1. Recessionary Impact on
Unemployment Taxes
Presented by:
Michael Mohr, Vice President
Matthew White, Director
AGENDA
• National Unemployment Economic Update
• Federal Unemployment Tax Act (FUTA) Review
• State Specific Example
• Unemployment Cost Management Review
• Summary
• Questions and Answers
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2. National Unemployment Economic Update
Key Unemployment Economic Terms
• Total Unemployment Rate (TUR) - the rate computed by dividing Total
Unemployed by the Civilian Labor Force (Bureau of Labor Statistics).
• Average High Cost Multiple (AHCM) - a standard measure of trust fund
solvency used by the U.S. Department of Labor. A multiple of 1.0 indicates the state
trust fund is sufficiently solvent.
• Federal Unemployment Account (FUA) - account from which repayable
advances are made available to states whose unemployment trust fund reserves
are unable to meet current unemployment benefit payments.
• Federal Title XII Loans - a loan made available to states under Title XII of the
Social Security Act when a state determines the unemployment trust fund will not
have adequate reserves to pay unemployment benefits. Title XII loans are funded
from FUA.
• Extended Unemployment Compensation Account (EUCA) - account from
which the federal share of federal-state extended benefits are paid during periods
of high unemployment.
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3. National Unemployment Trend
11.64%
10.2%
10.0% 10.0%
9.7% 9.7% 9.9% 9.7% 9.7% 9.8%
9.7% 9.5% 9.5% 9.4%
9.70% 9.4%
8.9%
8.5%
8.1%
7.6%
7.76% 7.2%
6.7%
6.5%
6.1% 6.1%
5.7%
5.5% 5.5%
5.82%
5.1% 5.0%
4.9% 4.8%
3.88%
1.94%
0.00%
January February March April May June July August September October November December
2008 2009 2010
Federal and State
Agencies and Associations
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4. National Association of State Workforce Agencies
Source: NASWA UI Trust Fund Solvency Survey, December 2009
Long-standing State Financing Policies have
Increased Risk of Insolvency
Source: U.S. Government Accountability Office (GAO), April 2010
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5. UWC – Strategic Services on Unemployment and Workers Compensation
Source: Committee on Ways and Means, Hearing to Assess the Solvency of State Unemployment Insurance Programs, May 2010
Total Unemployment Rate
Fourth Quarter 2008
0.0% - 3.9% TUR (5 Jurisdictions)
4.0% - 5.9% TUR (22 Jurisdictions)
6.0% - 7.0% TUR (12 Jurisdictions)
7.1% - 9.9% TUR (12 Jurisdictions)
10% > TUR (1 Jurisdiction)
The Total Unemployment Rate (TUR)
Source: is the rate computed by dividing Total
U.S. Department of Labor Unemployed by the Civilian Labor
Fourth Quarter 2008 Force (Bureau of Labor Statistics)
* Jurisdictions include 50 U.S. States, DC and PR
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6. Total Unemployment Rate
First Quarter 2010
0.0% - 3.9% TUR (0 Jurisdictions)
4.0% - 5.9% TUR (3 Jurisdictions)
6.0% - 7.0% TUR (3 Jurisdictions)
7.1% - 9.9% TUR (23 Jurisdictions)
10% > TUR (23 Jurisdictions)
The Total Unemployment Rate (TUR)
Source: is the rate computed by dividing Total
U.S. Department of Labor Unemployed by the Civilian Labor
First Quarter 2010 Force (Bureau of Labor Statistics)
* Jurisdictions include 50 U.S. States, DC and PR
Initial Claims
9,000,000 8,558,725
8,000,000 7,626,248
7,373,040
7,095,582
7,000,000 6,417,734 6,401,813
6,000,000
4,925,263 4,950,089 5,043,357
5,000,000 4,513,006 4,513,350
3,775,260
4,000,000 3,720,137
3,000,000
2,000,000
1,000,000
0
2007.1 2007.2 2007.3 2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1
Initial Claims – Any notice of unemployment filed (1) to request a determination of entitlement to and eligibility for compensation or (2)
to begin a second or subsequent period of eligibility within a benefit year or period of eligibility. Interstate claims are counted in the
paying state.
