TEN2_11_AttB.pdf

ETA Advisory File Text

Attachment B Analysis of Employment and Training Administration 581 Report Data for Calendar Year 2010 Analysis of ETA 581 Contribution Operations Data for Calendar Year 2010 Subject Employers Table 1 below shows the change in the num ber of active employers subject to state unemployment compensation coverage from December 31 2009 to the end of calendar year CY 2010. Chart 1 below graphs the number of active employers since the end of CY 2000. The table and chart include both contributory and reimbursing employers from all 50 states the District of Columbia Puerto Rico and the Virgin Islands. Table 1 Subject Employers - National Totals As of Date Contributory Employers Reimbursing Employers Total Employers 12 31 2009 7 508 603100 8947 609 497 12 31 2010 7 438 176100 5027 538 678 Change during CY 2010 70 427 392 70 819 Page 1 of 12 Chart 1 Total Employers as of End of Each CY 2000 - 2010 6 600 000 6 700 000 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 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Number of Empl oyer s Notes regarding Table 1 and Chart 1 follow 1. Part of the decrease in the number of active employers during CY 2010 is attributable to a correction of data by two states that had overstated the number of active employers in prior years by approximately 36 000 employers. 2. Since the Virgin Islands had not filed its ETA 581 report for the quarte r ending December 31 2010 as of the date when this Training and Employment Notice TEN was prepared May 2 2011 the number of active employers for the Virgin Islands as of September 30 2010 is used as the estimated count as of December 31 2010. Status Determinations New Employers The 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. These functions affect the timely processing of UI claims and payments of benefits to eligible recipients. Computed Measure CM numbers 1-4 as shown on Attachment A concern the timeliness in which states determine liability and establish accounts for new and successor employers. States report new status determinations on the ETA 581 report. The count 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 summarizes the number of new status determinations made by states in the last ten years. Chart 2 Number of New Determinations CY 2001 - 2010 700 000 750 000 800 000 850 000 900 000 950 000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Number of Det er mi nat i on s Chart 3 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. Chart 3 Volume of New Status Determinations 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- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08M- 09J- 09S- 09D- 09M- 10J- 10S- 10D- 10 Number of Determination s Page 2 of 12 Due to the im portance 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 minimum level of performance for this measure for CY 2010 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. Table 2 which appears on page 5 of this attachment provides a summary of the national performance over the last 10 CYs for both new employer determinations and successor employer determinations. The U.S. Department of Labor Department also established a Government Performance and Results Act GPRA goal for new determinations on a fiscal year FY basis October 1 to September 30 of the next CY . The GPRA goal in contrast to the 70 UI Perfo rms minimum acceptable level of performance was set higher at 90 for FY 2010 October 1 2009 to September 30 2010 . Nationally the goal was not met for FY 2010 as the actual new employer timely status determination percentage for FY 2010 was 86.4 . The national GPRA goal for FY 2011 October 1 2010 to September 30 2011 is 86.4 . Chart 4 below graphs the percentages for new employer determinations completed within 90 and 180 days. The quarterly fluctuations indicate that it is more meaningful to analyze computed measures for status determinations on a CY or FY basis. Chart 4 New Employer Determinations Completed Within 90 180 Days 78 80 82 84 86 88 90 92 94 96 M-05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08M- 09J- 09S- 09D- 09M- 10J- 10S- 10D- 10 90 Day 180 Day Status Determinations Successor Employers A successor status determination occurs when a state determines that an employer met the state s legal definition of successorship and was thus classified as a successo r. 