Congress passed the Trade Adjustment Assistance Extension Act (TAAEA) in 2011. The body of the Act centered on retraining for workers who lost their jobs due to foreign competition. However part of that Act included the Unemployment Compensation Program Integrity (UCPI). This Federal regulation requires that each state enact legislation that requires timely and adequate response by the employer to an individual unemployment claim. This rule would apply to both the employer and the employer's third party agent who normally responds to unemployment claims.
Typically those employers who have high turnover rates and are paying the maximum unemployment tax have not responded in the past to the state's unemployment claim information requests. These employers have often opted to simply not respond and allow the former employees to collect unemployment benefits. Under the new rule if the employer or the employer's agent shows a pattern of not responding timely to unemployment claims the state may charge the employer's account for any benefit paid. Additionally, there are provisions for potential civil and criminal penalties that can be applied.
This new rule shifts responsibility from the state to the former employer. Unemployment is regulated by the Federal Unemployment Tax Act (FUTA) and is administered jointly by the Federal and state authorities. When a person files an unemployment claim the state has to make a determination on benefits within a certain amount of time. While the employer may not respond or respond outside of the time established. As a result, states have paid out more in benefits than they have received in unemployment taxes from the employers. The Federal Reserve Bank reported earlier this year that in 2011 there were $108 billion paid in unemployment compensation benefits. Of that amount, $3.3 billion was deemed to be paid to ineligible claimants.
The new rule requires that all states are to have adopted this provision by October 21, 2013. States are very willing to comply with many states having depleted their unemployment reserves and relied on borrowing from the Federal government to maintain their unemployment compensation funds. The new rule puts the former employer in a position to account for the separation. As a result of the new rule employers must respond to all unemployment claims quickly and completely even in those situations where there is a clear entitlement unemployment benefits.
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