Joe Handrick, Administrator Division of Unemployment Insurance Janell Knutson, Director Bureau of Legal Affairs

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1 Wisconsin Unemployment Insurance Reform Joe Handrick, Administrator Division of Unemployment Insurance Janell Knutson, Director Bureau of Legal Affairs

2 Introduction: 2 Topics for Today Reforms enacted in the past 2 years; and Upcoming opportunity for you to forward ideas for continued reform and improvements to our UI system. The UI reforms that Governor Walker and the Legislature passed through the biennial budget and 2013 Wisconsin Act 36 are producing results, and there is more work to be done. ~~ Reggie Newson, Secretary Department of Workforce Development

3 UNEMPLOYMENT INSURANCE ADVISORY COUNCIL (UIAC) For more than 75 years the UIAC s role has included: Submitting recommended changes in UI law to the Legislature; and Advising the Department of Workforce Development in the administration of UI law.

4 UIAC Members: Ten members serve 6-year staggered terms. Five members represent employers, including one member who represents small businesses; Five members represent employees; and One nonvoting chairperson - Director of Bureau of Legal Affairs.

5 UI Trust Fund Basics The WI UI Trust Fund is separate from any State Funds Federal law mandates expenditures for benefits only. Taxes are deposited into the U.S. Treasury. UI Trust Fund borrows from U.S. Treasury when necessary. A positive balance is good news for employers

6 Safeguarding the UI Trust Fund January of 2011: UI Trust Fund deficit of $1.4 billion. Through the work of the Administration, the UIAC, and the Legislature, the UI Trust Fund moved to a positive balance in July of A financially stable and growing UI Trust Fund helps to support the pro-business climate that Wisconsin job creators need to expand and create more opportunities for working families. ~~ Reggie Newson, Secretary Department of Workforce Development

7 Good News Special Assessment for Interest (SAFI) When the state has to borrow from the federal government (as it did as a result of the 2008 recession), the federal government charges interest. Federal law forbids using regular state UI taxes to pay this interest. SAFI is assessed specifically to pay for the interest charged on loans to the UI Trust Fund from the federal government. This law was added to the Wisconsin statutes during the 1980 s recession.

8 Good News Special Assessment for Interest (SAFI), Continued Approximately $78.8 million was collected through SAFI assessments, and $25.6 million was paid through state General Purpose Revenue funds. The State Budget provided General Purpose Revenue to pay SAFI in 2013 and 2014, thus alleviating employers of this burden.

9 More Good News Federal UI Taxes (FUTA): Collected by federal government to cover administrative costs and to provide loans to state UI programs. Payroll tax of 6% on the first $7,000 of wages. Up to 5.4% is credited back to employers resulting in an effective rate of 0.6% in years when the state doesn t borrow from U.S. Treasury. Wisconsin employers had FUTA credit reductions through tax year 2013 due to the Trust Fund having a negative balance. An estimated $285.2 million in additional federal taxes were paid due to the FUTA reduction. The Trust Fund will be positive on November 9, 2014 when the FUTA rate is determined for 2014.

10 More Good News Federal UI Taxes (FUTA), Continued Because of the positive Trust Fund balance: There will be no FUTA credit reduction for tax year 2014; therefore, The Federal tax rate will drop 60% from the current effective rate of 1.5% to 0.6%. A small business with 40 employees will save more than $2,500 in taxes for Milwaukee Journal Sentinel 9/17/2014

11 Reform 2013 Significant Law Changes New Disqualification Standard Misconduct: Law codifies the standard for misconduct set out in case law: one or more actions or conduct evincing such willful or wanton disregard of an employer s interests

12 Reform 2013 Significant Law Changes, Continued. Law specifies actions by employees that constitute misconduct: 1. Violation of an employer s reasonable written drug and alcohol policy. 2. Theft, felonious conduct connected with employment, or intentional or negligent conduct causing substantial damage to the employer's property. 3. Conviction of a crime if the conviction makes it impossible for the claimant to perform the duties for the employer.

13 Reform 2013 Significant Law Changes, Continued. 4. Threats or acts of harassment, assault, or other physical violence at workplace. 5. Under certain circumstances, absenteeism or excessive tardiness. 6. Falsifying employer s business records. 7. Willful and deliberate violation of a written standard when the employer is licensed by a government agency and the violation would cause the employer to lose the license or be sanctioned.

14 Reform 2013 Significant Law Changes, Continued Substantial Fault: Acts or omissions of an employee which violate reasonable employer requirements. Does not include: 1. Minor rule violations unless repeated after warning from employer. 2. Inadvertent errors by employee. 3. Failure to perform work because of insufficient skill, ability or equipment.

15 Reform 2013 Significant Law Changes, Continued Reduced the number of quit exceptions (circumstances under which an employee can quit their job and still be eligible for benefits). Increased required number of work search actions from 2 to 4. Require claimant to create and protect security credentials. Suspension of benefits if claimant fails to provide information to the department.

16 More UI Reforms: Administrative Enhanced ALJ training; and Improved customer service.

17 Questions?

18 Thank You! Joe Handrick Division Administrator Janell Knutson Bureau of Legal Affairs Director

19 Appendix: LINKS To submit a suggested law change, UILawChange@dwd.wisconsin.gov For more information on the UIAC, visit: To obtain the plain language analysis for law changes, visit:

20 Appendix: UI System Basics Unemployment Benefits: Overview UI benefits are intended for employees who lose employment through no fault of their own. To receive benefits, claimants must have a proven work history with a UI employer. Under the Wisconsin UI program, workers can receive up to 26 weeks of benefits. The minimum weekly benefit payment is $54, the maximum is $370.

21 UI Benefits: Special Programs Emergency Unemployment Compensation (EUC). Additional weeks of federally funded unemployment compensation ended at the end of EUC is not charged against an employers account.

22 UI Taxes: State Taxes (SUTA) State UI tax revenue is paid to the Wisconsin UI Reserve Fund (Trust Fund) and used ONLY to pay benefits. Payroll tax on wage base of first $14,000. Two parts of the state UI Tax: Basic Tax Experience-rated and credited to employer s account. Solvency Tax Represents risk sharing amount for all employers. Credited to the Balancing Account.