Unemployment Cost Management “The Good, The Bad and the Ugly” Tennessee Statewide APA

1. Unemployment Cost Management “The Good, The Bad and the Ugly” Tennessee Statewide APA Barnett Associates, Inc. August 2012

3. WHO PAYS UNEMPLOYMENT TAXES? • Every Employer • Every Entity • Every State • PR, VI GUAM

4. WHO IS RESPONSIBLE???

5. HOW IS YOUR COST DETERMINED? • REIMURSABLE – 501(c) – Not for profit • Dollar For Dollar!!!! • Protesting of UI Claims – Super important • Experience Rated

6. HO MUCH DO YOU PAY?National Average

7. DEFINITIONS FOR TAX RATE CALCULATIONS • EXPERIENCE RATING: unemployment tax rates are based on the stability of the employment history of an organization • RESERVE BALANCE: sum of the total contributions paid, less unemployment claims collected against an account. Positive or Negative • RESERVE RATIO: reserve balance divided by taxable payroll • BENEFIT CHARGES: unemployment benefit payments made to previous employees • BENEFIT RATIO: benefit charges divided by taxable payroll

8. Rate Calculations Benefit Ratio State 20 States use this calculation Calculates tax rate based on Taxable Payroll & Benefit Charges Benefit Charges collected have a more direct effect on the unemployment tax rate Reserve Ratio State 34 States use this calculation Calculates tax rate based on Taxable Payroll, Benefit Charges & Reserve Balance Reserve Balance is like your “Bank Account” for unemployment taxes

9. Reserve Ratio States States Where Tax Contributions Most Affect Rate

10. Benefit Ratio States States Where Claims Activity Most Affects Rate * Payroll Stabilization **Combination of Reserve & Benefit Ratio state 5

11. State of Tennessee Reference ChartSee All State Ref!!!

12. TN Unemployment Rate • TN RATE

13. TN Unemployment Rate ProjectionYou Can Do It!!! • TN RATE PROJECTION

14. How to Control UnemploymentCost Impact Techniques

15. Voluntary Contribution – KY Example • KY RATE

16. Joint Accounting Energy & Utility Client By sharing unemployment tax reserves between commonly owned subsidiaries the following actual savings was secured:

17. Tax Effect on 2 Denied Claims– KY Example • Under Construction

18. Claims ControlTax Impact on Claims Won

19. Where is Unemployment Being Felt and Why Have Costs Increased

20. STATE 15states increasedtaxable wage bases from 2010 vs. 2011 26 states increasedtaxable wage bases from 2011 vs. 2012 Currently, 10 stateshave reached the maximum level on their Tax Rate Schedule A few states have re-released lower 2012 tax rates: FL, NM, UT Georgia re-released higher 2012 tax rates FEDERAL Since December 2008, 32 states have borrowed over $40 billionfrom the federal government If any of these states can’t pay back their balance within two years of borrowing, employers will lose 0.30%of the FUTA tax credit annually 21 States defaulted in 2011. 16 are expected to default in 2012 Legislative Changes

21. 2011/12 Taxable Wage Base Increases

22. 2011/12 Taxable Wage Base Increases(Continued)

23. Final Thoughts

24. #1 Correctly Identify Separation #4 Reinforce Consistent Behavior w State #2 Analyze the Viability #3 Complete Forms & Timely Communication w State Business Flow ProcessBest Practice Standard

25. Business Process Recommendations If you have one - Use your consultant!!! – they will educate you Know where your costs are and why they changed! Take full advantage of allowable saving techniques permissible per State Review Benefit Charge Statements Review/Create Hiring Policy Consistent Corrective Disciplinary Practices Educate Field Reps Re-enforce Worksite Location vs. Address of Record Review Address of Record (re-file POA forms) Project both SUTA and FUTA rates (or have vendor project them)

27. UI Links TN Employee Handbook - http://www.tn.gov/labor-wfd/Employers/forms/emphand00.pdf SIDES - UWC – www.uwcstrategy.org AUTO – www.autax.org ITSC -

28. Barnett AssociatesCast & Crew Jared S. Vale Director, Strategy & Compliance Barnett Associates, Inc. 61 Hilton Ave Garden City, NY 11530 Phone (516) 750-7037 jvale@barnettassociates.com