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 CY. Chart 5 b elow shows graphically the quarterly fluctuations of status determinations for successor employers. Page 3 of 12 Chart 5 Number of Successor Determinations by Quarter 16 000 18 000 20 000 22 000 24 000 26 000 28 000 30 000 32 000 34 000 36 000 38 000 M- 05J- 05S- 05D- 05M- 06J- 06S- 06D- 06M- 07J- 07S- 07D- 07M- 08J- 08S- 08D- 08M- 09J- 09S- 09D- 09M- 10J- 10S- 10D- 10 Number of Determinations Chart 6 below summarizes the trend of successor determinations made by states since 2001. Chart 6 Number of Successor Determinations by CY 2001 - 2010 90 000 100 000 110 000 120 000 130 000 140 000 150 000 160 000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Number of Determination s There was no change to the tendency for successor determinations to take longer than new liability determinations in CY 2010. This is illustrated in Table 2 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 10 of the calendar years shown below. Page 4 of 12 Table 2 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 2001 880 964 78.6 89.0 142 671 65.9 80.4 2002 887 307 82.4 90.2 134 367 67.5 81.3 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 82.4 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 873 202 84.6 90.8 119 638 62.7 76.2 2009 796 725 84.7 90.4 100 116 62.8 75.8 2010 806 087 86.5 91.7 91 293 63.8 75.9 Comparison of Status Determinations to Account Inactivations Terminations Chart 7 below compares status determinations to account inactivations terminations since 2001. Status determinations include determinations to establish new accounts and successor determinations. Chart 7 provides some insight regarding the changes in total subject employers that are graphed in Chart 1 on page 1 of this attachment. The number of inactivations and terminations exceeded the number of new and successor determinations for both 2009 and 2010. Chart 7 Comparison of New and Successor Status Determinations to Inactivations Terminations 800 000 850 000 900 000 950 000 1 000 000 1 050 000 1 100 000 1 150 000 1 200 000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Status Determinations Inactivations Terminations Timely Secured and Resolved Contribution Reports CM numbers 5 through 10 as shown on Attachment A summarize the promptness with which employers file quarterly contribution and wage reports with the states. C M numbers 5 6 and 7 summarize data for contributory employers and CM numbers 8 through 10 summarize data for reimbursing employers. A description of the measures for report filing follows Page 5 of 12 Page 6 of 12 1 The percentage of timely contribution reports received by the state. This CM measures reports for the quarter immediately preceding the ETA 581 report quarter that were filed prior to the delinquency cutoff date that each state established during the ETA 5 81 report quarter. 2 The percentage of secured delinquent contribution reports obtained by the state during the ETA 581 report quarter. This CM measures reports for 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 recorded 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 for 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 clo sing the account b establishing a judgment or assessment that is legally due and collectible for the estimated amount of tax due or c receiving the report through some other means such as voluntarily filing field auditor contacts subpoenaing records etc. B ecause resolved reports items 8 and 11 on the ETA 581 report include all of the secured reports su bmitted for the second tax report quarter prior to the ETA 581 report quarter the number of resolved reports recorded in items 8 and 11 on the ETA 581 report must be equal to or greater than the number of secured reports recorded in items 7 and 10 on the previous ETA 581 report. Filing Reports Contributory Employers Table 3 below provides a comparison of the national aggregate computed measures for contributory employers for the last ten years. Table 3 Filing Contribution and Wage Reports Contributory Employers Calendar Year Timely Secured Resolved 2001 87.2 92.1 96.9 2002 87.9 92.5 97.0 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 2009 88.8 92.6 96.4 2010 89.3 93.0 96.4 Note Table 3 excludes data from the Virgin Islands for CY 2010 because the Virgin Islands had not filed its ETA 581 report for the quarter ending December 31 2010 as of the date when this TEN was prepared May 2 2011 . Filing Reports Reimbursing Employers Table 4 below provides a com parison of the national aggregate computed measures for reimbursing employers for the last 10 years. Table 4 Filing Contribution and Wage Reports Reimbursing Employers Calendar Year Timely Secured Resolved 2001 80.3 84.9 86.8 2002 80.5 84.8 86.3 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 95.6 97.0 2008 92.2 97.4 98.9 2009 93.1 97.9 100.2 2010 92.7 97.4 99.0 Notes regarding table 4 follow 1. Table 4 excludes data from the Virgin Islands for CY 2010 since the Virgin Islands had not filed its ETA 581 report for the quarter ending December 31 2010 as of the date when this TEN was prepared May 2 2011 . 