In my almost 30 years of experience, it's hard for me to recall a more difficult time when it comes to Nevada's Unemployment Insurance Trust Fund. The trust fund is the pool of money from which U.I. claimants are paid. It is funded through a payroll tax assessed taxable employers in Nevada and the average tax rate in Nevada is subject to change each year depending on the health of the fund. The Employment Security Division of the Department of Employment, Training and Rehabilitation has done a masterful job over the years in managing this fund and seeing that it is solvent enough to ensure enough money for benefit payouts. For example, the trust fund balance on January 1, 1991 was $351 million and as recently as December 1, 2007 it had a balance of $816 million! But we are now in unprecedented times. With an unemployment rate as high as 12 percent, the stress on the trust fund has been enormous. The Employment Security Division has stated that the fund will be depleted by the end of 2009. Where we were once knocking on the door of having a $1 billion reserve, we are now trying to determine what needs to be done in order to continue the payout of benefits to eligible claimants!
The Employment Security Department's Advisory Council will meet in October, as they usually do, in order to determine the average tax rate for calendar 2010. In 2009, the average tax rate was 1.33 percent. There have been reports recently that the tax rate could double. There have also been reports that the state will borrow from the federal government in order to continue the benefit payouts. We just don't know at this point what the outcome will be. One thing is certain, Nevada needs additional funds to keep the program going and they're going to need to get the money somewhere. I've been telling my clients for months now to pay close attention to the payroll taxes line on their 2010 budget as the amount they pay is almost certain to go up. The October advisory council meeting will most certainly be one of the more important meetings they have had in the last 20 years.
So, what does all of the above mean to the average Nevada employer? During all my years in and around the unemployment insurance industry, I've told employers that their unemployment insurance tax rate is the one tax they can control. Historically that has been true! However, so much is now dependent on the direction the decision makers want to go (significantly higher taxes vs. government loans) that a decision based on numbers without politics is not very likely, meaning your tax rate is not as totally under your control as it has been. But there are still things employers can do to protect their unemployment insurance experience rating:
First and foremost, all employment termination decisions must be well documented. The state, when adjudicating a claim for benefits, puts much weight on evidence such as documentation. So don't underestimate the importance of properly written disciplinary actions or detailed records of other workplace issues.
Secondly, know and understand the various types of claims the state Employment Security Division issues. Know the difference between a base period notice and a notice of claim filed and how each could affect you. Know how to properly respond to a claim ensuring you the best chance of a favorable outcome. And, if an adjudicator calls for follow-up information DO call back and give them the information requested. Failing to do so simply gives the adjudicator a reason to rule in favor of the claimant.
Next regarding appeals hearings, a common mistake I see employers make is they send the HR representative to the hearing and then they testify to what others, including witnesses, have told them. This hearsay is easily overcome by the claimant usually by simply rebutting what the employer has said. So, if you have three witnesses who have direct testimony to provide make sure they all go to the hearing. Don't expect a favorable outcome if all you offer up is hearsay. Hearing preparation takes time but the results could be to your advantage.
Finally, conduct a comprehensive audit of your quarterly Notice of Benefit Payments Charged. Often there are charges which appear erroneously. It is up to you to identify these errors and protest them to the state in a timely manner.
Understanding how unemployment insurance works is the first step in having a successful plan to administer it. With each claim carrying a potential maximum value of $10,400 and with the likelihood of higher than ever tax rates next year, it's easy to know why we can no longer look at UI as a small part of doing business.
James V. Nelson is executive director of the Nevada Association of Employers. Contact him at 329-4241 or through www.nae-online.org.
