mohr and white - minimizing unemployment costs
DESCRIPTION
Minimizing Unemployment CostsPresented by Michael Mohr and Matthew WhiteTRANSCRIPT
1
Minimizing Unemployment Costs
Presented by Michael Mohr and Matthew White
8/31/2011
in 2011 and Beyond
Agenda
• National Unemployment Economic Update
• U.S. Unemployment System Solvency
• Federal Unemployment Tax Act (FUTA) Review
• President Obama’s Budget Proposal
U l t C t M t• Unemployment Cost Management
• Summary
• Questions and Answers
2
National Unemployment Economic Update
$5,554 9.28%$ ,Average cost of an unemployment claim
National annual benefit charge overpayment rate
$40,047,009,239Title XII loans outstanding
30Insolvent state trust funds
18 6$1,224,147,872Title XII loans projected interest
9 2% 18.6Average weeks a
person draws unemployment
Title XII loans projected interest
24States facing FUTA tax
increases in 2011
9.2%National
unemployment rateJune 2011
Source: U.S. Department of Labor and TALX Corporation, as of 7/28/11
3
11.00%9 5% 9.8% 10.0%9 7% 9 6%
National Unemployment Trend
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
5.1%5.5%
6.1%
7.2%
8.5%
9.5% 9.8%9.7%9.5%
9.6%9.4%
8.8%9.2%
0.00%
1.00%
2.00%
3.00%
March June September December
2008 2009 2010 2011
Source: U.S. Department of Labor
650,000
700,000
Four-week moving average of initial claims
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
0
50,000
100,000
,
- - 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
4
U.S. Unemployment System Solvency
Total Unemployment RateFirst Quarter 2011
0.0% - 3.9% TUR (0 Jurisdictions)
4 0% 5 9% TUR (4 Jurisdictions)
Source: U.S. Department of Labor First Quarter 2011
The Total Unemployment Rate (TUR) is the rate computed by dividing Total Unemployed by the Civilian Labor Force (Bureau of Labor Statistics)
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)
* Jurisdictions include 50 U.S. States, DC (Orange) and PR (Red)
5
TALX Assessment – Revenue per $1 of Benefits Paid
$1.20
$1.30
$1.19 $1.20 $1.19 $1.19 $1.17
$
$0 40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10 $1.10
$1.07 $1.03
$0.98
$0.91
$0.84
$0.74
$0.60
$0.47 $0.41 $0.39 $0.41
$0.52
$0.61
$0.68
$0.76
Source: Compiled from U.S. Department of Labor UI Data Summary
$-
$0.10
$0.20
$0.30
$0.40
Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111
Unemployment Trust Fund SolvencyTALX 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)
6
TitleU.S. AverageUnemployment Taxable Wage Base
$18,000 $15 718
U.S. Average Unemployment Taxable Wage Base
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$13,568 $13,836 $13,862 $14,481
$15,227 $15,718
$-
$2,000
$4,000
$6,000
2006 2007 2008 2009 2010 2011 2011 - 18 states increased taxable wage base
TitleNational AverageUnemployment Tax RateNational Average Unemployment Tax Rate
3 50%
4.00%
3.47%
1.50%
2.00%
2.50%
3.00%
3.50%
2.16%
2.56%2.74%
2.62%
2.40%2.26%
2.37%
3.02%
2.17%
2.68%2.86%
2.77%2.56%
2.26% 2.28%
2.82%
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.
0.00%
0.50%
1.00%
2003 2004 2005 2006 2007 2008 2009 2010 2011TALX Projection USDOL Actual
7
3 47% 3.5%
4.0%$60,000,000
TALX Unemployment Insurance (UI) Trust Fund Review
1.80%
2.17%
2.68%2.86%
2.77%
2.56%
2.26% 2.28%
2.82%
3.47%
1.0%
1.5%
2.0%
2.5%
3.0%
$20,000,000
$30,000,000
$40,000,000
$50,000,000
0.0%
0.5%
$0
$10,000,000
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
Revenue TF Balance UI Benefits Avg. UI Rate
All Values in $000
Source: U.S. Department of Labor
Footnotes:
2011 Average Unemployment Tax Rate is a TALX estimate
Federal Unemployment Tax Act (FUTA)Review
8
Federal Unemployment (FUTA) Tax Review
FUTA Tax Rate FUTA Taxable Wage Base FUTA TaxFUTA 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 (less credit)
FUTA Tax
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 TaxFUTA 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 (less credit)
FUTA Tax
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.)
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Potential FUTA Credit Reductions
StateLoan Balance Actual Potential FUTA Effective Tax Rate
July 28, 2011 20102011
1/1-6/302011
7/1-12/311 20121 20131 20141
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 1 10% 0 90% 1 20% 1 50% 1 80%Minnesota $485,842,962 1.10% 0.90% 1.20% 1.50% 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.
