Dear Editor: Recent concerns over the solvency of the Unemployment Insurance fund are misplaced.
As stated in a recent article, “The state could also further cut down on benefit payments to address the fund’s solvency,” and the state has been doing just that. Benefit payments in Wisconsin have plummeted to record lows. In early 2013, the Department of Workforce Development projected UI benefits to be $797 million in 2014 and $696 million in 2015. The actual benefit payments in 2014 were $732,327,104 and only $605,481,027 in 2015, $91 million less than expected.
Why have benefit payments plunged from what was expected? First, the department has set up a series of obstacles for folks to overcome when filing their claims, including poor phone support, mandatory internet registration, cumbersome job search busy work, and an increasingly complex filing process. Second, until the recent appeals court decision in Operton v. LIRC, substantial fault allowed DWD to disqualify claimants for inadvertent mistakes they make on the job. Finally, DWD has been charging claimants with unemployment fraud for making mistakes when trying to follow the increasingly complex process DWD has set up.
Recent DWD statistics showcase how unemployment fraud is becoming a major operation within DWD. In 2014, unemployment fraud charges jumped 44 percent from the previous year even as benefit payments markedly declined. For 2015, collection for unemployment fraud was up nearly 81 percent from 2013 collection efforts.
Since it is now so oppressive and dangerous to collect unemployment benefits, the risk of the fund going insolvent is minimal. But this concern for fund solvency ignores the whole point of unemployment benefits: to help those in need (and the state as a whole) when folks lose jobs through no fault of their own. In place of employers paying their taxes, the state has essentially achieved solvency on the backs of the unemployed.
The official Advisory Council/DWD bill has just been introduced, AB819. So, here is a rundown of what has been happening with unemployment law over the last several months, organized by proposal.
- A second SSDI prohibition, D15-01, to replace the current prohibition was approved in April 2015 and back-dated in May 2015. But, after the Department started winning the court cases challenging the old SSDI prohibition (see this post for the details), this proposal disappeared from the Department’s legislative draft at the council’s September 2015 meeting. But, after the Labor and Industry Review Commission ruled in November 2015 that departmental error had occurred when appeal tribunals (but not the Commission) had originally ruled in favor of claimants regarding dual receipt of SSDI and UI benefits (and so no repayment of UI benefits previously received was proper), this proposal re-emerged at the November 2015 council meeting in the Department’s legislative drafts and is now part of AB819. Why? This second SSDI prohibition is back-dated to January 2014, the effective date of the original SSDI prohibition.
- D15-02 is a house-keeping change that allows the Department to issue determinations against out-of-state employers in combined wage claims for being at fault for an erroneous benefit payment to a claimant. This proposal is part of AB416 and has been enacted in 2015 Wisconsin Act 86.
- D15-03 applies the Treasury offset program to employers, as described previously in this post. This proposal is part of AB416 and has been enacted in 2015 Wisconsin Act 86. Because of this quick enactment, employers will be subject to treasury offsets for their 2015 tax returns for any unemployment taxes for which they have been found individually liable.
- D15-04 sets up essentially a backup insurance program for reimbursable employers who get their unemployment accounts swindled by identity fraud (and so have little to no hope of ever recovering the stolen benefits). The final recommendation from the council was for reimbursable employers to be taxed initially in order to create a fund of $1 million for covering themselves against identity fraud, essentially the second option of the three presented. This proposal is part of AB819.
- D15-05 corrects a hole in the statutes that accidentally left LLPs out of the definition of employer (see also this DWD memo on this issue). This proposal is part of AB819.
- The Advisory Council approved the Department’s appeals modernization proposal, D15-06, at the 7 January 2016 meeting. LRB draft language was prepped soon thereafter. Perhaps the most significant change in this proposal — notice by Internet in place of postal mail — has NOT received any discussion of comment from council members, however. This proposal is now part of AB819.
- A renewed work-share program, D15-07, is part of AB416 and has been enacted as 2015 Wisconsin Act 86.
- Proposed changes to the definition of claimant concealment in D15-08 (described in this previous post and described in a Department memo (discussed in this post) are part of AB819. Additional criminal penalties for concealment in AB533 continue to advance in the legislature. To see what all the fuss is about, take a look at this January 21st Assembly Committee on Public Benefit Reform hearing regarding AB533 and other UI bills or read this LIRC memo on the proposed concealment changes.