Source: U.S. Department of Labor
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7. Average Duration
22
20.1
20 18.8
17.4
18
16.2
16 15.1 15.1 15.2 15.2 15.2 15.3 15.3 14.9 14.9
14
12
10
8
6
4
2
0
2007.1 2007.2 2007.3 2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1
Average Duration – The number of weeks compensated for the year divided by the number of first payments.
Source: U.S. Department of Labor
Exhaustions
3,000,000
2,750,000
2,500,000
2,237,338
2,250,000
1,949,564
2,000,000
1,827,621
1,765,067
1,750,000
1,500,000
1,299,660
1,250,000
1,004,203
1,000,000 883,022
802,122
682,668 732,710
750,000 673,316 649,648 664,751
500,000
250,000
0
2007.1 2007.2 2007.3 2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1
Exhaustions – Number of claimants drawing the final payment of their original entitlement for a given program.
Source: U.S. Department of Labor
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8. Unemployment Compensation – Weekly Benefit Review
Traditional Unemployment Benefits
26 13 - 20 = 46 weeks
Maximum Weeks in most states State Extended Benefits
Emergency Unemployment Compensation Program (EUC 08)
26 13 13 - 20 = 59 weeks
EUC 08 Program (Amended) – The Extension Act
26 13 7 13 13 - 20 = 79 weeks
Tier I Tier II
TUR >6% 3 consecutive months
The Worker Homeownership and Business Assistance Act
26 13 7 14 13 6 13 - 20 = 99 weeks
Tier II Tier III Tier IV
(Modified) TUR > 6% TUR > 8.5%
Unemployment Trust Fund Solvency
Fourth Quarter 2008
Above Average > .71 AHCM (22 Jurisdictions)
Average .53 - .70 AHCM (6 Jurisdictions)
Potential Risk .31 - .52 AHCM (9 Jurisdictions)
Source: Watch States < .30 AHCM (13 Jurisdictions)
U.S. Department of Labor
Fourth Quarter 2008 Outstanding Title XII Loans (3 Jurisdictions)
* Jurisdictions include 50 U.S. States, DC, PR and VI
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9. Unemployment Trust Fund Solvency
TALX Assessment as of July 28, 2010
Solvent Trust Funds (14 Jurisdictions)
At Risk of Insolvency (7 Jurisdictions)
Insolvent Trust Funds (32 Jurisdictions)
* Jurisdictions include 50 U.S. States, DC, PR and VI
National Average
Unemployment Tax Rate
3.50%
3.02%
3.00% 2.86%
2.68% 2.74%
2.62% 2.68%
2.56%
2.42%
2.50% 2.40% 2.37% 2.27%
2.26% 2.24%
2.16% 2.17%
2.00%
1.50%
1.00%
0.50%
0.00%
2003 2004 2005 2006 2007 2008 2009 2010
TALX Projection USDOL Actual
U.S. Department Of Labor 2010 average unemployment tax rate will not be finalized until 2011
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10. TALX Unemployment Insurance (UI) Trust Fund Review
$60,000,000 3.5%
3.0%
$50,000,000
2.5%
$40,000,000
2.0%
$30,000,000
1.5%
$20,000,000
1.0%
$10,000,000
0.5%
$0 0.0%
1998.4
1999.2
1999.4
2000.2
2000.4
2001.2
2001.4
2002.2
2002.4
2003.2
2003.4
2004.2
2004.4
2005.2
2005.4
2006.2
2006.4
2007.2
2007.4
2008.2
2008.4
2009.2
2009.4
2010.2
All Values in $000
Revenue TF Balance UI Benefits Avg. UI Rate
Footnotes:
 2010 Average Unemployment Tax Rate is a TALX estimate Source: U.S. Department of Labor
Federal Unemployment Tax Act (FUTA) Review
