TEN43-08acc.pdf

ETA Advisory File Text

Employment Training Administration U.S. Department of Labor Washington D.C. 20210 NO. 43-08 TRAINING AND EMPLOYMENT NOTICE DATE May 11 2009 TO STATE WORKFORCE AGENCIES FROM CHERYL ATKINSON s Administrator Office of Workforce Security SUBJECT Selected Unemployment Insurance UI Tax Data from Form ETA 581 OMB Approval No. 1205-0178 Contribution Operations for the Calendar Year CY Ending December 31 2008 1. Purpose . To provide a summary of selected ETA 581 data with associated charts and tables for CY 2008. 2. References . ET Handbook No. 401 4th Edition May 9 2007 Section II Chapter 2 ET Handbook No. 407 4th Edition November 20 2003 Unemployment Insurance Program Letter UIPL No. 14-05 Changes to UI Performs UIPL No. 14-05 Change1 Training and Employment Guidance Letter No. 20-07 Government Performance and Results Act GPRA Unemployment Insurance UI Program Goals Fiscal Year FY 2007 Performance and Performance Targets for FY 2008 and FY 2009 Form ETA 581 OMB Approval No. 1205-0178 . 3. Background . UI tax performance data and computed measures CMs for CY 2008 are presented in this summary report. The information is derived primarily from the quarterly ETA 581 Contribution Operations report. Although this is a summary of CY 2008 activity many of the charts in this analysis show quarterly data due to the cyclical nature of tax functions. State and Regional CM percentages for each of the 19 measures along with the raw data used for computation of the percentages are displayed in 13 CM tables that may be viewed on the Employment and Training Administration web site at http www.workforcesecurity.doleta.gov unemploy nat sum tables 2008.asp . The information included in this Training and Employment Notice and the referenced CM tables are based on data in the database as of April 3 2009. Due to occasional ETA 581 report adjustments made by states the attached charts and tables and the referenced CM tables may differ from more current information. Current CM information is available on the web page although displayed in less detail at http www.ows.doleta.gov unemploy tps.asp . 4. Action Requested . State Administrators are requested to distribute this advisory to appropriate tax program staff. 5. Inquiries . Inquiries should be directed to the appropriate regional office. 6. Attachments . A-Summary of National UI Tax Performance Data for CY 2008 B-Analysis of ETA 581 Data for CY 2008 Attachment A Summary of National UI Tax Performance Data Summary of National UI Tax Performance Data Selected Data from State ETA 581 Reports Calendar Year Ending December 31 2008 Subject Employers National Totals Contributory Employers Reimbursing Employers Total Employers Totals as of 12 31 2007 7 566 113 99 270 7 665 383 Totals as of 12 31 2008 7 603 129 99 626 7 702 755 Change during CY 2008 37 016 356 37 372 Status Determination Promptness CMs 1-4 Detailed on Table 1 Determinations 90 Days or Fewer 180 Days or Fewer New Employers 874 816 84.4 90.6 Successor Employers 120 697 62.8 76.2 Employer Report Filing - CMs 5-10 Detailed on Tables 2-3 Filed Timely Secured Resolved Contributory Employers 88.8 92.5 96.6 Reimbursing Employers 1 92.2 97.4 98.9 Collections Activity CMs 11-16 Detailed on Tables 4-9 Paid Timely of Receivables Declared Uncollectible Doubtful of Amt. Due Remaining Unpaid at Year End Contributory Employers 91.2 1.2 2.5 Reimbursing Employers 84.7 1.1 3.7 Receivables Delinquency See Tables 6-9 Beginning Bal 1 1 08 Ending Bal 12 31 08 Removed due to Uncollectible Age -2008 Contributory Employers 2 812 466 285 770 842 077 332 657 403 Reimbursing Employers 72 304 638 70 310 153 20 014 872 Total Receivables 884 770 923 841 152 230 352 672 275 National Audit Activity CY 2008 See Audit Tables 10-13 Field Audits Completed 3 110 956 Audit Penetration Objective 2 1.5 Large Emp. Audits completed 4 3 252 of Completed Audits that were Large 2.2 Number of Change Audits 51 164 of Audits Resulting in Changes 46.1 Total Wages Audited pre-audit 56 115 891 942 of Total Wages Audited - Annualized 1.1 Total Wages Changed 3 628 656 825 of Total Wages Changed 6.5 Total Wages Under Reported 3 072 609 885 Contributions Under Reported 42 447 730 Total Wages Over Reported 556 046 940 Contributions Over Reported 5 553 108 Total Wages Audited post-audit 58 632 454 887 Gross Change contributions 48 000 838 Average Time Per Audit 7.6 Hours Average Quarters Audited 4.5 Quarters Employees