Is Your Unemployment Rate Correct?

Excerpts as reported by DEPARTMENT OF LABOR EMPLOYER

System controls and processes need to be improved to ensure t h a t e m p l o y e r experience rates are correct. Employer Experience Rates The unemployment, workforce development, healthcare subsidy and disability insurance tax rates are assigned on a fiscal year basis. The Department of Labor (DOL) uses the “reserve ratio method” in determining tax rates for employers. This method requires a record be maintained for each employer identifying the contributions paid, unemployment and disability benefits charged to their account, and taxable wages. The cumulative contributions less cumulative benefits results in the employer’s reserve balance. This reserve balance is then divided by either the three or five year average annual taxable wages, whichever is higher, to arrive at the employer’s reserve ratio. The reserve ratio is used to determine the employer’s contribution rates based on current rate tables.

A review of 47 of the state’s 250,000 employers’ experience rate calculations for fiscal year 2000 disclosed 12 (26 percent) employers with incorrect calculations, resulting in the wrong assigned rate for four (8 percent) employers. In addition, where problems were noted, we expanded our testing to include a review of rate calculations for fiscal year 2001. Details of our review are as follows:

Certain employer penalty rates need to be reassessed. Employers are assigned a new employer (basic) rate until they have established three consecutive full or partial years of contribution payment experience. Effective July 1 of the fourth year of subjectivity, rates are assigned based on the employer’s unemployment experience history. Specially assigned or penalty rates apply to employers who previously had sufficient experience to receive an experience rate but subsequently paid no contributions on wages for employment with respect to at least one of the last three calendar years used in the rate calculation.  Our testing identified two employers with basic rates in fiscal year 2000 who were assigned the penalty rate in fiscal year 2001 when the EAS failed to recognize contributions paid for the first quarter of operations. Since both employers had filed and paid contributions on time, they should have received a calculated rate. One employer’s unemployment rate increased from 2.8 percent (basic rate) to 5.4 percent (penalty rate). The employer’s unemployment calculated rate should have been 1.4 percent. Additionally, the employer’s assigned disability rate of 0.5 percent should have been reduced to 0.2 percent.

When notified, department management investigated this matter further and identified 9600 employers who had basic rates in fiscal year 2000 and penalty rates in fiscal year 2001. They examined 114 of these employers and found that 50 percent were improperly assigned penalty rates and would have to be manually adjusted. Based on this error rate, a potential 4800 employers could be affected.

System edits do not adequately preclude contributions from being credited to the wrong employer. One employer had contributions for three quarters posted to another employer’s account even though the returns (NJ-927) properly reflected the employer’s identification number, name control and quarter referenced in the encoded data line. This error occurred when DOR registered the employer under their corporation number. This number happened to be consistent with numbers previously used by the DOL for registration numbers. Although DOR subsequently assigned a proper employer identification number, this information was not updated timely in the EAS. When the returns were transmitted to DOL they were matched and were posted to another employer’s account under the old registration number. As a result, both employers were assigned incorrect experience rates.

 These errors could have been detected if: 

 • The DOL had an edit check for reasonableness. The returns incorrectly posted included taxable wages between $3 million and $16 million. The employer whose account they were posted to generally had $20,000 or less in taxable wages.

• The DOL’s edit check for name control had not been turned off. • The EAS was updated in a timely manner.

• The DOL had periodically sent out delinquency notices.

Department management estimates that between 3,000 and 4,000 employers are affected by this type of error and will have to be manually adjusted. The department has changed the EAS programming to eliminate the option to post transactions using either the employer identification number or the old registration number.

The computer system does not automatically adjust employer accounts following a retroactive rate adjustment.

 Manual adjustments to employer accounts are required following a retroactive rate adjustment. These adjustments are often due to employers making voluntary contributions to increase their reserve ratio and thus reduce their unemployment contribution rate. In one instance, an employer’s taxable wages were overstated by $653,000 and cumulative contributions were overstated by $17,000 resulting in the employer receiving a lower rate. This occurred when the employer’s contributions were not properly adjusted and reallocated after making a voluntary contribution.

 The Employer Accounts System is n o t p r o p e r l y i d e n t i f y i n g contributions to be included in the rate calculations. The EAS currently excludes late transactions from subsequent rate calculations.

We noted one employer whose fourth quarter of 1998 payment was received late and was properly excluded in the fiscal year 2000 rate calculation. However, this payment should have been included in the fiscal year 2001 rate calculation, but was excluded.

The fiscal year 2001 calculation should only include account activity attributable to quarters ending December 31, 1999 and prior. Employer contributions overpaid are not included in rate calculations since there are no associated taxable wages to include in the calculation. In one case, an overpayment ($99,000) received prior to December 31, 1999 was reallocated and applied to the second quarter of 2000 and mistakenly included in the employer’s rate determination.

Pr e d e c e s s o r ’ s accounts are not always included in the successor’s experience rate. When an entire organization, trade or business or substantially all the assets of an employer subject to the law are acquired by another entity, the unemployment tax rate of the acquired entity is transferred to the new employer. Thus the predecessor’s contributions paid, benefits paid and taxable wages paid are included in the successor’s experience rate calculation. The same is basically true for disability unless the employer had a private plan. In one case, the successor’s experience rate calculation for fiscal year 2001 did not include three quarters of contributions and associated taxable wages paid by the predecessor. As a result, the successor was improperly assigned a lower experience rate. Department management was unable to explain how this condition occurred. 

