On May 18, 2013, the governor of Texas signed SB 1537, Chapter 203 into law. It goes into effect on October 1, 2013.
image credit: Assad Texas Longhorns
Texas SB 1537, Chapter 203
The new legislation subjects Texas employers to UI integrity provisions as required by Section 252 of the 2011 Federal Trade Adjustment Assistance Act (TAAEA). Section 252 provisions pertain to the overpayment of UI benefits caused either by an employer's failure to respond timely or adequately, or by fraud on the part of the claimant.
To comply with Section 252, Texas' new law:
Prohibits employer relief of UI benefit chargebacks when claims have been erroneously paid out as a result of employer (or the employer's agent) failure. Texas law defines a "pattern of failure" to respond timely or adequately as "at least two prior occasions."
Section 208.004 of the Texas Labor Code is amended to include:
- Subsection (a-1), which states responses to a notice "must include sufficient factual information to allow the commission to make a determination regarding the claimant's entitlement to benefits."
- Subsection (d) "a notification is not adequate if [it] merely alleges that a claimant is not entitled to the benefits without providing sufficient factual information, other than a general statement of the law, to support the allegation."
- Subsection (e) relating to a "good cause" exception to failure to provide adequate or timely notification, states "good cause is established only by showing that a person, or the person's agent, was prevented from complying with this section due to compelling circumstances that were beyond the person's control."
- Subsection (f) notes "the commission may adopt rules as necessary to implement this section."
Note: this is an excerpt; please see entire copy of the legislation here.
Here is the most current available UI data for Texas:
- Unemployment rate (as of March 2013): 6.4%
- Taxable wage base in 2013: $9,000
- Amount of state trust fund loans: now ZERO loan balance; positive account balance in state trust fund
- Minimum weekly benefit: $62
- Maximum weekly benefit: $440
- Minimum tax rate: 0.48%
- Maximum tax rate: 7.35%
- Using employer-financed bond: Yes
- FUTA reduction: No
About Section 252
Section 252 measures are part of a larger effort by the federal government to address the growing U.S. deficit, and are specifically designed to help prevent the improper payments which have long been a drain on the unemployment insurance system.
Section 252's mandate is that states must require employers to respond timely and adequately to state requests for UI benefit information. Accordingly, when employers (or their agents) fail to respond timely and adequately and are responsible (in part or in whole) for improper payments being made to claimants, the employer's UI account must not be relieved of charges. The prohibition against relief of benefit charges applies to for-profit and non-profit employers alike.
Federal TAAEA law requires employers to be charged for UI benefit overpayments when there is a pattern or practice of failure to adequately and timely respond to state requests for information about UI benefit claims.
Read more about UI Integrity
With TAAEA's Section 252, the federal government has mandated the states to apply new, stricter rules and practices which place a greater burden on employers to respond quicker, respond better, be more on top of what their third party administrator (TPA) is doing on their behalf, and to be financially responsible for overpayments on unemployment claims charges whenever they hold any blame for the overpayment.
The TAAEA requires states to have UI integrity provisions in place by October 21, 2013, or risk losing the 5.4% maximum federal unemployment insurance (FUTA) credit for their state's employers. Many of the states' new laws are going into effect before the October 21st date.
Past DOL claims that 19% of UI benefit overpayments stem from employers' untimely response and/or inaccurate information were a major impetus to hold employers accountable for these overpayments. In 2011, the Department of Labor estimated that $14 billion dollars, or 11% of all UI claim payouts, were a result of overpayments. For more information, see our earlier blog post here.
If you are an employer with operations in the state of Texas, now is an opportune time to ensure that your in-house and/or third party administrator is prepared to address the upcoming changes as a result of the newly-passed legislation. With this, Texas joins the ranks of other states that have recently enacted UI Integrity legislation, including: CA, CO, HI, IA, ID, IL, IN, FL, KS, KY, MD, MN, MS, MT, NC, NE, NH, ND, NY, OK, SD, UT, VA, WV, and WY.
Employers in other states, be on the lookout for similar legislation soon headed your way.
Download our one page Fact Sheet on Section 252 to get a better understanding of key provisions that will directly impact employers.
Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS "Circular 230" rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.