Commission on Unemployment Compensation

Ellen Marie Hess, Commissioner

Status of the Unemployment Trust Fund and Related Issues

August 4, 2015

Basic Benefit Information 2

¨  Purpose ¨  Min/Max Amount

¤  $60 ¤  $378

¨  Min/Max Duration ¤  12 weeks ¤  26 weeks

¨  Qualification ¨  Eligibility ¨  Minimum earnings requirement $3,000

Trust Fund Data—Standard Forecast (Millions of Dollars)

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2014 2015 January 1 Balance $186.9 $448.3

Tax Revenue $749.9 $667.3

Interest Revenue $9.4 $14.9

Benefits $498.4 $413.0

December 31 Cash Balance $448.3 $717.5

Solvency Level (6/30) 40.3% 52.2%

December 31, 2014, balance includes $0.5 million from FUTA Credit Reduction paid to IRS.

June 30 Trust Fund Balances and Solvency

$757

$291

($104) ($80)

$135

$335

$564

$808

$939

$1,044

$1,117 $1,159 $1,191

64%

24%

-8% -6%

9%

24%

40%

52%

60%

65%

67% 66% 65%

-$200

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

4

Mill

ions

Trust Fund Solvency shown as a percent (%)

Average Total State Tax 5

$97.40 $96.60

$127.60

$161.40 $177.60

$187.60 $187.40

$158.80 $149.20

$134.60 $126.00 $119.20 $121.20

$1.60 $6.40

$22.40

$37.60

$42.40 $30.40 $17.60

$11.20 $8.80

$10.40 $12.00

$12.80 $12.80

$16.00

$16.00

$16.00 $16.00

$16.00

$16.00

$99 $103

$166

$215

$236 $234 $221

$186

$158 $145

$138 $132 $134

$0

$50

$100

$150

$200

$250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

base tax pool tax fund builder tax

Calendar Year

Cos

t per

Em

ploy

ee

Pool Taxes

$1.60

$6.40

$22.40

$37.60

$42.40

$30.40

$17.60

$11.20

$8.80 $10.40

$12.00 $12.80 $12.80

0

5

10

15

20

25

30

35

40

45

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

6

Cos

t per

Em

ploy

ee

Calendar Year

Distribution of 2014 and 2015 Base Tax Rates (excluding 0.20% fund builder tax) Computed and Assigned Rates

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Tax Rates Number of Employers Percent of Total

Computed 2014* 2015** 2014* 2015**

0.10% 112,426 118,381 56.7% 59.3%

0.15%-0.90% 9,223 9,703 4.6% 4.9%

1.05%-1.95% 8,192 8,541 4.1% 4.3%

2.10%-2.85% 5,509 5,449 2.8% 2.7%

3.00%-3.90% 5,167 4,943 2.6% 2.5%

4.05%-4.95% 3,949 3,590 2.0% 1.8%

5.10%-5.85% 2,747 2,569 1.4% 1.3%

6.00%-6.15% 803 692 0.4% 0.3%

6.20% 17,538 14,594 8.8% 7.3%

Assigned

New, 2.50% 25,250 24,809 12.7% 12.4%

Delinquent, 6.20% 775 639 0.4% 0.3%

Foreign Contractor, 6.20% 277 222 0.1% 0.1%

Other, 6.20% 6,563 5,480 3.3% 2.7%

Total 198,419 199,612 100.0% 100.0%

Taxable wage base is $8,000. *excluding 0.22% pool tax. **excluding 0.14% pool tax

Claims Filed 8

Calendar Year Initial Claims

2010 380,830

2011 330,057

2012 301,211

2013 276,807

2014 224,882

2015 (Jan. – June) 94,635*

* Annual claims projected to be 182,000.

Virginia’s Unemployment Rates 2013 - 2015 (year to date)

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4.5

5.0

5.5

6.0

6.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2014 2015

(not  seasonally  adjusted)  

Percen

t  of  Labor  Force  

UI Initial Claims 2013 - 2015 (year to date)

10

13,000

18,000

23,000

28,000

33,000

38,000

43,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2014 2015

¨  Total initial claims through June this year are down 19.4% because of fewer layoffs in manufacturing.

