Tool Technology in Inman experienced several decades as a successful plastic injection molding and manufacturing business providing machining and tool and die services to the electronics, medical, and automotive industries. However, the company recently found that customers and prospects had a tendency to classify the business as providing either molding or machining services, but not both.
Unemployment Insurance taxes are a necessary cost of doing business. Play an active role in controlling these costs by understanding the factors that may increase or decrease this tax liability.
Tens of thousands of unemployment appeals are filed by both claimants and employers every year with DEW. The agency follows state and federal laws, regulations and U.S. Department of Labor guidelines to ensure parties are provided with due process during their appeal.
In the current IT landscape, nearly all companies and government agencies are the target of cyber criminals. The Information Security Team at the South Carolina Department of Employment and Workforce (DEW) works around the clock to safeguard private data entrusted to them by the public.
S.C. businesses received their individual tax rate notices for 2013 in early January.
Each employer’s rate is based on its benefit ratio, and the tax rate class assignment in the notice should be used for wages paid between Jan. 1 and Dec. 31, 2013.
South Carolina has been selected to help lead the nation’s efforts to improve Unemployment Insurance (UI) integrity commonly known as fraud and overpayment prevention.
The fastest, easiest and most cost-efficient way to stay on top of all your DEW-related business transactions is through the South Carolina Business One Stop (SCBOS).
S.C. businesses received their revised 2012 unemployment insurance tax rates during the last week of September.
Because of $77 million in state general fund appropriations, tax rates were recalculated and will save impacted businesses about 12 percent for the year compared to the original 2012 rates. The state appropriation was designed to help pay back outstanding federal loans and ease businesses’ transition to the new tax rate structure implemented in 2011.
The revised tax rate notices, which were mailed to affected businesses, informed employers of the new rate they should use when filing third and fourth quarter reports, due Oct. 31 and Jan. 31, 2013 respectively.
The notices also listed applicable credits businesses will receive for payments made in the first and second quarters, which total more than $32 million.
Federal law requires that any overages paid when tax rates were higher must remain as credits to be applied toward future taxes. Credits require no action on the part of the business, and can be used against any future unemployment tax liability and do not expire.
The 2013 tax rates are on track to be released in early November.
In August, DEW voluntarily repaid $106.5 million to the federal government for the agency’s unemployment trust fund loan bringing the outstanding balance to approximately $675.7 million. The state is scheduled to repay the entire loan by the end of 2015.
On June 18, 2012, the South Carolina General Assembly passed Act 247, which among other things, changed the law concerning disqualification for Unemployment Insurance (UI) benefits. Specifically, the act amended SC Code Section 41-35-120 which deals with situations where people have been fired or have voluntarily quit their jobs.
The primary change to the law was the addition of a new term called “misconduct connected with the employment.” If a person is determined to have committed misconduct connected with the work, the law now provides that the person will be totally disqualified from receiving unemployment benefits. In South Carolina, the maximum number of weeks a person can receive unemployment benefits is 20 weeks. Therefore, if someone is found to have committed misconduct connected with the employment, that person will receive no state-funded unemployment benefits.
Act 247 also included a provision that someone who is fired for “cause” will also be penalized, but because “cause” is described as something less than misconduct, the penalty is less severe than total disqualification. People who are deemed to have been fired for cause can receive some benefits – depending on the severity of their actions – but they are limited to no more than 15 weeks, and in some instances may receive only one week.
The law says that these individuals may be partially disqualified between five and 19 weeks (meaning that at most, they could receive 15 weeks and at the least, one week). Abiding by the range provided by the law, the SC Department of Employment and Workforce (DEW) has an internal policy that allows a penalty of five to 10 weeks for absences caused by medical reasons, and a penalty of 16 to 19 weeks for all other incidents.
Although the total disqualification for misconduct is new to South Carolina, the “cause” penalties have been part of the law for quite some time. During the last two years, DEW has become stricter on the non-medical causes:
- In 2011, the minimum disqualification was increased from 10 weeks to 12 weeks.
- Beginning April 1, 2012, the minimum disqualification was raised even further from 12 weeks to 16 weeks.
On disqualification claims as with all claims, every case must be decided on its own merits using the information supplied by each party. Having all of the necessary information about why the person was let go from the job is a critical factor in making an accurate determination of misconduct, cause, voluntary quit, etc.
After a claim has been filed, state law allows a business up to 10 calendar days to respond to DEW about why the claimant was terminated. Unfortunately, far too many businesses are not responding at all or not responding with enough information to allow the Department to make an informed decision.
DEW wants every business – and every claimant – to have the opportunity to provide input into the process, and DEW has launched substantial efforts to reach out to the public to make everyone aware of how convenient it is to share the information.
As part of this initiative, DEW is reaching out early to businesses by contacting them by phone to receive their input and speed up the initial determination process. Prior to the 10 days’ time limit in which a business has to respond to the agency, DEW makes efforts to contact businesses. If no response is received by the fifth day, DEW begins to reach out by telephone. A second attempt is made after seven days. If DEW does not get a response within 10 days, it makes yet another phone call, and then provides the business an additional two days to respond.
There are several ways that businesses can reply to DEW’s request for separation information on the claimant. An electronic request can be sent through the SC Business One Stop (SCBOS) at http://www.scbos.sc.gov or through the State Information Data Exchange System (SIDES). Read this article to learn more about signing up for SCBOS, and check out this article to learn about SIDES.
DEW encourages businesses to register for claim notification and communication with SCBOS because not only is it more convenient for the business, but it is also typically much quicker than the paper version. Ultimately receiving information from businesses is crucial in helping DEW make accurate decisions on eligibility and disqualification.
Act 247 brings an added measure of accountability to the UI program by disallowing any benefits for people who have been fired for misconduct. DEW implemented the new law immediately upon its enactment and is monitoring the results for accuracy and consistency.
This month, South Carolina will make its final application to the U.S. Department of Labor (DOL) so businesses will avoid a credit reduction on their federal unemployment taxes.
A part of the DOL requirement to stop the credit from being reduced is that South Carolina must make a voluntary payment of $106.5 million towards the outstanding loan balance prior to Nov. 9, 2012. The state made this payment in August, more than two months in advance.
Our state should receive approval from DOL in mid-November.
The Internal Revenue Service (IRS) will publish a list of credit reduction states after DOL makes its certifications in November and will have additional information available about completing the federal 940 tax forms.
Federal Unemployment Tax Act (FUTA) Background
Employers pay federal unemployment taxes on the first $7,000 of each worker’s annual wages. The FUTA tax for 2012 is a flat rate of 6.0 percent. However, businesses that pay their state unemployment taxes on time and in full can receive up to a 5.4 percent credit if the state is not subject to any credit reductions. Therefore the net FUTA tax rate is typically 0.6 percent.
Credit Reduction: What it Means
Federal law requires a reduction in the FUTA tax credit when a state has outstanding federal unemployment loans for two years and has not made sufficient voluntary payments towards the loan. The reduction in the tax credit is 0.3 percent for the first year and an additional 0.3 percent for each succeeding year until the loan is repaid or other avoidance criteria are met.
2012 is the third year that South Carolina has had an outstanding federal loan balance. The official credit reduction amount for 2012 would likely be 0.9 percent. Therefore, the net FUTA tax could be 1.5 percent for wages paid in 2012 if South Carolina does not meet certain avoidance criteria.