In December 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 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 2013, the minimum (base) bond obligation assessment will be $63 per employee.
Although it’s true that UI taxes are going up 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.
- Shortening the state benefit window from 26 to 20 weeks. (Signed into law in early 2011.)
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 FREE (4-UIAOEO) or via e-mail at OEO@michigan.gov. You may also contact Wendy Block, Director of Health Policy and Human Resources for the Michigan Chamber at firstname.lastname@example.org or (517) 371-7678.
Where We Stand:
The Michigan Chamber supports retaining the UI reforms signed into law in 2011. We would strongly oppose any efforts to increase Michigan's UI benefits as this would dramatically impact employers' UI tax rates at a time when employers are still repaying a $3.2 billion UI debt from the last recession.
Michigan Chamber Official Board Policy
(Adopted April 26, 2011)
The Michigan Chamber of Commerce reaffirms its support for a fair and balanced unemployment insurance (UI) system that provides an adequate level of benefits to employees who are temporarily unemployed through no fault of their own at a cost to employers that is affordable and competitive with other states. The Chamber supports enactment of cost-saving reform measures such as a establishing a one-week waiting period; strengthening requalification requirements for claimants who voluntarily quit or are discharged for misconduct; strengthening seeking work requirements; and lowering the minimum UI tax rate for employers who have had no benefits charged to their account for five years or more.
The Michigan Chamber of Commerce is opposed to any legislation that would reestablish the costly practice of automatic annual UI benefit increases. We believe the legislature should act on any increases in benefits as may be deemed necessary. Increases in UI benefits should be carefully targeted to help working families by increasing dependency allowances.
Preserving the financial solvency of Michigan’s UI trust fund should continue to be a top priority for the legislature and the administration. Benefit levels and eligibility standards should be considered in the context of maintaining a solvent trust fund, and an equitable tax burden on employers that encourages investment and job creation in Michigan.