As federal and state legislative sessions unfold, employers find themselves navigating a dynamic landscape of potential changes to unemployment taxes. This year, like many before it, has seen a flurry of activity with over 100 bills in various stages of consideration since January 1, 2024.
Addressing Trust Balances and Solvency
A recurring theme in these bills is the allocation of funds for state unemployment trust balances and programs. Across 10 states, legislation is under discussion proposing appropriations ranging from $2 million to nearly $90 million for bolstering respective unemployment insurance programs. This is particularly crucial for states with precarious trust fund balances that may not withstand economic downturns. According to the 2023 State Unemployment Insurance Solvency Report by the United States Department of Labor, only 16 states met the recommended minimum solvency standard by the end of 2023, unchanged from the previous year. Prior to the pandemic, this number stood at 31 states highlighting the significant impact of the pandemic. The risk of insolvency looms large for states ill-prepared to handle increased claims during recessions.
Facing potential insolvency, states may resort to requesting advances via Title XII loans from the federal government. However, this solution comes with the obligation of repayment as evidenced by the experience of two states and one territory mentioned on the 2023 Federal Form 940, all of which lost a portion of their FUTA credit due to outstanding loans.
Other Hot Topics: Labor Disputes, Weekly Benefit Amounts and Fraud
The payment of benefits during labor disputes is another pertinent topic in recent legislative agendas. With labor disputes increasingly making headlines and disrupting economies, legislators in 10 states are deliberating on the current disqualification of unemployment benefits for claimants involved in such disputes. If proposed legislation passes, employees involved in labor disputes would be eligible to receive unemployment benefits. While this may not directly impact all employers, it could significantly affect tax account funds for those embroiled in labor conflicts.
Legislators are also addressing claimant weekly benefit amounts and work search requirements to ensure accountability and prevent misuse of benefits. This includes initiatives to verify claimants’ efforts in seeking employment such as following through with interviews and maintaining communication with prospective employers.
Data integrity and fraud prevention remain key areas of focus. With fraud reaching alarming levels during the pandemic, states are taking proactive measures, aided by grants from the American Rescue Plan Act, to modernize their unemployment platforms and enhance detection capabilities.
Several bills passed both state-level houses and senates and are eligible to be sent to respective governors for signature. Below are those states along with a synopsis and link to the bill:
Colorado – HB 1189
This measure appropriates $76,527,050 for program costs related to unemployment insurance.
New Mexico – HB 2
This measure appropriates $13,846,600 for unemployment insurance to administer an array of demand-driven workforce development services to prepare New Mexicans to meet the needs of businesses. These measures would more-so benefit claimants and their ability to file claims quickly and efficiently.
Utah – HB 170
This measure addresses multiple issues:
- Claimant would be disqualified from receiving unemployment benefits if they fail to appear without good cause for a scheduled interview for suitable work.
- Claimant’s failure to accept within two days after the date the offer was sent, an offer of suitable work from an employer or the employment office as failure to accept suitable work.
- Develop and maintain a website for employers to access information and report potential fraud related to unemployment insurance claims.
Virginia – SB 542
This measure makes an amendment to the VA Unemployment Compensation Act regarding labor dispute disqualification. It provides that a lockout by an employer will not constitute a labor dispute and locked out employees, who are otherwise eligible, will receive unemployment benefits unless one of the following occurs:
- Recognized or certified collective bargaining representative of the locked out employees refuses to meet with the employer under reasonable conditions to discuss issues giving rise to the lockout.
- There is a final adjudication under the federal National Labor Relations ACT (NLRA) that such representative refused to bargain with the employer in good faith.
- The lockout is the direct result of such representative’s violation of an existing collective bargaining agreement.
- Effective July 1 after enactment.
In the ever-evolving landscape of unemployment law, staying abreast of statutory changes is essential for managing costs effectively. Stay tuned for more insights on this and other pertinent topics.
