End of 2014 Legislative Enactments Impacting Unemployment Insurance

At the end of December before adjourning for the year Congress passed and the President signed a number of bills that  will impact unemployment insurance in 2015. The major legislation enacted included the following:

Tax Increase Prevention Act of 2014 (HR 5771)– signed December 19, 2014

See http://www.gpo.gov/fdsys/pkg/BILLS-113hr5771enr/pdf/BILLS-113hr5771enr.pdf

 Extended the Work Opportunity Tax Credit through 2014

Section 119 provides an extension of the Work Opportunity Tax Credit for qualified individuals for work which began after December 31, 2013 and on or before December 31, 2014. The one year extension is welcome news but once again raises the question about authorization for a continued extension for individuals hired in 2015.

The President signed the Omnibus Appropriations Act making funds available for WOTC State Administration for the remainder of FY 2015 which ends September 30, 2015. It is expected that the Secretary of Labor will once again allocate these funds to States to allow acceptance and filing of employer certification requests in anticipation of WOTC’s retroactive reauthorization for 2015. However, there continue to be significant backlogs and the appropriation levels to support WOTC administration lag the increased workload.

Recognized PEOs as employers for purposes of unemployment insurance reporting and contributions

The specific provisions impacting unemployment may be found on page 155 of the bill  The new law adds conforming language to Sections 3302 and 3303 of the Internal Revenue Code clarifying that

 

‘‘(h) TREATMENT OF CERTIFIED PROFESSIONAL EMPLOYER ORGANIZATIONS.—If a certified professional employer organization (as defined in section 7705), or a customer of such organization, makes a contribution to the State’s unemployment fund with respect to wages paid to a work site employee, such certified professional employer organization shall be eligible for the credits available under this section with respect to such contribution.’’

 

(4) if the taxpayer is a certified professional employer organization (as defined in section 7705) that is treated as the employer under section 3511, such certified professional employer organization is permitted to collect and remit, in accordance with paragraphs (1), (2), and (3), contributions during the taxable year to the State unemployment fund with respect to a work site employee.

 

Below is the broader summary information from the National Association of Professional Employer Organizations (NAPEO)

 

The SBEA makes the following changes to the Internal Revenue Code (federal tax code):

  • Certification Process – The IRS is required to create a voluntary certification program for PEOs.
  • PEOs Recognized Under Federal Tax Law – PEOs that choose to be certified (CPEOs) will have clear statutory authority to collect and remit federal employment taxes under the CPEO’s EIN for wages the CPEO pays to worksite employees.   CPEO customers will never be liable for those taxes.
  • Customer Eligibility for Tax Credits Confirmed – The SBEA expressly codifies that customers of CPEOs will qualify for specified federal tax credits that the customers would be entitled to claim if there were no PEO relationship.
  • CPEO Gets Federal Tax Credit for SUTA Taxes Paid – If a CPEO (or a customer) makes a contribution to a state unemployment fund with respect to wages paid to a worksite employee, the CPEO receives the federal (FUTA) tax credit with respect to that contribution.
  • Potential Double Taxation Eliminated – The FICA and FUTA wage bases will not restart when a customer joins or leaves a PEO mid-year.

 

PEO Certification

Requirements for IRS certification include:

  • Bonding – A CPEO must maintain a $50,000 bond, or, if greater, a bond in an amount that is equal to five percent of the CPEO’s federal employment tax liabilities for the previous year (not to exceed $1 million).
  • Annual Audits – A CPEO must prepare and provide the IRS with annual independent financial statement audits prepared by a CPA.
  • Quarterly CPA Attestations on Employment Taxes – A CPEO must provide quarterly assertions to the IRS regarding payment of all employment taxes, accompanied by an examination level attestation by an independent CPA with respect to each such assertion.
  • Annual Fee – The CPEO must pay an annual fee of up to $1,000 per year to be (and remain) certified.
  • List of CPEOs will be Published – The IRS will publish a list of all CPEOs, as well as a list of those PEOs whose certification has been revoked or suspended.
  • CPEO Sole Liability – The CPEO assumes sole liability for the collection and remission of the federal payroll taxes with respect to wages paid by the CPEO to worksite employees.   A worksite employee is an individual who performs services for a customer at a qualifying worksite under a qualifying service contract between such customer and the CPEO.

