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LCI Subcommittee. March 1, 2011. Seasonal Restrictions. Currently in place in 15 states Arkansas, Arizona, Colorado, Delaware, Indiana, Maine, Massachusetts, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, South Dakota, West Virginia, and Wisconsin

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lci subcommittee

LCI Subcommittee

March 1, 2011

seasonal restrictions
Seasonal Restrictions
  • Currently in place in 15 states
    • Arkansas, Arizona, Colorado, Delaware, Indiana, Maine, Massachusetts, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, South Dakota, West Virginia, and Wisconsin
  • Restrictions vary depending on state but typically wage credits earned during “season” can only be used to qualify for unemployment during the “season.”
six potentially seasonal sectors
Six Potentially Seasonal Sectors

SECTOR OFF SEASON

  • Agriculture Q1
  • Construction Q1 & Q4
  • Retail Sales Q4
  • Public Administration Q4
  • Professional Services Q2, Q3, & Q4
  • Tourism Q1 & Q4
potential cost savings
Potential Cost Savings
  • Compared unemployment cost in “high” and “off” seasons.
  • Difference is projected cost savings from seasonal restrictions.
severance pay
Severance Pay
  • South Carolina does not currently take severance pay into consideration when determining weekly benefit payments for unemployment.
  • States with some reduction in benefits: AK, CA, CO, DE, FL, IL, KY, LA, ME, MD, MN, NH, OH, SD, UT, VT, VA, WA, WI (19)
  • States with ineligibility while receiving: AR, AZ, CT, GA, MA, MI, NV, NJ, TN, TX, WV, WY (12)
scenario 14 senator thomas
Scenario 14: “Senator Thomas”
  • Put all classes at last year’s average tax rate (I.e., 1.45% for tier 1, 4.76% for tier 20 etc)
  • Credit to 1-12 for extra FUTA
  • Surcharge on 13-20 to cover extra FUTA
  • Surcharge on 13-20 to cover cost of benefits (I.e. $500 million)
  • Surcharge on 1-20 to cover interest
scenario 14 senator thomas7
Scenario 14: “Senator Thomas”
  • Stretch repayment out by only collecting enough to cover current benefits and interest.
  • FUTA increases each year
  • Loan repaid in March 2017
  • $141.4 million total interest
  • Surcharge on 13-20 for extra interest cost
scenario 14 projected costs
Scenario 14: Projected Costs

Total SUTA & FUTA Cost 2011

scenario 14 change over current
Scenario 14: Change over Current

Total SUTA & FUTA Cost 2011

scenario 14 cost shift
Scenario 14: Cost Shift
  • For 2011:
    • Adds $33 million to classes 1-6
    • Saves $117 million for classes 7-20
  • For 2011-2017:
    • Adds $182 million to classes 1-6 & 13-16
    • Saves $182 million for classes 7-12 & 16-20
movement down tiers
Movement Down Tiers
  • Acme Inc. is in rate class 18 for 2011.
  • Assume that:
    • benefits return to 2006 levels experienced by Acme Inc.
    • taxable wages remain same as 2010 except on the higher taxable wage base.
  • What happens to benefit ratio and tax rates over time?
movement down tiers19
Movement Down Tiers

Improved employment history for Acme Inc. and lower benefit charges in general help lower costs quickly moving forward.

Note: TWB increased in 2012, look back period changes in 2014.

agricultural labor
Agricultural Labor
  • FUTA’s agricultural labor provisions apply to employing units who paid wages in cash of $20,000 or more for agricultural labor in any calendar quarter in the current or preceding calendar year or who employed 10 or more workers on at least 1 day in each of 20 different weeks in the current or preceding calendar year.
  • Typically limits coverage to large farms.
agriculture 1111 1112 1113 1114 1119 1121 1122 1123 1129 1131 1132
Agriculture (1111, 1112, 1113, 1114, 1119, 1121, 1122, 1123, 1129, 1131, 1132)
  • Firms in classes 1-12: 73.4%
  • Emp in classes 1-12: 75.6%
  • Firms in classes 13-20: 26.6%
  • Employment in classes 13-20: 24.4%
what makes up my rate
What makes up my rate?

Approximately 26% of cost in 2011 is for loan and interest.

paying off deficit
Paying Off Deficit
  • 7-year deficit for classes 13-20 is $1 billion
  • Larger than $680 million proposed to be raised in 2011.
  • Does not cover “non-charged” benefits
  • Does not cover “inactive employer” benefits
  • Does not address need to raise money for benefits in the upcoming year.
projected rates with no debt
Projected Rates with No Debt

DOL mandates that lowest max rate is 5.4% (class 20 must be at least 5.4%)

paying off deficit25
Paying off Deficit

Only 6 years have $264 million in non-charged; $241 million inactive--cannot be made up for with one-time check for deficit.