- Technical changes in D15-09 and included in AB819 will allow the Department to distinguish able and available determinations from separation determinations.
- D15-10 eliminates the publication of the claimant benefit tables within the statutes and is included in AB819.
- Major changes to the process for getting unemployment decisions reviewed in circuit court, set forth in D15-11, are part of AB819. These changes were previously described here and here.
- D15-12 allows the same protocols for unemployment taxes in regards to fiscal agents in adult care to apply to fiscal agents in child care situations. This proposal is part of AB819.
- D15-13 ends the sunset date in 2034 for the program integrity fund (i.e., the fund for receiving some of the monies from concealment enforcement) since the Department now expects concealment monies to continue in perpetuity. See the next two proposals for why.
- The Department’s proposals for a program integrity slush fund, D15-14 and D15-15, are part of AB819.
Labor and Management Proposals
At the Advisory Council’s 19 January 2016 meeting, the council took action on various management and labor proposals and the agreed-to changes have been incorporated in AB819.
The management proposals that the council agreed to include significant changes to what will be considered suitable work:
- During the first six weeks of a job search, suitable work that a claimant MUST accept will be those jobs that (1) do not have a lower grade of skill than one or more of his or her most recent jobs and (2) have had an hourly wage that is 75 percent or more of what the claimant previously earned in his or her most recent, highest paying job.
- After the first six weeks, suitable work means any work the claimant is capable of performing regardless of prior experience, skills, or training, as long as the wages for that job are above the lowest quartile wage-level in the claimant’s relevant labor market.
Once a job offer is considered suitable work for a claimant, then the claimant only has good cause for declining the job offer if the claimant’s personal safety is at risk, the claimant’s sincerely held religious beliefs conflict with the work, the work entails an unreasonable commuting distance, or some other compelling reason makes accepting the offer unreasonable. These changes to what will be considered suitable work will also apply to those who tentatively accept a job and then quit within the first thirty days.
In addition, this accepted management proposal will either eliminate unemployment eligibility entirely for anyone receiving temporary or partial workers’ compensation benefits or mandate offsets against UI benefits for those receiving these kind of workers’ compensation benefits (the specific type of workers’ compensation benefit being received leads to the different kinds of treatment). In other words, the SSDI prohibition is being expanded to workers’ compensation benefits. Also, anyone making a mistake in how they report their specific workers’ compensation benefits will, under the new on-line filing system, likely face a concealment charge for his or her mistake in reporting the kind of workers’ compensation benefits he or she is receiving.
These management-sponsored changes will take effect four weeks after enactment.
The labor proposals that the council agreed to include:
- repealing the mis-classification prohibitions in workers’ compensation and fair employment law,
- creating an administrative penalty for mis-classification for unemployment purposes of $500 per employee (capped at $7,500) when construction employers (and only construction employers) knowingly and intentionally provide false information to the Department (NOTE: compare this definition with the proposed changes to claimant concealment) for the purpose of misclassifying or attempting to mis-classify an employee,
- fining employers in painting and sheetrock work $1,000 per incident (capped at $10,000 per calendar year) when coercing employees into accepting non-employee status for unemployment purposes, and
- fining construction employers $1,000 per employee (with a maximum of $25,000) for subsequent violations as well as possible referral for criminal prosecution.
These mis-classification changes will take effect six months after passage.
Budget Bill Fixes
The LIRC funding fix bill, discussed here, is also right now being considered by the legislature.
The call in the budget bill for the Department to create suitable work rules for claimants has been eliminated by the management-sponsored changes to suitable work described above.
At the 17 December 2015, several legislative proposals affecting unemployment benefits were described to the Advisory Council. This legislation includes:
- Returning work search waivers to what previously existed — Employees and employers have begun to voice concerns about how the limitations on work search waivers previously approved by the Advisory Council do not make sense for Wisconsin. No immediate change to the current work search waivers will happen, however. And, whether Wisconsin ever returns to the original rules is uncertain. For instance, there was extended discussion by council members of perhaps allowing employers to designate certain employees for longer waivers because of their skills or high value to the employer but leaving other employees to the now 8/12 week waiver maximum. See my own comments on the proposed regulations.
