Over $5 Billion in Unemployment Claims Improperly Paid by the States
by Brian Cameron, SVP Business Development
The numbers are in and according to the US Department of Labor (DOL); states improperly paid more than $5,000,000,000[1] to the unemployed in 2011. When you add this number to the legitimate claims that many employers have had to pay due to the economic downturn, you can see why state unemployment tax rates (SUI) have jumped for most employers. According to the DOL Employment and Training Administration, the average SUI rate has gone from 2.68% in 2006 to 3.24% in 2011[2]. This does not take into account that some of the states have also raised the base wage rate and also added a surcharge for the extended unemployment benefits approved by congress. As a result of the average improper payment rate of 11.31% (2.92% of that being fraud)[3], the DOL has increased efforts to reduce improper payments by addressing the three most common causes: - People continuing to make claims even after returning to work;
- Failing to register with the state employment services or meet state work search requirements; and
- Untimely or inaccurate separation information from employers.
To reward states that have implemented programs to improve the situation, the DOL awarded more than $191 million in 2011 for unemployment insurance program integrity and technology infrastructure systems. Here is a link to the news release announcing the awards: http://www.doleta.gov/ETA_News_Releases/20111361.cfm. Many employers on the other hand have chosen not to wait and have moved their employees to Professional Employer Organizations (PEOs) or use third party administrators such as Paradigm Partners to handle their unemployment claims. These organizations specialize in claims management and have the expertise to work with multiple state rules and regulations. They can focus on timely responses and in most cases are familiar with the different idiosyncrasies of the states. They also provide benefit audits to look for errors in claim payments and charge rates. Unemployment claims cost businesses many thousands of dollars a year. Unfortunately, few employers actually realize how much their company's bottom line is negatively impacted when state unemployment rates (SUI) are allowed to climb. Every day we encounter businesses of every size that are paying an extra 1-3% of their payroll in additional SUI because they are not fully cognizant of how the system works. When a company receives a poor annual increased SUI rate due to their negligence of the system, it normally takes up to three years before it can be substantially reduced. By that time, employers with even a small amount of unwarranted employee turnover will experience a tremendous increased expense as they begin to grow and hire new workers. You might not be aware that Paradigm Partners offers Unemployment Claims Management services. Once our program is implemented, we will help your company minimize your unemployment tax rates by providing an Initial Review, Administration of Claims, Audit of Benefit Charges, Management of Unemployment Taxes, Unemployment Claims Management and finally, Reporting. Go to Unemployment Claims Management to learn more. Contact Karim Solanji at 281-558-7100 or KSolanji@ParadigmLP.com to learn how Paradigm can minimize your company's unemployment tax rates.
[1] The value was taken from the Calendar Year improper payment data for the Unemployment Insurance (UI) program derived from the Benefit Accuracy Measurement (BAM) program. Unemployment Insurance Integrity Rates worksheet.
http://www.dol.gov/dol/maps/Data.htm
[3] The value was taken from the Calendar Year improper payment data for the Unemployment Insurance (UI) program derived from the Benefit Accuracy Measurement (BAM) program. Unemployment Insurance Integrity Rates worksheet.
http://www.dol.gov/dol/maps/Data.htm | 
