Bright Idea Newsletter – April 2011

Bright Idea Newsletter – April 2011

What’s Happening with Unemployment?

From HR News Update:

The White House has a problem: State unemployment funds are shrinking and the Obama administration is proposing that an increase in the wage base for the Federal Unemployment Tax Act tax is the way to fix the problem.

In a nutshell, the proposal is that the wage base for FUTA tax paid by employers be increased from $7,000 to $15,000.

Under current law, employers pay 6.2% in taxes on the first $7,000 of earnings paid to each worker – a level that’s been in effect since 1983. If the proposal becomes law, an employer’s maximum FUTA contribution per employee would increase from $434 to $930. The increase would go into effect in 2014.

How bad is the problem?

At least 30 states have exhausted their unemployment funds and have had to borrow $41 million from the federal government. The states who are the biggest borrowers:

  • California
  • Illinois
  • Michigan
  • New York
  • Pennsylvania

If Congress and the administration make no changes in current law, the borrowing states will start paying interest on the loans in September. Where will they find the money? Most states don’t want to raise taxes on workers, so employers likely would see a special assessment – meaning it’s a pick your poison predicament for businesses: pay the state or pay Uncle Sam.

Would the increase be temporary? Economists say it will take about a decade for states to climb out of the hole.

SSA No-Match Letters Are Back

….The Social Security Administration (SSA) has resumed sending employers no-match letters. No-match letters are issued by the SSA if an employee’s name does not correspond to a valid Social Security number. Employers are strongly encouraged to develop or dust off their action plans for addressing no-matching issues.

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