discovered in audits that had been misclassified as independent contractors 209 109 Footnotes 1 Computations exclude Massachusetts MA since MA does not report data for this item. 2 3 4 Mississippi s receivable balance is excluded from the US total on CM Table 8 but is included in the 2008 ending balance above. The Employment Security Manual ESM requires states to audit 2 of the count of contributing employers taken on 9 30 of the preceding year. Using this formula the national objective was 150 430 audits for CY 2008. The ESM requires that 1 of the above 2 audit objective qualify as large employer audits which computes to 1 504 audits. Page 1 of 9 Attachment B Analysis of ETA 581 Data Subject Employers The number of active employers subject to state unemployment compensation coverage grew to 7 702 755 by the end of December 2008 an increase of 37 372 .5 employers for the 2008 CY. The count includes both contributory and reimbursing employers from all 50 states the District of Columbia the Virgin Islands and Puerto Rico. Chart 1 Total Employers QE 12 31 2002-12 31 2008 6 800 000 6 900 000 7 000 000 7 100 000 7 200 000 7 300 000 7 400 000 7 500 000 7 600 000 7 700 000 7 800 000 D- 02M- 03J- 03S- 03D- 03M- 04J- 04S- 04D- 04M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08 Number of Employers Chart 1 above illustrates the relatively stable quarterly growth of covered employers over the last six years 12 31 2002-12 31 2008 . Average annual growth including both contributory and reimbursing employers for this six year period has been 116 615 new employers per year. However growth in 2008 in the amount of 37 372 was smaller than the average growth in the previous five years 132 463 . During 2008 the number of covered employers increased in 36 states and decreased in 17 states. The Tax Performance System TPS Review and Computed Measures CM An important element of the TPS review is the calculation and evaluation of the nineteen CMs. CM percentages are based on aggregate information taken from the quarterly ETA 581 reports the monthly ETA 2112 reports OMB Approval No. 1205- 0154 and the quarterly ES 202 program. CMs indicate the timeliness and completeness with which basic and essential unemployment insurance tax transactions occur. Aggregate national CMs provide a basis for comparing individual state performance with national performance. Please note that national CMs are aggregate percentages rather than an average of individual state scores. Therefore large states and small Analysis of ETA 581 Contribution Operations Data for CY 2008 Page 2 of 9 states each affect the national scores in direct proportion to the volume of transactions reported. Status Determinations New Employers Timely discovery of liable employers and the prompt establishment of new accounts are tax functions vital to the successful operation of a state UI tax program. For example the functions affect the timely processing of UI claims and payment of benefits to eligible recipients. Computed measures 1- 4 as shown on Attachment A concern the timeliness in which states determine liability and establish accounts for new and successor employers. These measures indicate successful state UI tax program management. For a complete listing of the CMs for CY 2008 for new and successor determinations see CM Table 1 at http www.workforcesecurity.doleta.gov unemploy nat sum tables 2008.asp . Due to the importance placed on New Status Determinations UI Performs includes a core measure that sets a minimum level of performance for timely discovery and establishment of new employers. The expected minimum level of performance for this measure for CY 2008 was to establish 70 of new accounts within 90 days from the last day of the quarter in which the new entities first became liable. For CY 2008 49 of the 53 reporting states achieved the 70 or greater acceptable level of performance. Arizona 67.9 Kansas 67.0 Puerto Rico 52.8 and Wisconsin 69.5 did not meet the timely determinations measure for the CY. Nationally 84.4 of new status determinations were made within 90 days for CY 2008. Table 1 which appears at the end of the next section Status Determinations Successor Employers provides a summary of the performance over the last six CYs for both new employer determinations and successor employer determinations. The Office of Workforce Security OWS also established a Government Performance and Results Act GPRA goal for New