StateLoan Balance Actual Potential FUTA Effective Tax Rate
July 28, 2011 20102011
1/1-6/302011
7/1-12/311 20121 20131 20141
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%
Potential FUTA Credit Reductions
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 90% 1 20% 1 50%
Total Title XII Loans $40,047,009,239
Hawaii $12,635,911 .90% 1.20% 1.50%Kansas $170,821,412 .90% 1.20% 1.50%Vermont $77,731,860 .90% 1.20% 1.50%
1 - Reflects the expiration of the 0.2% “temporary” surtax on June 30, 2011
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
11
TitleLong-standing State Financing Policieshave 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
12
Federal Unemployment (FUTA) Taxable Wage Base
$16,000 $15,000
$6,000
$8,000
$10,000
$12,000
$14,000
$ 6,000
$4,200
$6,000 $7,000
$-
$2,000
$4,000
1940 1972 1978 1983 2014*
$3,000
* Proposed change in FUTA wage base based on President Obama’s 2012-2013 budget proposal
State 2011 Wage Bases
AL $8,000
AR $12,000
State 2011 Wage Bases
MI $9,000
MO $13,000What if
AZ $7,000
CA $7,000
CO $10,000
DC $9,000
DE $10,500
FL $7,000
GA $8,500
IL $12,740
IN $9 500
MS $14,000
NE $9,000
NH $12,000
NY $8,500
OH $9,000
PA $8,000
PR $7,000
SC $10,000
SD $11 000
What if State Unemployment Taxable Wage Bases = $15,000?
IN $9,500
KS $8,000
KY $8,000
LA $7,700
MA $14,000
MD $8,500
ME $12,000
SD $11,000
TN $9,000
TX $9,000
VA $8,000
VT $13,000
WI $13,000
WV $12,000
13
Title
Sponsored by Rep. Camp, R-MI
JOBS Act of 2011HR 1745
JOBS Act of 2011 - HR 1745
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 reductionFUTA 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
TitleTALX 2011Unemployment Tax Review
TALX 2011 Unemployment Tax Review
Source: NASWA State Unemployment Insurance Tax Survey, April 2011
14
TitleExpected Change in UI Tax RevenueFrom 2010 to 2011
130 0%
140.0% 135.0%
Expected Change in UI Tax Revenue - From 2010 to 2011
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
120.0%
130.0%
54.0%
40 0%
50.0%
98.0%
Source: NASWA State Unemployment Insurance Tax Survey, April 2011
0.0%
10.0%
20.0%
30.0%
40.0%
CO IL IN NV NY OH OK PA SC TX VA WA
29.0%
40.0%
2.0%
10.0%
20.0% 22.0%
32.0%
4.7%
Unemployment Cost Management
15
Unemployment Tax and Benefit Review
Unemployment Tax Cost – State Example
Florida 2011 Merit Rating
$7,000
$378
$72
5.4% (2010: 5.4%)
Ra
te
$
$7,150
1.03% (2010: .36%)
Em
plo
yer
R
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
2010
3Q
2010
4Q
2010
1Q
2011
2Q
2011
3Q
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.
17
Unemployment Claim Process
Separation Claim
Ideal place to end process!• Complete claim responses save time and money
• Reduce follow-up requests
Response
• Claim Adjudicator can make fully informed decision
• Avoid unnecessary appeals
• Improve win % substantially
Types of Separations
Lack of Work• Completed Assignments
• Plant closing
P iti li i t d
Voluntary Quit• “I quit”
• No show/No Call for three or more days
• Position eliminatedDischarge• Misconduct
• Attendance
• Violation of Policy
18
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 availableavailable.
Forced resignation = DISCHARGE
ALWAYS ask for a signed letter of resignation
DischargeThe burden of proof is the responsibility of the employer to prove that 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
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 Rate12.00%
9.92% 9.99% 10.06%
4.00%
6.00%
8.00%
10.00% 9.20%
8.54%8.19%
9.10% 9.31% 9.52%9.13% 9.28%
0.00%
2.00%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0.87% 0.85% 0.86%0.66% 0.63% 0.67% 0.66% 0.67% 0.65% 0.62% 0.63%
% of Underpayments % of Overpayments
Source: U.S. Department of Labor – Benefit Accuracy Measurement Report: 2009 (most recent data available)
2009 Estimated Overpayments - $7.124 Billion
2008 Estimated Overpayments - $4.192 Billion
2009 Estimated Underpayments - $484.9 Million
2008 Estimated Underpayments - $259.3 Million
20
Merger-Acquisition-Reorganization Planning
Unemployment Cost Management
21
Summary• National Unemployment Tax Rate - Key metric for employersp 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 AnswersFor more information please contact:p
Michael Mohr
Vice President
TALX Corporation
(314) 684-2299
Cell: (314) 369-4143