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 Focus On: Unemployment Taxes

LTC providers can save by better managing this aspect of the business.

 President & CEO of UC Alternative

State unemployment insurance trust funds are underfunded by at least $100 billion dollars, which means that employers’ unemployment taxes will need to double or even triple in the coming years in order to keep up with benefit demands. 

The fact that unemployment across the United States has risen dramatically in the past four years is not news. At the end of 2007, the jobless rate was 4.6 percent, compared with 9.1 percent as of September this year.

Less well known is the fact that, in order to continue paying unemployment benefits, 27 state unemployment insurance trust funds recently had to borrow $38 billion from the Federal Unemployment Insurance Trust Fund as of Sept. 2011. 

Unemployment Eligibility
Unemployment benefits are designed to provide temporary assistance to those who have lost their job, or had their hours reduced, through no fault of their own. 

If an employee is terminated for misconduct, unemployment benefits should be denied. And in order to best defend against misconduct, each employer should have a policy and procedure handbook that defines misconduct. A copy of this handbook should be given to and reviewed with each new employee.

Each employee must sign a statement acknowledging receipt and understanding of this policy. This statement, along with other documents such as copies of warnings or other proof of misconduct, plus first-hand witnesses who are willing to testify, are critical to winning a claim.    

For employers, managing this aspect of a business can be easily overlooked, but long term and post-acute care employers, which are now facing an 11.1 percent Medicare reimbursement cut in addition to further Medicaid cutbacks, need to watch their operating costs like never before.

One way to do this is through an aggressive and effective unemployment cost-control program that helps reduce unemployment taxes.

How It Works
According to the Center on Budget and Policy Priorities, no state trust fund meets the Department of Labor’s minimum funding requirements. In addition, over the next several years, it is projected that state trust funds will need to raise at least $100 billion to repay the debt, plus interest and penalties and the re-capitalization of state trust funds.

States have the ability to raise unemployment taxes in a variety of ways: charging an across-the-board surtax, increasing the employment taxable wage base, increasing the minimum rate, or increasing each employer’s experience tax rate by shifting to a higher tax table.

Each employer pays an annual unemployment payroll tax, per employee, which is paid into federal and state unemployment insurance trust funds. In addition, each employer has an unemployment tax rate that is based on the company’s specific experience with terminated employees, known as the experience tax rate, which is then applied to each employee’s wages, up to a maximum amount, which varies by state and ranges from $7,000 to $36,800.

The taxes are used to provide some assistance to employees who have lost their jobs through no fault of their own.   

Controlling Costs
There is nothing an employer can do to minimize an across-the-board surtax or an increase in an unemployment taxable wage base. However, with a more aggressive management of one’s unemployment cost-control program, an employer’s tax will be significantly minimized.

One 3,000-bed company recently took a more proactive approach to managing its unemployment cost control program and was able reduce its average monthly unemployment benefits paid from $33,000 to $19,000, a 42 percent reduction.

Most employers in the long term and post-acute care industry could experience similar savings by being more aggressive in defending unemployment claims. 

Vendor Review
Following are some key characteristics that providers should consider when implementing an effective unemployment cost-control program:
1. Centralized control and accountability.
2. A level of cooperation from each hiring location.
3. No non-protestable claims due to lack of responses, insufficient documentation, or missing separation information.
4. Decisions not to protest or appeal unemployment claims should not rest solely with the hiring locations.
5. Training and retraining should take place at each hiring location as staff turnover takes place.
6. The creation of a concise management report that allows management to identify problems and implement immediate corrective actions. 

John Doran is president and chief executive officer of UC Alternative, based in Gaithersburg, Md., a consulting company that helps long term care providers reduce the number of unemployment claims lost. For more information, contact Doran at: john.doran@ucalternative.com or 301-355-6249.​​

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