Here Ye
July 23, 2015
Hear ye…. Hear ye… Hear ye……
This is to serve as notice
To all businesses in the State of New Jersey…..
Your new unemployment rates have just been mailed
By the State of New Jersey
You should be receiving your new rate notice….. Any day
Note:
All business owners have 30 days to question the new rates
you have been assigned
This is as good a time as any to verify…….
Is our new Unemployment Rate correct?
Unemployment…
Is the 2nd highest Employer Mandated Tax
By the US Government
Yet, people know so little about it
It is the only employer tax that can be controlled
Did you know that each claim can be worth up to $16,000????
Unemployment…..
Is like having a checking account with the State
Each year, at this time, the state sends you a notice
In NJ, it is called the
Employer Contribution Report
This report tells you…
How much money you had in your account at the beginning of the plan year
How much money you paid out in claims during the year
How much money you deposited into your account during the year
How much money is left in your account now….
It then goes thru a calculation based on the numbers listed above
As to what your new rate will be for the next 12 months
This new rate determines the funding level needed
To meet future claims
What is your rate????
Is your rate high or low????
Did your rate go up????
If so…You got a tax increase……
How do you know if your rate is correct????
That last question is the one question
All business owners should be asking
Especially if you have over 100 Employees
When there is a mistake in unemployment
The mistake is not on just 1 employee
It is the all factor
A mistake effect all your employees
That means the State may be taking more money
Out of your account than they should be taking
Remember….This is like a checking account
Would you miss money…..
If it was taken out of your personal checking account????
Who is holding the State accountable????
We are
HBS works with many established clients
Who took the time to ask the question
Is our rate correct????
Boy were they surprised…..
When we found there was a mistake
We went back to the State
Corrected the error
And our client received a refund
We are always asked how did you do that????
That is what separates HBS from all others
We know where to look
Many of the cost we work with
Most businesses take for granted
As the cost of doing business
Did you know……..
The state has over a 12% error rate
In the payment of unemployment claims
Once again…..
They are taking money out of your account
And they are not being held
Accountable
That is reason enough to ask the question….
Do you think you can look at our
Unemployment rate????
Is it correct??????
To learn more
Give us a call
We offer a free consultation
Unemployment Benefits: More States Eye Cuts
May 20, 2011
Written by Arthur Delaney for Huffington Post
Add Pennsylvania and Wisconsin to the list of states considering cuts to unemployment insurance.
The Pennsylvania General Assembly needs to pass a law in order for the state to remain eligible for the federal Extended Benefits program for the rest of the year, which provides the final 20 weeks of checks in Pennsylvania for people who use up 73 weeks of combined state and federal aid. Within the past two months, lawmakers in Michigan, Missouri and Florida permanently slashed state unemployment aid in bills that preserve temporary federal aid.
Two Republican-sponsored measures moving through the GOP-controlled Pennsylvania statehouse would achieve similar results. And in Wisconsin, a proposal by Republican Gov. Scott Walker would restore the Extended Benefits program after local lawmakers let it lapse with virtually no public debate last month. But Walker’s bill would also permanently install a one-week waiting period for new claimants before any jobless claims are paid, relieving Wisconsin businesses of a $45.2 million tax burden. (Wisconsin is one of 13 states that had no waiting week in 2010.)
“Without knowing exactly how the state arrived at the $45.2 million figure, it is safe to say that a roughly equivalent amount will come out of workers’ pockets,” said Mike Evangelist of the National Employment Law Project, a worker advocacy group.
States pay for the first 26 weeks of unemployment benefits, and during recessions the federal government pays for extra weeks. While current federal unemployment benefits will only be around until January barring an unlikely congressional reauthorization, changes to state law will be permanent.
The bill in the Pennsylvania House of Representatives would save the state $632 million chiefly by cutting the average weekly payment from $324 to $277, according to Sharon Dietrich, an attorney with Community Legal Services, a nonprofit group that advocates for poor people in Pennsylvania. The bill in the Pennsylvania Senate — which Dietrich said she considers “way more innocuous” — would, like its counterpart in the House, tighten work-search requirements, but would only result in a net spending decrease of $50 million, Dietrich said. Each bill will reach the floor of its respective chamber early next week.
