On Dec. 19, 2011, Governor Rick Snyder signed legislation to address Michigan’s bankrupt unemployment insurance (UI) system. The legislation attacks Michigan’s $3.2 billion debt to the federal government for its 100 percent employer-financed unemployment insurance (UI) system. Without this legislation, Michigan employers would have faced significant, ever-increasing federal penalties to repay the debt and interest, without building solvency in the fund that is used to pay unemployed workers (UI Trust Fund).
The new law provides a comprehensive solution to the UI crisis. It reforms the system to address many of the fundamental problems that created the crisis and authorizes the Michigan Finance Authority to issue bonds to repay the $3.2 billion debt to the federal government. The law also provides that an “obligation assessment” shall be assessed on all employers on both a fixed and experience rated formula. For 2012, the minimum (base) bond obligation assessment will be $42 per employee.
Although it’s true that UI taxes are going up in 2012 due to the legislation, doing nothing would have been the most expensive option. In fact, the new law provides over $430 million in principal and interest savings for Michigan employers in tax year 2011 and 2012 and allows the state to avoid triggering a federal penalty in mid-2012, which would have cost Michigan businesses an estimated $739 million in higher UI taxes in 2013 and beyond.
In addition to the funding solutions, the new law includes a range of new job searching and eligibility requirements for claimants and cost-saving reforms for job providers, including:
- Implementing strict penalties for claimants who scam or defraud the system;
- Tightening the rules for eligibility and disqualification standards;
- Strengthening the “looking for work” requirement to ensure individuals are available for, and actively seeking, work;
- Increasing the suitable work requirements and thresholds by prohibiting claimants from refusing to work because they can make a comparable amount on unemployment;
- Increasing pursuit of overpayments and increasing the penalties for fraud;
- Allowing more employers to seek a UI exemption if they hire seasonal employees;
- Shortening the look-back period to determine employers’ experience rating from five to three years; and
- Increasing the taxable wage base from $9,000 to $9,500 but allowing the rate to return to $9,000 once the UI Trust Fund returns to a balance of $2.5 billion.
Beginning the week of January 30, 2012, job providers will receive a detailed explanation of these reforms and their new UI tax rate notice. This notice will come directly from the Michigan Department of Licensing and Regulatory Affairs. Michigan Chamber members who have questions are encouraged to utilize the Department’s new Office of Employer Ombudsman through its toll-free phone number at 1-855-484-2636 (4-UIAOEO) or via e-mail at OEO@michigan.gov. The Office is open from 8:30 a.m. to 4:30 p.m., Monday through Friday. You may also contact Wendy Block, Director of Health Policy and Human Resources for the Michigan Chamber at wblock@michamber.com or 517/371-7678.