Recommendation We recommend the department: • continue their efforts to identify and correct employers who have been improperly assigned penalty rates, • implement additional edit checks to ensure that contributions are posted to the proper employer’s account, • develop a program to automatically update employer accounts following retroactive adjustments, • reprogram the EAS to properly identify and include contributions in the proper quarter when making experience rate determinations, and • modify procedures for successor employer accounts to determine why the EAS is not properly capturing and including all predecessor employer(s) account activity.

Our Perspective:

We have found many instancesthe state has incorrectly calculated the company’s unemployment rate. Many look at unemployment as the cost of doing business. The state will never contact you if they find you are overpaying taxes. The onus is on the company to provide proof of overpayment.

Hutchinson Business Solutions has great success validating the assigned rates are incorrect and securing refunds for our clients.

Is your rate correct?

We offer a free review of your existing rate.

Should we find that an error is made, we will contact the state and take the necessary steps to secure a refund.

Should you like to know more email george@hbsadvantage.com or call 856-857-1230

Tame Your Telecom Spending

As Reported by National Business Association

Copyright (c) 2009 Nermine Shaker The Sygnal Group Telecom spending can be a very large part of a company’s operating costs. Companies are always looking to keep their costs under control and telecom spending is one of the more difficult areas to manage. Even with the increase in value and flexibility from new technology, companies have also seen an increase in their telecom costs. Mobile phones, remote network access and broadband solutions have simplified our workspaces, but have complicated the telecom accounting procedures. Although you can’t just forgo your telecom services to cut your budget, you can curb and control them. Here are a few ways to tame your telecom budget. Assess Your Inventory What do you have? What do you use? Sometimes you don’t use what you have. Take an inventory of all your lines, services, hardware, mobile devices, and contracts. As you do this you may find that employees have left but you are still paying for their cell phones, or departments have closed and you are still paying for their phone lines. Wireless devices can be a huge drain on your company pocketbook. Sometimes employees are given mobile devices that the company pays for and sometimes they use their own and are reimbursed. Organizing and setting up a company policy for wireless devices takes time but can save you money in the end. Audit Your Bills Check your contracts and see if the pricing in the contract matches the pricing on your bill. If not, you’ll need to apply for a credit for those overcharges. If you were promised a refund or rebate in your contract, make sure you received those. If you’ve done a complete inventory, matching bills to the inventory is a great way to identify problems. Assess Your Usage Now that you know what inventory you have and that you are paying correctly for that inventory, you need to look at your services with an eye to how your company is using them. Is your company growing or downsizing? Don’t just cut back to cut back. Look at the value the services provide to your company. Employee personal usage of business telecom services should be addressed as well. If you provide perks like home broadband, business mobile devices and WiFi access, boundaries should be addressed with employees in a telecom company policy. Managers must take responsibility to enforce whatever controls the company puts in place. If your business has multiple locations or if many of your employees work from home, voice over Internet protocol (VoIP) might be a cheaper option. VoIP can connect offices and remote workers and could offer big savings. Renegotiate Your Contracts After you have reviewed your contracts and current usage, it might be time to renegotiate your contracts. If it’s been a while, you might be able to get a better deal. Or, after looking at what you have, you may decide to consolidate or cancel some services. Carriers would like to have all of your business, so in consolidating with one, you may get a higher discount. Shop around to make sure you are getting the best deal. Sometimes, it may be better for your business to use flat rates and per-user or per-month services. This will give you a predictable monthly payment. If it is possible, you many want to consider adding a “business downturn” clause when you renegotiate your contracts. This clause will allow you to renegotiate your contract if there is a downturn in your business, such as having to close one of your multiple offices. Automate Your Telecom Bill Paying Process Many businesses use multiple carriers for all of their telecom services. These carriers each send a separate invoice and sometimes they charge extra for sending a paper invoice. Automating your telecom billing and payments can save you money, both in internal processing costs and in staffing resources. When you automate your billing, you can still have the opportunity to review all your charges. You will have access a variety of reports that can break down the charges by service, circuit, department, location, or carrier. Consider Hiring A Telecom Management Company For smaller companies, the business owner is often in charge of telecom spending. As the size of the business increases, telecom responsibility moves from one person to a group or a department. A telecom management company can help assess your spending and inventory, provide automated billing and can negotiate contracts for you. Since they are familiar with all the telecom carriers, they will be especially helpful in finding you a good rate and negotiating the contract. They can even apply for refunds on your behalf for services that were incorrectly billed. Dealing with one telecom management person is always preferable than having to deal with 10 different service providers. And, when you work with a management professional, they will always be looking out for other ways to save money in your telecom spending, something you can’t always do. It’s tough to tame your telecom spending. It takes time and effort. These days, cost cutting is a must and we are all trying to do more with less money. Getting organized, especially in the telecom area of your business will help you to see where you can cut costs and make sound telecom business decisions. Our Perspective: Telecom is a very important expense for any business. It represent the companies tie to the public, where service is king.  All things being equal, your ability to respond and meet your client’s needs ranks first. It all begins with communication. How are decisions made to insure this success? In speaking with many clients, there is intial hesitancy to examine this process. The fear of disruption lingers. What if we start having problems? Everything seems to work fine now? But what is the real cost for the staus quo? You might be surprised! With recent advances in the telecom industry, savings and efficiencies can be found. We are working with a client right now that has 3 different providers in multiple locations. In reviewing their existing bills we have been able to consolidate these services to 1 provider and provide a savings of close to $50,000 per year. Where was there existing provider? Why did they not reach out and reviw these options with their client? Do not be complacient! Your ability to be successful in today’s business climate relates directly to your abilty to be competitive, control cost and continue to service your clients. Hutchinson Business Solutions has great success in this area. Contact us for a no cost review of your voice and data expenses. Email george@hbsadvantage.com