can assess how legislative activity will impact unemployment taxes. Employers who are forecasting the impact of legislative changes on 2010 unemployment costs will avoid unexpected tax increases and budget variances throughout the coming year.

We previously reported that Indiana employers could expect an increase in not only unemployment taxable wage base (going from $7,000 to $9,500), but tax rate as well (changing from a range of 1.1% to 5.6% in 2009 to 0.7% to 9.5% in 2010.)

Some recent activity in the state senate however could give Indiana employers a break, at least in 2010.  Lawmakers are proposing a delay in the unemployment insurance tax increases to give business owners a break and hopefully encourage new job growth in the state.

While I wholeheartedly agree with a delay in the tax increases, it appears that certain lawmakers may be banking on a bailout of state unemployment insurance funds as the rationale for why a delay could make sense. 

It is interesting given the position that the Nevada Economic Security Council took when they considered reducing the tax on employers in 2010 and statements made by South Carolina Board of Economic Advisors Chairman, John Rainey.  (See my previous blog "What would happen if interest was waived...?")  These state advisors took the position that the federal loans had to be repaid or employers would end up paying more later.

In my heart I don't believe in government bailouts, however, it has been a practice for so long that is has come to be expected (as evidenced by comments made by Indiana lawmakers).  We have created a situation where there is almost no longer a choice in whether to bailout a sector of the economy or not. 

So, if there is any thought by federal lawmakers out there that a bailout of the trust funds could happen, I wish they would just go ahead and do it so employers in all states could possibly benefit from some relief. 

We'll keep a close watch on what happens in Indiana, but don't expect a decision quickly.  The delay won't be discussed until the next Senate session in January. 

Tammy Mullin

HR Service Matters: By: Mike Smith

At our recent Client Advisory Board (CAB) meeting we had a great opportunity to hear from our clients and communicate key initiatives currently underway at TALX.  Our CAB is now in its 7th year and our members represent the executive levels of HR/Payroll/Benefits/Tax within their organizations. 

These in-person meetings always include a time to discuss important issues that member organizations are encountering.  Many members mentioned the cost reduction focus taking place at their companies and one commented that the HR team was asked to look in some areas that they had never looked at before for cost savings.  Several mentioned salary freezes and we also heard that 401(k) matches are being reduced. In the midst of all of these issues was the common theme of keeping employees happy.

I’m sure these issues are most likely representative of many HR teams across a wide range of industries. While a recent Watson Wyatt survey (link below) reflects that a growing number of employers are planning to lift their salary freeze soon, employees still feel the sting.

http://www.watsonwyatt.com/news/press.asp?ID=22602

In these tenuous times it is important to let employees know how they too are helping manage costs beyond their pay freeze.  For example, many HR service initiatives have a solid cost reduction component.  Making these cost savings more visible to employees can help them understand how their utilization of HR services is making a significant contribution.  In addition, many paperless employee services support the organizational goal to be more “green.” This represents yet another opportunity to tout how employees are making a difference while promoting the scope of all HR services initiatives.

We are notifying our employers of an issue with the filing deadline in Texas for the third quarter this week.  While this notice is going out to all our clients, I also thought it important enough to post on our blog in case anyone is out there searching on these rules for Texas. 

Situation

The third quarter, 2009 unemployment insurance contribution report filing deadline of October 31st falls on Saturday this year.

What Employers Need to Know

According to Texas law, if the quarterly filing deadline falls on a Saturday, Sunday or a legal holiday, it is extended to the following business day. No penalty will be assessed as long as the report and payment are postmarked or filed electronically before midnight CST the next business day. That date is Monday, November 2nd for this quarter.

Since the computation date for employer’s 2010 rate calculations is September 30, 2009, another section of the law applies. Only taxable payroll from reports filed and paid by October 31, 2009 is included in the 2010 unemployment insurance rate calculation. That date is NOT extended; therefore, employers should plan on filing and making payment by October 31, 2009 to ensure proper credit in their rate calculation. Not getting credit for the third quarter taxable payroll could have a detrimental effect on the 2010 rate assignment.

