ETS Tax Intelligence: SUI Account Consolidations
All states have unemployment insurance (“SUI”) anti-abuse provisions mandated by the passage of the SUTA Dumping Prevention Act of 2004. In addition, many states have enacted even more stringent provisions aimed at further preventing manipulation of the joint federal-state unemployment insurance program. One of these provisions is often referred to generically as an “account consolidation” provision. An account consolidation, in its many forms, effectively “consolidates” the unemployment experience of some or all of the SUI tax accounts of affiliated or related employers in the determination of a single tax rate assigned to all the employers subject to the consolidation.
The states identified on the map below currently have some form of a consolidation provision that gives their state workforce agencies the ability to consolidate, affiliate, unify, or otherwise join the unemployment experience of multiple SUI tax accounts. Depending on the state, application of account consolidation provisions can be mandated by state workforce agencies or applied at their discretion. Employers even have the discretion in certain states to enter into temporary or permanent account consolidations in the form of “joint accounts.”
Implementation of an account consolidation by a state workforce agency can be prompted in a number of different ways; the most common of which targets employers who engage in merger and acquisition activity that results in the movement of employees from one legal entity to another. This can be among affiliated or unaffiliated employers. Application of account consolidations may also result from an agency’s detection of rate manipulation, SUTA dumping detection actions, random or specific audit initiatives, or internal system searches.
When a state workforce agency initiates an inquiry, examination or audit under its account consolidation provision, employers should obtain a clear understanding of the provision, including related case law, and the ability of the agency to retroactively enforce the provision (e.g., statute of limitations). An understanding of these issues will allow the employer to quantify risk and make decisions on how to react to the inquiry.
If an account consolidation provision is not mandatory, or leaves room for interpretation, employers may be able to mitigate the impact of the consolidation or avoid it altogether. In addition, many state workforce agencies will negotiate settlements with employers. For example, employers may have the ability to treat a mandatory account consolidation on a prospective basis (versus retroactive), have assessed interest and/or penalties abated, include only certain SUI tax accounts in the consolidation, etc.
Employers should also keep in mind that mandatory or elective account consolidation provisions may actually be of benefit and reduce SUI tax liabilities, which requires action on the part of employers. Once a potential consolidation issue is identified, quantifying the associated risks and benefits is prudent.
Equifax has the expertise and agency relationships to assist employers in navigating the complexities of SUI tax account consolidation matters. For more information on how Equifax can assist employers in addressing account consolidations, please contact Pete Krieshok at (314) 214-7325 or via e-mail at firstname.lastname@example.org. You can also visit our corporate blog at https://insight.equifax.com/ for information on other employment tax matters that might impact your organization.
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