 

Implementation

  • Effective Date – The SBEA is likely to be effective on January 1, 2016.
  • Certification Program Timeline – The IRS is directed to establish a PEO certification program within six months (late June 2016).
  • Reporting Requirements – The IRS will provide necessary reporting and recordkeeping rules and procedures, including rules that require the CPEO to track and report the “commencement or termination” of a service agreement with a customer.

Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015

 See http://www.gpo.gov/fdsys/pkg/BILLS-113hr3979enr/pdf/BILLS-113hr3979enr.pdf

Added special pilot reemployment services program for individuals who become unemployed from military service.

 

Section 555 of the Act includes

 

PILOT PROGRAM TO ASSIST MEMBERS OF THE ARMED FORCES IN OBTAINING POST-SERVICE EMPLOYMENT.

(a) PROGRAM AUTHORIZED.—The Secretary of Defense may conduct the program described in subsection(c) to enhance the efforts of the Department of Defense to provide job placement assistance and related employment services to eligible members of the Armed Forces described in subsection (b) for the purposes of—

(1) assisting such members in obtaining post service employment; and

(2) reducing the amount of ‘Unemployment Compensation for Ex-Service members’ that the Secretary of Defense and the Secretary of the Department in which the Coast Guard is operating pays into the Unemployment Trust Fund.

(b) ELIGIBLE MEMBERS.—Employment services provided under the program are limited to members of the Armed Forces, including members of the reserve components, who are being separated from the Armed Forces or released from active duty.

(c) EVALUATION OF USE OF CIVILIAN EMPLOYMENT STAFFING AGENCIES.—

(1) PROGRAM DESCRIBED.—The Secretary of Defense may execute a program to evaluate the feasibility and cost-effectiveness of utilizing the services S\AJSCIA~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\CPRT-1~1.XM

of civilian employment staffing agencies to assist eligible members of the Armed Forces in obtaining post-service employment.

(2) PROGRAM MANAGEMENT.—To manage the program authorized by this subsection, the Secretary of Defense may select a civilian organization (in this section referred to as the ‘program manager’’)whose principal members have experience—(A) administering pay-for-performance programs; and (B) within the employment staffing industry.

(3) EXCLUSION.—The program manager may not be a staffing agency.

(d) ELIGIBLE CIVILIAN EMPLOYMENT STAFFING AGENCIES.—In consultation with the program manager if utilized under subsection (c)(2), the Secretary of Defense shall establish the eligibility requirements to be used for the selection of civilian employment staffing agencies to participate in the program. In establishing the eligibility requirements for the selection of the civilian employment staffing agencies, the Secretary of Defense shall also take into account civilian employment staffing agencies that are willing to work and consult with State and county Vet-

erans Affairs offices and State National Guard offices, when appropriate.

(e) PAYMENT OF STAFFING AGENCY FEES.—To encourage employers to employ an eligible member of the Armed Forces under the program if executed under this section, the Secretary of Defense shall pay a participating civilian employment staffing agency a portion of its agency fee (not to exceed 50 percent above the member’s hourly wage). Payment of the agency fee will only be made after the member has been employed and paid by the private sector and the hours worked have been verified by the Secretary. The staffing agency shall be paid on a weekly basis only for hours the member worked, but not to exceed a total of 800 hours.

REPORT REQUIRED.—If the Secretary of Defense executes the program under this section, the Secretary shall submit to the appropriate congressional committees a report describing the results of the program, particularly whether the program achieved the purposes specified in subsection (a).The report shall be submitted not later than January 15, 2019.

Consolidated and Further Continuing Appropriations Act, 2015

See http://www.gpo.gov/fdsys/pkg/BILLS-113hr83enr/pdf/BILLS-113hr83enr.pdf

Continued dedicated funding for reemployment eligibility assessments and reemployment services for UI applicants.

The Act at page 324 provides appropriations within amounts provided for UI administration of not less than $60,000,000 state UI agencies to conduct in-person reemployment and eligibility assessments and unemployment insurance improper payment reviews, and to provide reemployment services and referrals to training as appropriate

In addition, $20,000,000 from the Employment Security Administration Account of the Unemployment Trust Fund shall be available for in-person reemployment and eligibility assessments and unemployment insurance improper payment reviews and to provide reemployment services and referrals to training as appropriate, which shall be available for Federal obligations through December 31, 2015, and for State obligation through September 30, 2017.

 

UWC has supported targeted reemployment and eligibility assessments, reemployment services, and increased attention to improper payments in as measures to reduce erroneous payments and reduce the duration of unemployment compensation and charges to employer accounts.