Determinations. The GPRA goal in contrast to the 70 UI Performs minimum acceptable level of performance was set higher at 84.9 for FY 2008 10 1 2007 9 30 2008 . Nationally OWS met the FY 2008 goal with a new employer timely status determination percentage of 84.9 . The national GPRA goal for FY 2009 10 1 2008 9 30 2009 is 88.7 . The number of new employer status determinations declined during CY 2008. States reported making 874 816 new employer liability status determinations in CY 2008 compared to 924 378 reported for CY 2007 a decrease of 49 562 determinations. The count of new status determinations as reported in item 14 on the ETA 581 report includes all determinations of liability made within the ETA 581 report quarter of employers who have actually met a state threshold of liability plus determinations that reactivated inactive accounts. Chart 2 below displays graphically the typical surge in the number of new status determinations that occurs during the January March quarters contrasted with the lower count of determinations during the quarters ending in December. Page 3 of 9 C hart 2 Volume of N ew Status D eterminations by Quarter 170 000 180 000 190 000 200 000 210 000 220 000 230 000 240 000 250 000 260 000 270 000 M- 03 J- 03S- 03D- 03M- 04J- 04S- 04D- 04M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08 Number of Determinations Chart 3 below graphs the percentages for new employer determinations completed within 90 and 180 days. Normally the percentages for determinations completed within 180 days parallel the 90 day percentages in a regular quarterly cycle. Also the quarterly percentage of determinations completed within 90 days declines in the first quarter of the CY and peaks in the third quarter. Chart 3 shows that performance in calendar years 2005 and 2008 differed from the norm. The quarterly fluctuations show why it is more meaningful to analyze computed measures for status determinations on a CY or FY basis. Chart 3 New Employer Determinations Completed Within 90 180 Days 78 80 82 84 86 88 90 92 94 96 M- 03J- 03S- 03D- 03M- 04J- 04S- 04D- 04M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08 90 Day 180 Day Status Determinations Successor Employers Similar to status determinations for new employers the largest volume of status determinations for successor employers occurred in the first and second quarters of each calendar year. Chart 4 below shows graphically the quarterly fluctuations of status determinations for successor employers. Page 4 of 9 Chart 4 Number of Successor Determinations by Quarter 20 000 22 000 24 000 26 000 28 000 30 000 32 000 34 000 36 000 38 000 40 000 M- 03J- 03S- 03D- 03M- 04J- 04S- 04D- 04M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08 Number of Determinations Chart 5 below summarizes the trend of successor determinations made by states since 1997. From 1997 through 2003 total successor determinations decreased each year. From 2003 through 2007 yearly successor determinations remained fairly constant. In 2008 total successor determinations decreased by 3 514 from the number of successors determined in 2007. Chart 5 Numbe r of Succe ssor De te rminations by CY 1997-2008 100 000 110 000 120 000 130 000 140 000 150 000 160 000 170 000 180 000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Number of Determinations Data points reflect the count of s uc c es s or det erminat ions for each year shown. There was no change to the tendency for successor determinations to take longer than new liability determinations in 2008. This is illustrated in Table 1 below by comparing the percentages in the New within 90 Days column with the Successor within 90 Days column. The percentage of timely successor determinations is lower than new liability determinations for all six of the calendar years shown below. Moreover the time needed to complete successor determinations has increased each year since 2004. Page 5 of 9 Table 1 New and Successor Status Determinations Year New Determinations New within 90 Days New within 180 Days Successor Determinations Successor within 90 Days Successor within 180 Days 2003 861 661 83.3 90.8 122 628 70.7 83.1 2004 904 784 83.8 91.3 124 819 71.2 83.1 2005 938 927 82.3 90.6 125 276 69.1 81.6 2006 933 982 84.2 91.4 124 122 68.8 81.5 2007 924 378 85.7 91.7 124 211 66.6 79.6 2008 874 816 84.4 90.6 120 697 62.8 76.2 Timely Secured and Resolved Filing of Contribution Reports Six computed measures show the promptness with which employers file quarterly contribution and wage reports with the states. Three CMs measure contributory employers and three similar CMs measure reimbursing employers. The measures for report filing follow 1 The percentage of timely contribution reports received by the states - This CM measures reports for the quarter immediately preceding the ETA 581 report quarter that were filed prior to the delinquency date during the ETA 581 report quarter. 