“On June 11, approximately 45,000 unemployed Pennsylvanians who currently qualify for federal extended benefits will be dropped from the unemployment rolls unless we slightly modify the state law,” State Sen. John Gordner (R) said in a statement. “It costs the state no money to qualify for these fully funded federal benefits through the end of the year, and results in an estimated $150 million in economic benefits.”
And in the U.S. Congress, Republican lawmakers are pushing a bill that would give states leeway to trim federal aid to the unemployed to use the money instead to repay federal unemployment government loans
States ignored warnings on unemployment insurance
April 28, 2011
As reported by Ebru News Feb 19,2011
WASHINGTON (AP) – State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.
“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.
It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.
The ramifications will be felt for years.
In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.
In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.
Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.
But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.
The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.
Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.
Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.
Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.
“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,”‘ said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.
In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.
Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.
“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”
In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.
“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.”‘
California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.
Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.
“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.
California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.
In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.
Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.
“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.
The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.
“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.
Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.
A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.
Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.
“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.
Posted by: Mitchell Hirsch on Feb 17, 2011
As reported by Unemployedworkers.org
UPDATE: FEB. 17 – UNEMPLOYMENT INSURANCE SOLVENCY BILL INTRODUCED IN SENATE
Senator Richard Durbin (IL), with Senators Jack Reed (RI) and Sherrod Brown (OH), today introduced the Unemployment Insurance Solvency Act of 2011, which offers immediate tax relief to cash-strapped states and employers, preserves UI benefit levels, and creates strong incentives for states to restore their UI programs to solvency while also rewarding states that have managed their UI trust funds effectively.
In a statement, NELP Executive Director Christine Owens said, “Jobless workers, and we hope employers too, should be grateful for the leadership of Senator Richard Durbin and his colleagues Sherrod Brown and Jack Reed on the issue of unemployment insurance solvency. Following the President’s FY 2012 budget, the introduction of the Unemployment Insurance Solvency Act sets the stage for a serious conversation on how to make sure that the safety net tens of millions of Americans have counted on during the tough times of the last few years will be financially secure into the future.”
The new bill is similar to the plan outlined by President Obama in his remarks last week, but adds further protections for benefits and additional opportunities and incentives for states to return to solvency in the long run.
Original Post: Feb. 11
Unemployment insurance is just that — insurance — and it’s financed by premiums paid on workers’ paychecks and deposited into a trust fund. However, the unemployment insurance (UI) trust funds in many states are not only insolvent, but now face heavy debt burdens due to their increased need for federal borrowing during this prolonged period of high unemployment. Restoring them to financial health is essential to ensure that unemployment insurance benefits are there for workers when they’re needed, both today and in the future. The Administration has outlined a significant framework to address the problem, which would provide needed debt and tax relief to states and businesses.
A new plan from the National Employment Law Project (NELP) and the Center on Budget and Policy Priorities (CBPP) would build on that framework, further strengthening the long-term solvency of state UI systems while avoiding benefit cuts and employer tax increases. Workers need to pay attention to this issue. The last time UI trust funds got hit this hard, in the 1980s, 44 states cut back benefits for workers.
Many states UI trust funds have been hit in recent years by a double-engine freight train. First, for years many states have inadequately financed their UI funds, both by keeping their taxable wage base for UI too low relative to inflation-adjusted dollar values, and by taking a dangerous “pay-as-you-go” approach, which failed to build adequate reserves during periods of economic growth. The graph below shows the substantial erosion in the inflation-adjusted value of the wage base that is subject to the UI taxes that fund state systems. What does this mean? It means that the employer of a dishwasher pays the same unemployment premium as the employer of a banker. It does not take a degree in actuarial science to know that this is not going to work.
And oh yeah, second — well, then came the Great Recession with millions of workers’ jobs being lost and the vastly increased need for unemployment benefits to help sustain unemployed job-seekers and their families.
