C O M P N O T E S
Unemployment compensation
Reducing unemployment costs after historic volumes and pandemic legislation
Since March 2020, the topic of the unemployment system has received unprecedented attention due to claim volumes, new legislation and historic levels of fraudulent claims as the COVID-19 outbreak swelled the ranks of unemployed Americans from 6.2 million in February 2020 to 20.5 million in May 2020.
In March 2020 new weekly unemployment claims went from 225,000 to over 6 million in the same month. The official U.S. unemployment rate surged from 3.8% — among the lowest on record — to over 14% in April 2020. The sudden disruption in the employment market caused a total of 60,856,885 unemployment claims to be filed in 2020 compared to 11,359,338 in 2019, an increase of 536% year-over-year.
In 2020, unemployment claims volumes were driven not only by massive business shutdowns and job eliminations, but also from ground-breaking legislation and high numbers of fraudulent claim filings. The new acts covered people who did not typically qualify for unemployment benefits, such as gig workers, independent contractors and self-employed individuals. The legislation also extended on-going benefits to a maximum total of 79 weeks through September 4, 2021 and boosted weekly payments by $600 initially and then later $300 during that extended benefit period.
Additionally, recent data from the U.S. Department of Labor (DOL) estimates that more than $63 billion has been paid out improperly through fraud or errors. This estimated total is roughly 10% of all benefits paid under coronavirus (COVID-19) pandemic-related unemployment programs since March 2020. Fraudsters exploited the overwhelmed systems which had generally reduced oversight in the interest of enabling rapid access to benefits for those in need.
The new environment has made it more important than ever for employers to have a centralized, consistent process for managing unemployment claims and taxes. For example, Sedgwick’s depth of resources, commitment to client service and ability to quickly configure technologies meant that our client’s increased pandemic claims volumes were successfully managed, and processes were in place to identify and successfully protest fraudulent claims on their behalf.
Returning to normal – the importance of taking advantage of special tax rate saving strategies
After over a year of high claim volumes and expanded unemployment benefits, it appears we are beginning to return to normal. Pandemic legislation expired on September 4, 2021, the national unemployment rate has fallen below 6% and new weekly jobless claims have consistently been below 350,000 per week.
It will be critical for Ohio employers to keep focused on the key strategies of managing unemployment costs as we return to normal, especially since state trust funds that have been depleted by high claims volumes will need to be replenished. Historically, that has translated into tax rate increases for employers.
Some of the most impactful cost reduction strategies for 2022 will soon be available and for a limited time only. Specifically, Ohio will be issuing employer tax rates for 2022 and there are a couple of options available for employers which can reduce their assigned rates. Below we outline these strategies, which can often result in significant savings for merit rated (UI tax paying) employers.
Recently, a Sedgwick employment tax specialist saved an Ohio client with nine operating companies and 350 employees over $113,000 in one calendar year. The complex analysis involved understanding and meeting the legislative requirements and for this client, finding a specific two group combination – out of thousands of possible combinations – that resulted in the maximum 2021 tax savings.
Note: Voluntary contributions and common rating elections are due to the Ohio Department of Job and Family Services by January 3, 2022 for the 2022 tax year.
Please contact Donny Phillips of the Sedgwick unemployment team if you have questions about how to take advantage of special Ohio tax strategies and to learn about other best practices to mitigate the costs of pandemic claims or how to manage traditional unemployment as we return to normal. Donny can be reached at donny.phillips@sedgwick.com.
Ohio Department of Job and Family Services introduces a new online unemployment insurance tax system
The Ohio Department of Jobs and Family Services (ODJFS) will be launching a new unemployment insurance (UI) tax system called The SOURCE in December of 2021. The SOURCE will be replacing the current ERIC system for on-line unemployment tax activities. This move will result in improvements in the state's on-line UI tax system as well as necessitate some changes in their processes.
The SOURCE will allow employers and their agents, including third party administrators, to manage all their unemployment tax, benefits and appeals information in one place. It will also have:
In order to prepare to use The SOURCE, ODJFS is suggesting employers take the following actions prior to go-live:
With the transition to The SOURCE, the following additional changes will occur:
For updates regarding ODJFS’s transition to The SOURCE, go to: jfs.ohio.gov/ouio/thesource
Source: https://jfs.ohio.gov/ouio/TheSOURCE/index.stm
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