2 The percentage of secured delinquent contribution reports obtained by the state during the ETA 581 report quarter - This CM measures reports from the quarter immediately preceding the ETA 581 report quarter that are either secured by state staff or voluntarily filed between the date on which the reports first became delinquent and the end of the ETA 581 report quarter. Since the secured report count items 7 and 10 on the ETA 581 report includes all of the timely reports the number of secured reports must always be equal to or greater than the number of timely reports reported in items 6 and 9 on the ETA 581 report. 3 The percentage of delinquent reports that are resolved by the end of the report quarter - This CM measures delinquent reports from the second quarter preceding the ETA 581 report quarter that are resolved by the end of the report quarter. States may count a delinquent report as resolved by a determining that the report is no longer due inactivating the account or closing the account b establishing a judgment or assessment that is legally due and collectable for the estimated amount of tax due or c by receipt of the report through some other means such as voluntarily filing field auditor contacts subpoenaing records etc. Because resolved reports items 8 and 11 on the ETA 581 report include all of the secured reports reported for the second tax report quarter prior to the ETA 581 report quarter the number of resolved reports reported in item 11 on the ETA 581 report must be equal to or greater than the number of secured reports reported in items 7 and 10 on the previous ETA 581 report. Additional information about the computed measures for report filing data can be found at http www.ows.doleta.gov unemploy tps.asp . Page 6 of 9 Filing Reports Contributing Employers Table 2 below provides a comparison of the national computed measures for contributory employers for the last six years. Table 2 Filing Contribution and Wage Reports Contributory Employers Calendar Year Timely Secured Resolved 2003 88.2 92.5 97.0 2004 88.2 93.1 97.1 2005 88.3 93.1 97.4 2006 88.5 92.8 97.8 2007 88.3 92.3 97.0 2008 88.8 92.5 96.6 Filing Reports Reimbursing Employers Fifty-two of 53 states are now reporting their counts of timely secured and resolved reimbursing employer contribution reports that are received and processed during the ETA 581 report quarters. Massachusetts is not yet reporting this data but is expected to begin receiving and reporting reimbursing employer report data soon. The performance percentages shown in Table 3 below for calendar years 2003 through 2006 include approximately 2 850 Massachusetts reimbursing employers. Because Massachusetts did not report a count of the timely secured and resolved reports from reimbursing employers including them in the employer count lowered the national aggregate percentages for those years. However reimbursing employers for Massachusetts were excluded from performance percentages for 2007 and 2008. Consequently the national aggregate percentages for 2007 and 2008 are higher than previous years. Receivables Contributory and Reimbursing Combined Chart 6 below tracks the amount of receivables past due as of the end of each quarter for calendar years 2003 to 2008. The amounts were reported by states on quarterly ETA 581 reports. Chart 6 includes receivables past due from contributory and reimbursing employers. Table 3 Filing Contribution and Wage Reports Reimbursing Employers Calendar Year Timely Secured Resolved 2003 80.4 86.4 88.3 2004 81.7 86.8 88.1 2005 83.7 88.2 88.8 2006 86.3 92.0 93.7 2007 90.2 95.7 97.0 2008 92.2 97.4 98.9 Page 7 of 9 Although the trend line on Chart 6 shows that past due receivables have generally increased over the years the ending balances at the end of 2007 and 2008 have decreased from their respective prior years. Table 4 below shows the actual amount of past due receivables as of the end of each calendar year and the changes between