Now, 30 states have exhausted their UI trust funds and are borrowing from the federal government.
The lead editorial in The New York Times yesterday, titled ‘Relief for States and Businesses’, explained the need for the Obama administration’s approach. Here are some excerpts:
So many people now receive jobless benefits that 30 states have run out of their unemployment trust funds and are borrowing $42 billion from the federal government. Three of the hardest-hit states — Michigan, Indiana and South Carolina — have borrowed so much that they triggered automatic unemployment tax increases on employers, and the same thing is likely to happen to 20 more states this year.
….
On Tuesday, the Obama administration unveiled a smart proposal to delay those tax increases and provide some relief to both employers and state governments. Congressional Republicans reflexively objected to the idea, which could produce higher taxes in three years, but this plan provides relief that might stimulate hiring now when it is most needed.
….
Under the plan, which is subject to Congressional approval, there would be a two-year moratorium on the increased taxes that employers would otherwise have to pay to support the unemployment insurance system, which could save businesses as much as $7 billion. During those same two years, states would be forgiven from paying the $1.3 billion in interest they owe Washington on the money they have borrowed.
….
In 2014, when the economy will presumably have recovered somewhat, employers will have to make up for the moratorium by paying higher unemployment taxes to the states. Specifically, they will have to pay taxes on the first $15,000 of an employee’s income, instead of the current $7,000. But, even then, unemployment taxes will be at the same level, adjusted for inflation, as they were in 1983, when President Ronald Reagan raised them.
The administration is proposing to cut the federal unemployment tax rate in 2014 so that employers would pay the same amount to Washington as they do now. States, if they choose to do so, could collect more from each employer to repay the federal government and restock their own unemployment trust funds.
….
The full details of the plan’s costs and benefits will be available when President Obama submits his 2012 budget to Congress next week. When he does, both parties should take a close look at the numbers and seize the opportunity to keep this fundamental safety net solvent.
“It is a major step forward for the President’s FY 2012 budget to address the UI trust fund crisis,” said Andrew Stettner, deputy director of the National Employment Law Project and a co-author of the new joint NELP-CBPP policy proposal. “Our proposal rests on the same core principles — giving employers and states relief now while taking concrete steps to restore the long term solvency of the UI trust fund as the economy recovers. The plan endorses two key aspects of what the Administration’s proposal reportedly includes — raising the taxable wage base up from the inadequate, outdated level of $7,000 and endorsing a two-year moratorium on federal UI tax increases.”
The NELP-CBPP plan, detailed in a new report, would enable states to restore the solvency of their UI trust funds, avoid significant tax increases on employers during a weak economy, and prevent damaging cuts in UI eligibility and benefits for jobless workers, without increasing the deficit. The plan also suggests additional debt relief for states and positive incentives for employers, rewards states that have maintained sound financing packages, and builds on existing federal protections of state benefit levels.
In a statement, the groups provide a summary of the plan:
• The federal government would gradually raise the amount of a worker’s wages subject to the federal UI tax (i.e., the FUTA taxable wage base). This would automatically raise the floor for the taxable wage bases in the states which by law cannot be lower than the federal wage base, helping those states rebuild their trust funds. (The federal UI tax rate would fall, however, so that overall federal UI taxes did not go up.)
• The federal government would provide a moratorium, until 2013, on state interest payments on their UI loans.
• The federal government would also postpone, for two years, the FUTA tax increases required to recoup the loan principal in borrowing states.
• The federal government would offer immediate rewards and future incentives for states that currently have and continue to maintain adequate trust fund levels.
• The federal government would excuse a state from repaying part of its loan if the state (a) enters a flexible contractual agreement with the U.S. Labor Department to rebuild its trust fund to an appropriate level over a reasonable number of years, and (b) agrees to maintain UI eligibility, benefit levels, and an appropriate tax rate over the loan-reduction period.
This plan would produce the following benefits:
• Employers would not pay higher federal UI taxes until the beginning of 2014, saving them $5 billion to $7 billion while the economy remains weak and $10 billion to $18 billion over the next five years. Also, employers would pay no additional assessments to cover interest payments in 2011 or 2012, saving them $3.6 billion.