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11. Federal Unemployment Trust Fund
Unemployment Trust U.S. Treasury
Tax Receipts Fund General Revenue
(UTF) New – HR 3357
Employment Security Extended Unemployment Federal Unemployment
Administration Account Compensation Account Account
(ESAA) (EUCA) (FUA)
• Appropriations are • Designated to pay the • Provides loans to
made for state federal share of insolvent state trust
administrative costs extended benefits funds
Potential FUTA Credit Reduction
Loan Balance Actual Potential FUTA Effective Tax Rate
State
July 28, 2010 2009 2010 2011 2012 2013 2014
Michigan $3,814,145,999 1.10% 1.40% 1.70% 2.00% 2.30% 2.60%
Indiana $1,762,821,380 1.10% 1.40% 1.70% 2.00% 2.30%
South Carolina $886,662,352 1.10% 1.40% 1.70% 2.00% 2.30%
Alabama $283,001,164 1.10% 1.40% 1.70% 2.00%
Arkansas $330,853,383 1.10% 1.40% 1.70% 2.00%
California $7,771,500,479 1.10% 1.40% 1.70% 2.00%
Connecticut $498,452,705 1.10% 1.40% 1.70% 2.00%
Florida $1,612,500,000 1.10% 1.40% 1.70% 2.00%
Georgia $416,000,000 1.10% 1.40% 1.70% 2.00%
Idaho $202,401,700 1.10% 1.40% 1.70% 2.00%
Illinois $2,239,582,343 1.10% 1.40% 1.70% 2.00%
Kentucky $795,100,000 1.10% 1.40% 1.70% 2.00%
Minnesota $628,874,221 1.10% 1.40% 1.70% 2.00%
Missouri $722,116,933 1.10% 1.40% 1.70% 2.00%
Nevada $486,502,726 1.10% 1.40% 1.70% 2.00%
New Jersey $1,749,563,533 1.10% 1.40% 1.70% 2.00%
Footnote: If a state has an outstanding loan balance on January 1st of two consecutive years and has not repaid the balance by November 10th of the
second year, employers risk losing a portion of their state FUTA Tax Credit for that year.
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12. Potential FUTA Credit Reduction
Loan Balance Actual Potential FUTA Effective Tax Rate
State
July 28, 2010 2009 2010 2011 2012 2013 2014
New York $3,176,873,428 1.10% 1.40% 1.70% 2.00%
North Carolina $2,409,107,298 1.10% 1.40% 1.70% 2.00%
Ohio $2,314,186,799 1.10% 1.40% 1.70% 2.00%
Pennsylvania $3,008,614,960 1.10% 1.40% 1.70% 2.00%
Rhode Island $225,472,937 1.10% 1.40% 1.70% 2.00%
Texas $1,461,275,786 1.10% 1.40% 1.70% 2.00%
Virgin Islands $15,289,407 1.10% 1.40% 1.70% 2.00%
Virginia $346,876,000 1.10% 1.40% 1.70% 2.00%
Wisconsin $1,424,768,541 1.10% 1.40% 1.70% 2.00%
Arizona $53,420,272 1.10% 1.70% 2.00%
Colorado $236,267,185 1.10% 1.40% 1.70%
Delaware $12,901,505 1.10% 1.40% 1.70%
Kansas $88,159,421 1.10% 1.40% 1.70%
Maryland $133,840,764 1.10% 1.40% 1.70%
Massachusetts $387,313,005 1.10% 1.40% 1.70%
Vermont $32,657,064 1.10% 1.40% 1.70%
Total Title XII Loans $39,527,458,920
Footnote: If a state has an outstanding loan balance on January 1st of two consecutive years and has not repaid the balance by November 10th of the
second year, employers risk losing a portion of their state FUTA Tax Credit for that year.
State Specific Example
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13. State Review - Florida
•Enacted Legislation – 2009: SB 810
• Increases the wage base from $7,000 to $8,500 for
2010-2014.
