Employers May Soon Be Penalized for Unemployment Benefit Overpayments
Author: Rena Pirsos, XpertHR Legal Editor
June 4, 2013
As of October 21, employers in several states may be subject to higher unemployment insurance (UI) benefit costs if they do not properly respond to UI claim notices received from state labor departments. This is because all states and the District of Columbia (DC) are required, under the federal Trade Adjustment Assistance Extension Act of 2011 (TAAEA; +112 P.L. 40), to make certain changes to their UI laws by the October deadline. The changes are designed to prevent individuals who file UI benefit claims from receiving greater amounts of benefits than they are actually entitled to and improve the states' ability to recover these overpayments. Congress passed the TAAEA after it saw a significant increase in UI benefit overpayments during the recent economic recession.
The TAAEA's provisions mandate that the UI laws for all states (and DC) must now provide that an employer's UI account will not be relieved of benefit charges if the employer does not respond on time to state UI agency requests for information when an individual applies for UI benefits and the result is a benefit overpayment. However, states may impose stricter standards than those required by the TAAEA. Any state that does not comply by the October deadline may lose certification of its UI program, which may cause employers in those states to lose the 5.4% maximum federal UI credit.
Conforming laws are already in effect in Hawaii and Mississippi. Many other states have also passed conforming laws that go into effect on various future dates:
- July 1 - Indiana, Iowa, Kansas, New Mexico, South Dakota, Virginia and Wyoming
- August 7 - Colorado
- October 1 - Maryland, Montana, New York and Texas
- October 20 - Washington
- October 21 - Alabama, Kentucky and North Dakota
- October 22 - California and Idaho
Continue to check XpertHR often for updates as more states pass laws in order to meet the October 21 deadline.
Additional Resources
Payroll > Federal Unemployment Insurance Tax
Eighteen States Lose FUTA Credit Reduction for 2012
Employee Benefits > Legally Required Benefits > Unemployment Insurance