years. Chart 6 Ending Balances Receivables - All States All Employers - March 2003 - December 2008 550 600 650 700 750 800 850 900 950 1 000 M- 03J- 03S- 03D- 03M- 04J- 04S- 04D- 04M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08 Millions Table 4 Receivable Balances - All Employers - All States Year CY Ending Balance for Contributory Employers CY Ending Balance for Reimbursing Employers Total Past Due Receivables at End of CY Change in Dollars from Previous CY Percentage Change from Previous CY 2003 601 726 827 93 638 818 695 365 645 31 422 320 4.7 2004 699 471 080 87 540 250 787 011 330 91 645 685 13.2 2005 820 906 453 75 708 553 896 615 006 109 603 676 13.9 2006 852 437 577 76 673 915 929 111 492 32 496 486 3.6 2007 812 466 285 72 304 638 884 770 923 44 340 569 -4.8 2008 770 842 077 70 310 153 841 152 230 43 618 693 -4.9 Audit Activity The OWS measures three state audit functions 1 the percent of total wage changes resulting from audit adjustments 2 the percent of contributory employers audited and 3 the percent of total wages audited annualized . Although not a computed measure the number of employees misclassified as independent contractors were counted and reported by the states when discovered in audits beginning in the first quarter of 2000. As set out in the Employment Security Manual ESM states are expected to audit 2 of their contributory employers each year. The ESM also requires that 1 of the 2 requirement qualify as large employers. The ESM defines large employer as an employer with at least 100 employees during the current or preceding CY or with at least one million dollars in taxable wages for the CY preceding the first quarter being audited. To compute the number of audits required per year states should multiply Page 8 of 9 2.0 times the number of contributory empl oyers counted at the end of the third quarter of the preceding CY. Table 5 below shows national totals for each of the three audit computed measures plus additional audit information. Table 5 Information on Audit Activity Year Audits Complete Change Audits of Contributory Employers Audited of Audits Qualified as Large Audits of Pre-audit Total Wages Changed of Total Wages Audited annualized Employees Misclassified as Independent Contractors 2003 116 281 49 114 1.7 2.2 4.9 1.3 123 044 2004 120 243 50 998 1.7 2.3 5.1 1.3 139 554 2005 116 124 50 088 1.6 2.3 5.2 1.2 132 965 2006 116 463 50 437 1.6 2.5 5.3 1.2 160 000 2007 117 486 50 032 1.6 2.3 12.2 1.7 151 039 2008 110 956 51 164 1.5 2.2 6.5 1.1 209 109 For CY 2008 states completed 110 956 audits which result in a national penetration rate of 1.5 of the contributory employers reported by states as of September 30 2007. Discrepancies were found in 51 164 46 of the audits and auditors d iscovered 209 109 employees that employers had misclassified as independent contractors. CM Table 13 may be viewed at http www.workforcesecurity.doleta.gov unemploy nat sum tables 2008.asp . It shows that 26 states were successful in meeting the 2 penetration objective for CY 2008. As shown in Table 5 above the percentage of Pre-audit Total Wages Changed was 12.2 in 2007. The percentage of 12.2 for 2007 is correct. The percentage is larger than normal because the State of New York discovered a large amount of underreported wages as a result of auditing a high number of large employers. This is reflected in Table 6 below for 2007. Table 6 Summary of Total Wages Discovered Through Audits - CY 2003- 2008 Year Underreported Total Wages Overreported Total Wages 2003 2 022 483 640 577 708 747 2004 2 242 798 141 604 335 021 2005 2 235 658 270 387 940 990 2006 2 570 351 349 494 602 132 2007 9 290 360 049 412 040 928 2008 3 072 609 885 556 046 940 Page 9 of 9 Chart 7 below provides a quarterly comparison of audits to the number of misclassified employees that were discovered and reported on the quarterly ETA 581. The number of misclassified employees discovered by states increased in 2008 from prior years. The State of New York accounts for a large portion of the increase. New York discovered 46 450 more misclassified employees in 2008 than in 2007. Chart 7 Audits Completed Misclassifications Discovered 1 1 2003 - 12 31 2008 20 000 23 000 26 000 29 000 32 000 35 000 38 000 41 000 44 000 47 000 50 000 53 000 56 000 59 000 62 000 65 000 M- 03J- 03S- 03D- 03M- 04J- 04S- 04D- 04M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08 Audits Completed Employees Found Misclassified