- Expanded criminal penalties for unemployment concealment — Previously discussed here.
- UI law changes in order to counter recent NLRB decisions — Legislators want to pass legislation that will supposedly undo a recent NLRB decision called Browning-Ferris Industries that re-defined the test for determining when the employees of one company will be treated as the employees of another company (e.g., when the employees of a franchisee or temp agency are really the employees of the franchisor or client company because the franchisor or client company sets the terms and conditions of employment for the employees). NOTE: unemployment is not mentioned once in the decision, so the applicability and purpose — let alone its effectiveness — of the state law changes in this proposed legislation are muddled at best. And, as DWD notes in its memo, the changes could be extremely problematic for some Wisconsin employers.
- Exempting real estate agents from unemployment law — The proposed legislation is intended to remove real estate agents from coverage of any and all employment law and unemployment law issues.
- Whether UI claimants will have their benefits publicly revealed — As DWD notes, this proposed legislation conflicts directly with federal law.
Also, the Department has begun publishing on its website some of the proposals being discussed by council members, including management proposals to add additional claimant disqualifications and labor proposals regarding new penalties for employers who mis-classify their employees as independent contractors and increasing the wage base and tax schedule for employers’ unemployment taxes in order to make the UI fund solvent. NOTE: This 2013 PowerPoint presentation describes what makes or does not make a UI fund solvent. The Department has yet to publish any of its proposals, so this blog remains the sole source for Department-initiated changes to unemployment law. For instance, the Department is still waiting for the Council’s decision on its UI modernization proposal, D15-06.
NOTE (8 January 2016): At the January 7th council meeting, the Advisory Council approved of D15-06 with minor changes that were not detailed.
As noted previously, three DWD proposals were quickly put into a bill, AB416, and that bill was passed by the legislature, signed by the Governor on November 11th, and published that same day as 2015 Wisconsin Act 86.
The three DWD proposals that make up this bill are:
- D15-02 — adding the ability to issue determinations against out-of-state employers in combined wage claims for being at fault for an erroneous benefit payment to a claimant,
- D15-03 — applying the Treasury offset program to employers, as described previously in this post, and
- D15-07 — changes to how work share benefits are calculated so as to comply with federal requirements for work share programs.
Given the quick passage of this bill, the Treasury offset of tax refunds against employers will be in effect for the 2015 tax year. Accordingly, employers who owe money because of unpaid employer employment taxes will have any 2015 tax refunds due them intercepted by the state in order to recover unpaid taxes that are due.
In light of the recent news about states dismantling their workers compensation programs, Rick McHugh from NELP describes how unemployment provides a similarly vital safety net and how states have been reducing unemployment benefits as well. McHugh offers a persuasive explanation for why the recovery from the recession has been so flat and why wages continue to be stagnant.
Nicole Woo of CEPR posted earlier this morning to EARN about a recent series by Michael Grabell of ProPublica and Howard Berkes of National Public Radio. Her post inspired me to follow up and include both workers’ comp (WC) and unemployment insurance (UI) in my observations. Both are central social insurance programs and both are under attack.
The ProPublica/NPR series exposed a combination of political pressure from employers and insurance companies and stern administration that has left many injured and disabled workers without adequate income support and rehabilitation. This demolition process took decades and was propelled by claims that cutting workers comp (WC) would create a better business climate. The achievement of their dismantling goal by opponents of strong WC programs is marked by the fact that the annual legislative fights of the last 3 decades over workers compensation (usually in conjunction with UI issues) no longer take place in most states. In short, the WC program is practically dead in many states and fails to protect injured and disabled workers as the data posted with the series documents.
Why should UI advocates and EARN researchers care about this WC story? As noted by Nicole, Columbia Journalism Review has a piece by Trudy Lieberman encouraging local follow-up reporting to the WC series. Lieberman quotes John Burton, a rare academic focused on workers’ comp, “I think we’re in a pretty vicious period right now of racing to the bottom.”