• In addition, partial loan forgiveness that comes from a state’s commitment to build adequate trust funds would save employers about $37 billion by the end of the decade. Counting the interest payments on this principal as well, employers could save as much as $50 billion.
• All or nearly all states would assume a path to permanent solvency.
• Employers in responsible states would receive concrete rewards and a more level playing field between the states.
• Adequate trust funds would stabilize UI tax rates over time, avoiding the roller-coaster tax rates common in many states — very low during healthy economic times, rising rapidly during recessions — that harm businesses and the economy.
• States would maintain current UI benefit and eligibility levels.
• The federal deficit would not rise as a result of these policies.
“States face a tremendously urgent crisis when it comes to their unemployment insurance trust funds,” said Michael Leachman, assistant director of the Center’s State Fiscal Project and co-author of the report. “If federal policymakers address this crisis using our plan, employers could save as much as $50 billion in taxes and states would maintain the critical benefits they provide to people who lose their jobs.”
NJ Announces New Unemployment Rates
July 7, 2010
The state of New Jersey will soon be issuing the 2010/2011 unemployment tax rate notices.
For those clients with over 100 employees, it is important to be aware how these new rates will affect your company.
Once you receive your notice, please fax a copy along with a copy of last years notice to HBS @ 856-857-1233.
Upon receipt, we will review the information with you and validate the numbers are correct or discuss what options may be available with you.
There are times that a voluntary contribution may appear to be beneficial. This contribution will actually lower your rate. We will advise you as to the amount of contribution, as well as the anticipated tax savings.
Please take note, due to the high level of Unemployment Benefits paid out, the State of New Jersey requires a higher tax rating table to be imposed this year. As a result, Tax Schedule “C” is in effect this year, compared to Tax Schedule “B” which was in effect last year. Thus, most employers will receive a higher tax rating assignment this year than they did last year.
To illustrate how this works, if you compare the two tables (see below portion of the tables) you will see that a Reserve Ratio between 0.00% – 00.99% last year produced a 3.0% tax rate; however, this year the same ratio produces a 3.6% tax rate, creating a 0.6% tax increase
Tax Rate Tax Rate Reserve Ratio 2009/2010 2009/2010 Difference
2.00% – 2.99% 2.8% 3.3% +0.6%
1.00% – 1.99% 2.9% 3.4% +0.6%
0.00% – 0.99% 3.0% 3.6% +0.6%
Unemployment Costs are rising and Unemployment Cost Control is more important than ever. The high level of unemployment, along with anticipated legislation, is expected to continue the trend of increasing unemployment compensation costs.
Employers should continue to be pro-active in contesting unwarranted unemployment claims.
While this has always been our position, it is important to continue to be diligent in this area.
If you previously chose not to actively contest unemployment claims you may want to reconsider this approach in the future, based on the tax information outlined above.
The successful participation in all unemployment hearings, with the assistance of our strategic partner DCR as required, will continue to help maintain the lowest possible tax rate. The impact of a few weeks in Unemployment benefits paid out may now have an even a higher impact to your bottom line.
Take the time now to proactively maximize your position on minimizing the cost of future tax increases.
If you should have any questions concerning the new tax rate, or would like specific recommendations for your organization, please do not hesitate to call.
Now more than ever, controlling the cost of unemployment is important for your company.
For more information email george@hbsadvantage.com or call 856-857-1230
Visit us on the web www.hutchinsonbusinesssolutions.com
NJ Unemployment Tax……Going Up!!!!!!
February 4, 2010
N.J. businesses’ unemployment taxes expected to skyrocket in next year
By Lisa Fleisher/Statehouse Bureau
December 30, 2009, 7:32PM
James Bellis is already in a bind.
As an employer, he pays higher state unemployment taxes than many because he lays off about a dozen workers from his tree maintenance business every winter.
But next year, he expects to be forced into a deeper hole. Businesses will likely see their unemployment taxes skyrocket in July — and not come down for years — because the fund is broke.
