Four Trends in Wage Audits and Earnings Verifications
New unemployment insurance (UI) integrity regulations are looking to stem the “pattern of failure” of employers and state agencies to accurately report eligibility requirements. These failures account for $4.15B in improper benefits and overpayments and has helped create 10 states with insolvent unemployment trust funds.
A new federal mandate, The Trade Adjustment Assistance Extension Act (TAAEA) and its Federal Unemployment Tax Act (FUTA) subsection, creates a framework by which states and employers are held accountable for the timeliness and accuracy of responses. UI agencies now prohibit relieving employers of benefit charges to their unemployment tax account when both of the following scenarios exist:
- UI benefits were improperly paid because the employer, or their agent, was at fault for failing to respond in a timely manner to the agency’s request for information relating to the unemployment claim.
- The employer or agent has established a pattern of failing to respond to such requests in a timely manner.
As a result, four trends have emerged with the goal of increased speed and accuracy of employer reporting to state agencies.
Tracking of UI overpayments and underpayments
The State Information Data Exchange System (SIDES) will have been implemented in 45 states by the end of 2015 with Connecticut and Alaska joining in 2016 (Montana, Arkansas and Minnesota have unknown adoption plans). SIDES adoption will help state agencies account for overpayments, incorrect payments and unpaid unemployment taxes by sharing and tracking information on claimants.
More aggressive follow up
One of the largest factors in UI overpayments is due to employers not responding to state requests for information. Too often, only requests that the employer thought were erroneous were given the proper follow up. State agencies are becoming more aggressive in pursuing information and penalizing employers who do not respond. This is reducing the number of overpayments and benefiting the overall health of unemployment trust funds.
More states adding penalties for non-compliance
States are allowed to define what constitutes a “timely manner” and a “pattern of failure” which as well create penalties beyond those mandated by law. Fourteen states have included an additional employer penalty beyond elimination of charge relief for companies that fail to respond in a timely manner to state information requests. Penalties range from $15 per instance to a fee based on the percentage of overpayment as well as standardized fines of up to $500 or loss of appeal rights.
Expanding legislation to other requests
UI Integrity legislation is being applied to wage audit and verification requests with the intention of getting a more accurate view of recipients to catch overpayments before they happen. Other agencies are looking to UI compliance legislation, including enforcement of penalties for inadequate responses, as a standard for their own reporting needs.
Across many agencies, employers and auditors, everything from updated state databases to employee training and access must work in order to prevent unnecessary benefit payments. Adherence to guidelines will likely help reduce both the costs of overpayments as well as minimize employers’ financial exposure to penalties from legislation. States and employers working together will help everyone increase the efficiency and effectiveness of UI Integrity.
For more of the latest insights on UI Integrity, read our latest whitepaper here:
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