Racing to the bottom should be a familiar concept to UI advocates. Many of the same forces that dismantled WC are combined to attack UI programs with considerable success in recent years. And, some state programs have already been reduced to levels where the term “dismantled” fairly describes their situations. Reviewing the most recent federal data for the 12 months ending 9/30/14, regular state programs overall paid UI benefits to only 27 out of 100 jobless workers. (Using a recipiency rate calculated as the insured unemployed divided by total unemployed and reported in the UI Data Summary.) In comparison, the overall UI recipiency rate for CY 2007 was 37, representing a 27 percent reduction taking place over the Great Recession and our lingering labor market recovery. The UI race to the bottom continues in 2015. Just last week, a bi-partisan majority of state legislators in the lower house in Arkansas passed a bill cutting the maximum duration of UI benefits from 25 to 20 weeks and reducing weekly benefits an average of $72.
I have studied UI recipiency for many years, and in the past a recipiency rate below 25 placed a state at or near the bottom. Now, 14 states have recipiency rates of 20 or below (AZ, DC, FL, GA, IN, KY, LA, NC, OK, PR, SC, SD, TN, and VA). Some formerly average states, like Texas, Ohio, and Michigan, have 2014 recipiency rates below 25, as do perennial bottom feeders like AL and MO. And, the ability of states with better UI programs to resist the race to the bottom is threatened as a significant minority of states abandon any pretense of protecting their jobless workers under our federal-state UI arrangements.
UI and WC are both minor factors in total labor costs in 2014, with workers comp amounting to 44 cents per hour in the March 11 CPS report and UI coming in at only 22 cents an hour. How can our opposition make a convincing business climate argument in light of these figures?
Despite their low costs, UI and WC programs nonetheless serve as part of the picture in supporting wages, especially for those out of work or out of work due to work-related injuries. As these programs recede, they become another piece that explains the downsizing of the middle class and the absence of growth in wages. This is part of the story we need to tell as UI and WC cannot return as relevant social insurance programs if only their relatively disenfranchised participants care about these programs.
Changing a job or losing a job usually means a change in health care coverage. The big change in 2014 was the folks now have an option to find health care coverage on their own through the Affordable Care Act/healthcare.gov website.
Now, in 2015, we get to find out how the subsidies and exemption provisions of the Affordable Care Act are working out. When filing taxes this year, all of us will need to document our health care coverage and indicate whether any state or federal subsidies received for health care coverage were appropriate based on the actual 2014 income reported on these tax forms.
One of the issues that will cause problems for folks on these returns or when signing up for individual health care coverage is whether their income was so low as to qualify them for a Medicaid plan if Wisconsin had actually opted for the Medicaid expansion.
Because Wisconsin did not expand Medicaid coverage, the healthcare.gov website may have prevented folks here is Wisconsin from signing up for coverage because they presumably should have signed up for Medicaid coverage had Wisconsin expanded that coverage. But, since Wisconsin did not expand Medicaid coverage, there was no actual Medicaid coverage available for folks caught in this Medicaid gap. The solution, announced by the IRS (look for the sections about Medicaid) is that there will be no penalties for lack of health care coverage. The Medicaid exemption can be had from both the healthcare.gov website or when filing a tax return with the IRS.
If you are granted a coverage exemption from the Marketplace, they will send you a notice with your unique Exemption Certificate Number or ECN. Keep this notice with other important tax information.
You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in column C.
If the Marketplace hasn’t processed your exemption application before you file your tax return, complete Part I of Form 8965 and enter “pending” in Column C for each person listed. If you claim the exemption on your return, you do not need an ECN from the Marketplace.
For a coverage exemption that you qualify to claim on your tax return, all you need to do is file Form 8965 with your tax return – you do not need to call the IRS or obtain the exemption in advance.
You will use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a coverage exemption if your income is below your filing threshold and you choose to file to file a tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to claim this exemption.
Other coverage exemptions may be claimed on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965. Use a separate line for each individual and exemption type claimed on the return.
This chart shows the types of exemptions available and whether they must be granted by the Marketplace, claimed on an income tax return filed with the IRS, or either may be granted by the Marketplace or claimed on a tax return. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions.
Hat tip to Jason Huberty for spotting this info.