Unemployment Insurance Everything you ever wanted to know about UI, but were afraid to ask.
Andrew Baldwin Arizona UIA Program Administrator Department of Economic Security Neil Gorrell Washington Deputy Director Unemployment Insurance Division Employment Security Department 2
3 Brief History
What s the Point? Temporary income replacement for jobless workers Only partial income replacement Benefits help support local economies Employers pay taxes into trust fund Trust fund used solely to pay benefits 4
1935, Social Security Administration Frances Perkins - Secretary of Labor for President Franklin D. Roosevelt The first woman to hold a Cabinet post Chaired the Committee on Economic Security (CES) In 1935, the CES created the Social Security Act which created the federal-state unemployment compensation (UC) program 5
Federal/state partnership Based on federal law, administered by state employees under state law Federal laws provide framework for state programs On behalf of states, the U.S. Department of Labor (USDOL): Ensures conformity and compliance with federal law Provides administrative funding Monitors state s performance and provides technical assistance Holds and invests monies in trust funds 6
Conformity If states meet minimum federal requirements they are considered to be in conformity with federal law and may receive: Up to 5.4% basic and additional tax credits Federal grants Administrative funding 7
8 Benefits
UI Benefits Take claims (by phone or internet) Adjudicate issues Take appeals on determinations Process and collect overpayments 9
Claimant Eligibility Monetary Issues: Benefit amount is determined by wages earned during four calendar quarters called the Base Period Paid benefits to replace up to about 50% of wages Not paid benefits forever (from <10 to 26 weeks maximum) 10
Claimant Eligibility Non-monetary issues: Unemployed through no fault of their own Reason for separation from last employer Able to work Available to work (transportation, child care, etc.) Actively seeking work Approved claimants file every week to continue receiving benefits. 11
Benefit Calculations (varies by State) Weekly Benefit Amount (WBA) Maximum amount a claimant may receive each week Can be reduced by income in the week or other factors Maximum Benefits Payable (MBP) Total amount payable in the entitlement Like a bank account from which a claimant may withdraw up to the WBA until it runs out 12
Claim Duration and Benefit Amount Claims last for up to 52 weeks unless there is a special extension. Maximum and minimum weekly benefit amount limits The claimant could collect until either the year is over or the benefit amount exhausted. 1st eligible week of a claim is a waiting week with no benefits paid. 13
Federal Extensions Regular benefits: weeks 1 up to 26 100% state-funded Emergency unemployment compensation: weeks 27 up to 79 100% federally funded Up to 53 weeks, paid out in 4 tiers Extended benefits: weeks 80 up to 99 Federally funded through 2011 14
Eligibility Issues Any information or set of circumstances that raises a question about whether unemployment insurance benefits are payable, and that may cause denial of benefits under the unemployment insurance benefits laws. 15
Suitable Work (varies by State) Determined on a case-by-case basis. Claimants are only obligated to accept work that is in-line with their training and experience. Claimants do not have to accept work that: Is unreasonably dangerous Offends the claimant s religious beliefs or moral conscience That the claimant cannot physically do Others 16
Disqualifications: Misconduct To establish misconduct, an employer must show the employee had a willful or wanton disregard for the interests of the employer or co-workers such as: Dishonesty related to employment Repeated and inexcusable absences Gross Misconduct Conviction of a crime connected to the job Flagrant and wanton disregard of the interests of the employer or co-workers 17
Disqualifications: Voluntary Quits Some states allow employees to voluntarily quit their jobs and still receive UI benefits (set by state law). Each case is investigated individually by qualified specialists who gather information from both the employer and the employee. 18
Disqualifications: Fraud Fraud is the intentional misrepresentation of information, or lying about facts to get benefits. Punishments for fraud: Overpayments Denial of benefits for a period of time Others Integrity measures are receiving increased attention recently from Congress and the President. 19
Employment Service Registration Arizona: Registration with Employment Service is mandatory. Claimants who file for UI benefits are automatically registered as part of the claims process. Others may register in person or on line. Washington: Claimants are automatically registered with WorkSource to assist with their job search. 20
Washington: Job Search Review Claimants must: Make at least three documented job searches each week; or Participate in WorkSource job-search activities such as résumé writing and interviewing skills; and Immediately accept a suitable job offer. 21
Payment Methods Arizona: Everyone who files for UI benefits is provided a debit card through a banking institution identified by the Department. Individuals may elect direct deposit to a checking or savings account of their choice. Washington Direct Deposit Postal Warrant 22
Unemployment benefits Training instead of looking for work Commissioner Approved Training Training Benefits Regular benefits, up to 26 weeks Short-term training to gain work skills Income support only no tuition or fees Up to 52 weeks (including regular benefits) Long-term training, must be approved in advance Occupation must be in demand 23
Arizona Efficiencies Unemployment Insurance implemented efficiencies such as the delivery of services through call centers and the Internet. Benefits paid through debit card or direct deposit are more secure. Some staff work entirely from home in Virtual Offices. 24
Other programs Shared Work Self-Employment Assistance Program Disaster Unemployment Assistance Temporary Total Disability 26
26 Tax
Arizona: UI Tax Who must pay Unemployment Insurance taxes? Generally speaking, all employers who employ at least one person. Employers pay taxes on the first $7,000 paid to each employee in a calendar year, the lowest wage base allowable by federal law. There are 128,617 active employers liable to provide Unemployment Insurance coverage in Arizona. 27
Washington: UI Tax Employers must: Register for master business license and UBI number; Report employee names, social security numbers, hours worked, wages; and Pay taxes quarterly on taxable wages. 212,000 registered businesses in 2010 $1.25 billion paid in fiscal year 2010 Taxable wage base adjusted annually: $37,300 in 2011 $38,200 in 2012 28
UI Tax Responsibilities Employer reporting and tax responsibility Tax liability criteria, established through rule and statute, monitored by UI staff Employer accounts Wage and tax audits Quarterly benefit charge notices Appeal rights 29
UI Taxes Employers pay federal tax (FUTA) and state tax (SUTA) FUTA paid to IRS Revenues held in the federal trust fund Pays for federal programs and administration SUTA paid to Employment Security Revenues held in state trust fund Can be used only to pay unemployment benefits 30
Washington Unemployment taxes SUTA tax: two components Experience tax ~ based on benefits paid to former employees in past four years. 31 Shared-cost (social) tax ~ calculated annually. Two functions: Covers shared costs of the insurance system. When benefit payouts far exceed tax collections, it rises to slow trust fund decline.
Washington Unemployment taxes Experience-based tax The more lay-offs, the higher the tax rate. Experience is averaged over four years to minimize sharp rate spikes. 40 rates, 0% to 5.4% of taxable wages. 34 percent of tax payers are in lowest rate class (They only pay social tax). 32
Bankrupt states
34 Questions?