Bottom Line

Even though you have til the 2nd to file your report, doing so will likely have a negative impact on your 2010 state unemployment insurance rate calculations in Texas.  You want to plan to file on the 30th to avoid problems. 

Tammy Mullin

I know this is posted on our website, but I really wanted to highlight this article from CCH's Journal of Taxation in the July/August publication.  The article titled The Recessionary Impact on Unemployment Insurance Taxes - 2009 and Beyond was written by our very own Lori Roberts.  Lori is a Senior Manager in our Government Relations group and sits on the board of the UWC, an organization focused on Unemployment and Worker's Compensation legislation and the impact of both on employer organizations.  Her background and expertise is unmatched in the industry.

Some of the information is a little dated, but the article does a great job of talking about the topic in terms that I think most people can understand and gives some basic information about how unemployment works in the section UI Financing 101. 

Tammy Mullin

For anyone out there wondering where all that stimulus money is going, check out www.recovery.gov.  I have to say that I was somewhat skeptical about the impact of all that Recovery Act spending.  Actually, I'm still somewhat skeptical about the impact.  However, I spent some time digging around the site tonight and while I was heard to issue a couple "Oh come on"'s and a few "Seriously?"'s I also found myself thinking "Well that's not so bad" for a few.

This one story in particularly about an EPA project in PA was interesting.  Not only did they create jobs from the project, but they are upgrading water service where residents "for the last 10 years...periodically have been without sufficient quantities of clean drinking water, or without water service at all."  It might be costing $12.5 million to create 100 jobs, but really 40,000 people are being positively impacted. 

Tammy Mullin

We recently held a Webcast where we had some experts talk about the impact the current recession is going to have on employer's taxes next year and in to the future. It also addressed the solvency of the trust funds in many states and talked about legislation that may have some impact. If you're interested in hearing the presentation, we have it available at the following link. The title is "Unemployment Taxes-An Emerging Crisis?" 

http://www.talx.com/News/IndustryInsights/index.asp

Pat Powell

Managing unemployment insurance costs in any environment is difficult, but particularly so as it relates to retailers.  Part of the value of outsourcing to an Unemployment Cost Management vendor is being able to centralize the process in a very decentralized environment.  Retailers have stores across the country which makes if very difficult to ensure the effective management of proper documentation, 1st hand witness reports and other aspects of an Unemployment Cost Management program.

While the vendor can handle all the paperwork, the expertise necessary to do prep work with witnesses and generally advise you on case work, really making sure that stores comply requires special attention.  A great best practice for retailers is to experience rate your stores and allocate unemployment taxes across the organization.  Your bound to get more attention from your store managers if the cost of unemployment hits their bottom line.

Tammy Mullin

Georgia Department of Labor has an interesting program in their state to help get unemployed workers back to work.  It’s called “Georgia Work$.”  The basic premise is that participating employers provide workforce on the job training to UI Claimants that qualify for up to 6 weeks.  The state pays the UI Claimant directly in the form of continued unemployment insurance payments while the employers pay nothing.

Critics of the program complain that the try before you buy process is limited in its scope, encourages employers to abuse the workforce by getting free labor and just plain doesn’t work.

My question is, what’s wrong with being able to evaluate a potential hire during training before you commit to a long-term working relationship with that person?  The program only lasts for 6 weeks which gives the employer ample time to evaluate their hiring decision, but certainly not enough time to encourage abuse.   It doesn’t even make good business sense to abuse this type of program.  Well, unless of course you work at Paddy’s Pub in “It’s Always Sunny in Philadelphia.”  They tried to abuse a similar Welfare Program in “Dennis and Dee Go on Welfare.”  Funny episode, but not something that happens in real life.

The Georgia Department of labor has posted the following statistics about success rates since the program’s inception in 2003; 60% of those completing the program are hired, more than 3,000 UI Claimants have found full time employment and 6,000 different Georgia employer have participated.  Georgia thinks those are great numbers and has recently talked expansion of the program .  Also, Georgia is counted among the states that have yet to take a Title XII Loan from the Federal Government, although they are on the TALX watch list.

So, you tell me does Georgia Work$ work?  In my mind it is hard to criticize a program that helps people find jobs.

Tammy Mullin