Mergers, acquisition and reorganization activities impact to unemployment

Many organizations complete merger, acquisition, divestiture, and reorganization activities on January 1^st.  There are several key compliance and procedural requirements that need to be considered with these types of activities with respect to unemployment insurance. 

Here are some items to consider:

• State Compliance Filings: Have the appropriate agencies and offices been formally notified of the transaction? 
• Registrations and Closures: Have the relevant unemployment and withholding account registrations and / or closures been filed with the appropriate offices and agencies? 
• Experience Transfers: Was the transaction handled appropriately as required by state legislation resulting in the correct tax rate? 
• Savings Strategies: Were the available strategies analyzed to ensure the lowest possible unemployment tax costs? 

Each state has its own requirements around these types of activities.  Most states have standard forms that need to be completed when a change to an organizational structure occurs. 

Ohio, for example has the following requirements:

• To report the purchase of a business, visit jfs.ohio.gov or complete and file form JFS20101 (Transfer of Business form) with the Ohio Department of Jobs and Family Services (ODJFS).
• To report the sale of your business, visit jfs.ohio.gov or complete and file form JFS 20110 (Disposition of Business) with ODJFS.
• To report the transfer of all or a portion of your business, there are a variety of forms that may need to be completed, depending on the specific situation.
• If your business closes, you must notify ODJFS online at jfs.ohio.gov or complete form JFS20110. You must also file a final quarterly report detailing the wages paid to employees within 30 days of ceasing operations.

Source:  https://jfs.ohio.gov/ouio/uctax/IfYouBuySellReorgYourBusiness.stm

Failure to file the correct forms in a timely manner may result in penalties, higher than necessary tax rates or surprise invoices in the future.  Therefore, it is important to engage an expert early in the process to prevent missteps and potential negative financial consequences. 

A company with 165 employees failed to register and report a reorganization that occurred mid-year resulting in the assignment of a penalty tax rate in Ohio.  After contracting with Sedgwick to help file the required paperwork, the penalty was resolved saving them $76,000 in one year.  Sedgwick was also able to recover additional taxes for wages that were overpaid providing them with another $18,000 in refunds. 

Sedgwick has also encountered issues where an employer with multiple SUI accounts in the same state misreported the wages of 500+ employees to an incorrect unemployment account for over a year.  Once the wages were corrected, the state issued hundreds of duplicate claims for the employees that were impacted by the wage change.  By contracting with Sedgwick for their claims management, we immediately recognized the issue and responded promptly to all of the state requests.

Sedgwick offers a comprehensive service around mergers and acquisitions, reorganizations and other tax planning projects that help clients navigate the mandatory notification process and help to determine the impact of these types of activities on their unemployment tax liability.  We can also identify potential unemployment tax savings opportunities and assist with the preparation of related tax documents.

Please contact the Sedgwick unemployment team at unemployment@sedgwick.com  if you have questions or to learn more about how Sedgwick can help with all tax and claims matters.