•Changes the rules for calculating the final and
variable adjustment factors used in the employer's
rate calculations. The changes revert back to 2009
rules in 2015.
•The taxable wage base reverts back to $7,000 in
2015.
•Enacted Legislation – 2010: HB 7033
•Delays the increase in the taxable wage base from
$7,000 to $8,500 until 2012.
•Suspends the positive trigger for two years, thus
reducing the factors used to calculate tax rates.
•Allows employers to make their 2010 and 2011 UC
tax payments in quarterly installments
Unemployment Tax Management Discussion
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14. Unemployment Tax and Benefit Review
Unemployment Tax Cost – State Example
Florida 2010 Merit Rating
5.40% (2009: 5.40%)
$7,000
$378
Employer Rate
$25
$7,150
.36% (2009: .12%)
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15. Unemployment Cost Management
Effective Unemployment Cost Management
 Establish an organized process for initial claim responses
 Evaluate each individual determination
 Ensure timely appeals and proper hearing preparation
 Audit benefit charge statements by individual claim and protest overpayments
Unemployment Claim Eligibility and Liability
4Q 1Q 2Q 3Q 4Q 1Q
2008 2009 2009 2009 2009 2010
Last Employer Claim – The claim notice sent to the most recent employer from which the employee has separated.
Base Period Claim – The claim notice sent to each employer for which the claimant worked during the base period. Base Period
earnings determine weekly benefit amounts and employers chargeable proportionate to wages paid.
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16. Unemployment Claim Process
Separation Claim Response
Ideal place to end process!
• Complete claim responses save time and money
• Reduce follow-up requests
• Claim Adjudicator can make fully informed decision
• Avoid unnecessary appeals
• Improve win % substantially
Types of Separations
Voluntary Quit
• “I quit”
• No show/No Call for Lack of Work
three or more days
• Completed Assignments
• Plant closing
• Position eliminated
Discharge
• Misconduct
• Attendance
• Violation of Policy
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17. Voluntary Quit
The burden of proof is the responsibility of the
former employee to show there was good cause
to quit attributable to the employer.
Good Cause
A change in the condition of
employment or compelling reasons.
Continued employment must be
available.
Forced resignation = DISCHARGE
ALWAYS ask for a signed letter of resignation
33
Discharge
The burden of proof is the responsibility of the
employer to prove that the employee was
discharged for misconduct.
Misconduct
A deliberate and willful disregard
of employer’s interest or repeated
violations of a known company
policy
34
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18. Lack of Work
Not Disqualifying
 Intent of Unemployment
Job Eliminated
 No positions available
Reduced hours
 Full-time to Part-time
Job Offers and Refusals
35
Unemployment Cost Management
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19. Unemployment Tax Cost Projections
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
Nov. Feb. Nov. Feb. Nov. Feb. Nov. Feb.
1/1/09 1/1/10 1/1/11 1/1/12
Federal Unemployment Tax State Unemployment Tax (SUI) SUI Rates Issued
Account Experience State Factors Legislative Changes FUTA Credit Reduction
 Unemployment Claims  Taxable Wage Base  Federal Level  Based on Title XII Loans
 Unemployment Tax Paid  Rate Tables and Surcharges  State Level  Increases Effective FUTA Rate
Merger-Acquisition-Reorganization Planning
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20. Summary
• Economic Trends – Impact unemployment taxes
• Recent GAO Report – Provides recommendations on
forward funding
• Title XII Loans – Interest waiver expires 12/31/10
• 2010 FUTA Taxes – Potential credit losses in MI, IN and SC
• SUTA Taxes – Continued legislative review of tax increases
• Budget and Forecasting – Key planning initiatives 2011 and
beyond
• Stay Informed - Tax Updates: http://blog.talx.com/
Questions and Answers
For more information please contact:
Matt White Michael Mohr
Director Vice President
TALX Corporation TALX Corporation
(314) 684-2873 (314) 684-2299
Cell: (314) 363-5756 Cell: (314) 369-4143
mwhite@talx.com mmohr@talx.com
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