¨  October 2013 increase includes initial claims from partial federal government shutdown.

UI Final Payments 2013 - 2015 (year to date)

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3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2014 2015

¨  For the first six months of 2015, final payments are down 20.2% from 2014 and 30.5% from 2013.

¨  The exhaustion rate in June was 41.2%, down from last June’s 46.3%.

Exhaustion Rates 2013 - 2015 (year to date)

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41.0%

42.0%

43.0%

44.0%

45.0%

46.0%

47.0%

48.0%

49.0%

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

2013 2014 2015

Exhaus3o

n  Ra

te  

Fourth Circuit States 13

Trust Fund Balance

(6/30/15) (Millions)

Average Tax per Employee (year ending

9/30/14)

Average Tax Rate

(year ending 9/30/14)

2015 Taxable

Wage Base

2015 Maximum

Weekly Benefit

2015 Maximum

Weekly Benefit

Replacement Rate

2015 State

Potential Duration (Weeks)

DC $369 $251 2.79% $9,000 $359 24% 19 – 26

MD $1,003 $241 2.83% $8,500 $430 43% 26

NC $690 $473 2.18% $21,700 $350 41% 5 – 12

SC $175 $340 2.43% $14,000 $326 42% 13 – 20

VA $740 $211 2.64% $8,000 $378 39% 12 – 26

WV $115 $362 3.02% $12,000 $424 55% 26

US Avg. $400 2.98% $13,408 $431 45%

Trust Fund Loans

¨  Outstanding Loans from the Federal Unemployment Account. Balances as of July 14, 2015 are:

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State Outstanding Loan

California $5,843,107,481.32

Connecticut $103,054,308.32

Indiana $311,071,360.87

Kentucky $35,628,424.92

Ohio $978,459,387.04

Virgin Islands $72,261,088.66

TOTAL $7,343,582,042.13

Source: United States Department of Labor Employment and Training Administration

Short-Time Compensation and Military Trailing Spouse Updates

¨  Short-Time Compensation (STC): U.S. Department of Labor has written that Virginia’s STC law precludes Virginia from qualifying for the STC grant due to sunset provisions in 60.2-710(5) and 60.2-710(6). ¤  Since the January 1, 2015, implementation of the law, there

have been no participating employers.

¨  Military Trailing Spouse: For Fiscal Year 2015, $658,597 in benefits were paid to 212 claimants. 

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2015 Session: HB 1278 Unemployment Compensation; Responsibility for Benefit Charges

¨  Would have amended provisions in Virginia's unemployment compensation laws designating the employer responsible for benefit charges. Under current law, the last employer that employed a benefits-eligible individual for 30 days or 240 hours will be assessed benefit charges relating to such individual's benefit claim. The bill increases the amount of employment required before responsibility attaches to 60 days or 480 hours.

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2015 Session: HB 1855: Unemployment Compensation Tax; Excluding Wages

Total FUTA tax where SUTA paid on time and in full per employee

Total FUTA tax where wages were not covered by SUTA

$7,000 x .006=$42 $7,000 x .06(.006+.054)=$420

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If a business owner’s wages are excluded from taxable wages, then the business will be liable for the increased FUTA amount.

United States Treasury Offset Program (TOP) Information

¨  The Treasury Offset Program is administered by the Bureau of the Fiscal Service’s Debt Management Services (DMS).

¨  Virginia law (§ 2.2-4806) mandates that state agencies use TOP to collect eligible debts.

¨  VEC will utilize TOP to collect eligible UI benefit overpayment debts and unpaid UI tax debts.*

¨  100% of funds recovered from TOP are deposited into the UI Trust Fund.

¨  There is a fee of $17 per offset, which the agency (VEC) must pay.

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United States Treasury Offset Program (TOP) Information (continued)

¨  VEC estimates that in the first year of participation, approximately ¤  65,000 accounts will be referred to TOP ¤  $35 million will be requested for offset ¤ Up to $1 million in IRS administrative fees will be incurred.

¨  *Debts are eligible to be referred to TOP if they are ¤  The result of fraud or failure to report earnings while

collecting UI benefits. ¤ More than 90 days delinquent, and the debtor is not in

appeal, repayment, or bankruptcy.

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