It’s almost more than Bellis can handle, after seeing a 23 percent drop this year at Tree Tech, his Randolph business.
“In this economy, every dollar is valuable to managing a business,” he said.
Gov.-elect Chris Christie’s administration says the unemployment fund is one of the top three financial problems it will face when it takes over on Jan. 19.
“It’s a very serious problem, and, frankly, it’s as serious of any of the state’s fiscal problems,” said Rich Bagger, Christie’s chief of staff.
The fund has been strained by a persistent unemployment rate of close to 10 percent, but legislators and national observers say the problems stem from years of pillaging by lawmakers during better times to pay for other projects.
Because the fund is insolvent, employers will see an automatic tax hike in July, which could translate into businesses paying between $300 and $1,100 more per worker to bring $1 billion more to the state, according to the state Labor Department.
But even that will not stop the fund’s deficit from increasing fivefold, from $926 million now to $4.5 billion by the end of April 2011. New Jersey is one of 25 states that has borrowed money, interest-free through 2010, from the federal government.
The situation puts Christie in an unpleasant position, because he has promised no tax increases, because the hike is baked into the unemployment system. It automatically adjusts the tax rate based on the fund’s balance and an employer’s individual history of layoffs.
The tax hike could work against an economic recovery, causing businesses to hire fewer people, lay off workers or freeze or lower salaries, said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
“This is a serious increase in costs for employers,” he said. “They have to figure out some way to cover that cost.”
The tax increase comes at the worst time for businesses, said Art Maurice with the New Jersey Business and Industry Association.
“Employers are struggling to keep people working that they have on their payrolls now,” he said. “Now to add an across-the-board (unemployment insurance) payroll tax increase on top of that would just be backbreaking.”
Bagger said the administration must look at all possible options to revive the once-flush fund that now supports more than 175,000 New Jersey residents. The choices include:
• Pushing legislation to put off or reduce the tax increase. The downside is that increases debt.
• Reducing benefits to bring them more “in line” with other states. Democrats and worker advocates will fight that change.
• Finding $1.9 billion for the fund. But from where? Gov. Jon Corzine just cut $839 million in spending to deal with a nearly $1 billion current budget deficit, and the Christie team projects it will be $9.5 billion short for next year’s budget.
• Teaming with other states to ask the federal government to forgive loans.
Lawmakers have known this was coming for years. Over the last two years, Corzine pushed off similar tax increases on employers by putting $380 million from the general fund into the unemployment fund.
The U.S. Department of Labor expects 40 states’ funds to become insolvent by 2011.
Already, 25 states and the Virgin Islands have borrowed more than $25 billion from the federal government to pay claims, not including extended benefits paid for by the federal government. New Jersey started borrowing in March and now owes more than $926 million. The biggest borrower, California, owes $5.9 billion. Michigan owes $3 billion and New York owes $2 billion. The states’ problems are not unprecedented. In the 1970s and ‘80s, states borrowed regularly from the federal government, but loans at that time were interest-free. This time around, loans are interest-free only though 2010
State lawmakers around the country are scrambling to deal with the problem.
New Hampshire, for example, has instituted a one-week waiting period to get benefits and increased the portion of salary taxed. Indiana in April saw thousands of union workers protesting cuts the governor there called “Rolls-Royce” benefits. And 10 states are already making employers pay their system’s highest tax rate, which is what New Jersey is scheduled to do.
New Jersey legislators disagree about how to solve the problem.
New Jersey has one of the highest weekly benefits — $584, compared with $405 in New York and $566 in Pennsylvania — and it will automatically increase to $600 for newly laid off workers who receive their first benefit check after the New Year.
It also is one of a handful of states to allow people to collect checks the first week they are unemployed — instead of waiting a week — and which allows increased benefits for people with children, according to the National Association of State Workforce Agencies. Advocates say this is because it costs so much to live here.
Still, some legislators say the state can’t afford to categorically leave out options.
“Everything should be on the table,” said Assemblyman Joseph Malone (R-Burlington), who said the solution to the fund’s problem needed to be worked out with a comprehensive approach to fixing the economy. “The decisions that are going to have to be made are going to anger people.”
The very suggestion has drawn sharp words from some legislators and advocates.
“Given the dire situation it’s just mean-spirited,” said state Sen. Barbara Buono (D-Middlesex.) “I think that it would be unconscionable, given the current state of affairs, to decrease benefits. We’re talking about people keeping a roof over their heads and keeping food on the table.”
An alternative approach, offered by state Sen. Stephen Sweeney (D-Gloucester), is to let the pot just replenish itself.
“These funds have to build up, and they can’t build up overnight,” he said.
To be sure, even the more generous features are not what caused the fund to fail. The major source of the problem, critics say, is not even the recession, but rather the $4.7 billion siphoned from the 1990s through 2006 by governors and legislators from both parties to pay for things such as health care for the poor.
“Unemployment wasn’t so long-term back then,” said Buono, who supported the diversions. “Given the set of alternatives that we had and the cuts that were made, this was not anything that any individual legislators wanted to do but … I think it was something that needed to be done at the time.”
The unemployment fund kept growing, reaching $3.1 billion by the end of 2001. But even after the balance slipped, plunging to $1.5 billion by the end of 2003, governors and legislators continued to scoop up money before it hit the fund, until Corzine stopped the practice in 2006.
The state has started to take steps to prevent that from happening again. In November, voters will decide on a constitutional amendment that would prevent the Legislature from diverting money.
As an employer, Stephen Fauer wouldn’t mind that his environmental services business needs to pay higher taxes to contribute to the state’s bankrupt unemployment fund.
“If someone puts their hand out and asks, ‘Help me,’ you don’t say, ‘No,’” said Fauer, who owns Environmental Strategies and Applications in Middlesex. “That’s the kind of tax I pay not necessarily with a smile on my face, but not with a heavy heart.”
What bothers Fauer is the reason he will likely have to pay more.
“It’s the irresponsibility of our politicians,” he said. “Doing things for expediency rather than things that are correct. You need to behave in a way that’s correct. You need to behave in a way that’s responsible.”
How it works
Employers and employees both contribute to the fund. But employees put in a small, fixed amount, whereas employers pay the lion’s share of the tax – and the amount they pay varies.
The system taxes employers based partially on how much money is in the fund, and partially based on their history of laying off workers.
But there’s another factor: All employers are affected by how much money is in the unemployment pot. If the balance sinks too low, taxes go up for everybody, which is happening this year.
Our Perspective:
Did you Know:
Unemployment is the 2nd highest US Government Employer Mandated Tax!!
Why is it, that something that is ranked so high, stirs so little questions?
Many employers just see it as a cost of doing business.
Did you know that the unemployment tax is the only tax that you can have a say as to what your rate is?
How do you know if your current unemployment rate is correct?
When is the last time you asked that question?
Did you know that the state of NJ has a 12% error rate in the payment of unemployment claims?
If they are paying claims incorrectly, that means they are taking too much money out of your account and that your rate may be incorrect!
Unemployment is a very basic concept:
Each company basically has a checking account with the state to pay for unemployment claims.
The state assigns a rate to each company, which determines what percentage of payroll is paid into this checking account to help pay for claims.
The state then notifies you how much money was taken out of your account to pay for claims that your company may have been liable for.
Would you give the state your personal check book?
You may say no!!!!!
But you have more $$$ in your unemployment account, then you will ever have in your personal checking account. Yet people still do not ask……
How much are we paying into unemployment?
Are you sure we are paying the correct amount?
Is your currenr nemployment Rate Correct?
Hutchinson Business Solutions has been dealing with this exact question for over 10 years. We offer a free service to determine if your rate is correct.
If we find there is an error, we will work with the state to get it corrected and take the necessary steps to file for a refund.
We will also work with you to help control unemployment cost and your future rate.
Should you like to know more email george@hbsadvantage.com or you may call 856-85-1230.
Is Your Unemployment Rate Correct?
November 9, 2009
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
Hutchinson Business Solutions 