2. Massachusetts began reporting data on report filing for reimbursing employers in the fourth quarter of 2009. Therefore Massachusetts is excluded from the performance percentages for CYs prior to CY 2010. The performance percentages shown in Table 4 for CY 2006 and prior years include Massachusetts reimbursing employers but exclude data on the filing of reports by those reimbursing employers. This explains in part why the national aggregate percentages for those years are lower than the pe rcentages for each of the years 2007 through 2010. Receivables Contributory and Reimbursing Combined Chart 8 below tracks the amount of receivables past due as of the end of each CY from 2000 to 2010. The amounts were reported by states on quarterly ETA 581 reports. The chart i ncludes receivables past due from contributory and reimbursing employers. Page 7 of 12 Chart 8 Ending CY Receivable Balances CY2000 - CY2010 0 100 200 300 400 500 600 700 800 900 1 000 1 100 1 200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Millions All Employers Contributory Reimbursing Table 5 below shows the actual amount of past due receivables at the end of each CY and the changes between years beginning in CY 2001. Table 5 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 2001 641 934 074 78 108 222 720 042 296 13 019 227 1.8 2002 589 738 905 74 204 420 663 943 325 59 098 971 7.8 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 75 708 553 896 615 006 201 249 361 28.9 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 772 806 609 70 511 546 843 318 155 41 452 768 4.7 2009 808 586 865 157 873 405 966 460 270 123 142 115 14.6 2010 865 355 447 226 267 678 1 091 623 125 125 162 855 13.0 Note Since the Virgin Islands had not filed its ETA 581 report for the quarte r ending December 31 2010 as of the date when this TEN was prepared May 2 2011 the ending balance of receivables for the Virgin Islands as of September 30 2010 is used as the estimated balance as of December 31 2010. Page 8 of 12 Page 9 of 12 Audit Activity The UI employer audit program has been primarily measured by the number of audits completed annually. With the issuance of UIPL No. 03-11 Implementation of the Effective Audit Measure the Department s Employment and Training Administration established a new policy for the UI employer audit program. Beginning with data for CY 2011 the Effective Audit Measure will assess the success of state audit programs. Refer to UIPL No. 03-11 on the Employment and Training Web site at https www.ows.doleta.gov dmstree uipl uipl2k11 uipl 0311.pdf for specific information on each factor that comprises the Effective Audit Measure. The following information for audit activity is presented according to the factors that comprise the Effective Audit Measure. Factor 1 of the Effective Audit Measure Percent of Contributory Emp loyers Audited Prior to January 1 2011 states were expected to audit 2 of their cont ributory employers each year. As part of the Effective Audit Measure states will be required to audit 1 of their contributory employers each year. To compute the number of audits required per year states should multiply 1 times the number of contributory employers counted at the end of the third quarter of the preceding CY. Table 6 below summarizes national data for the last 10 years. The number of required audits shown in Table 6 is based on a 1 audit penetrati on rate. Table 6 Audit Penetration - Factor 1 of Effective Audit Measure - All States Year Number of Employers as of Previous September 30 Required Audits 1 of Number of Employers Completed Audits Percent Completed 2001 6 675 083 66 751 107 429 1.6 2002 6 779 109 67 791 110 987 1.6 2003 6 852 994 68 530 116 281 1.7 2004 6 955 550 69 556 120 243 1.7 2005 7 054 890 70 549 116 124 1.6 2006 7 156 865 71 569 116 463 1.6 2007 7 375 964 73 760 117 487 1.6 2008 7 521 497 75 215 108 693 1.4 2009 7 574 880 75 749 108 147 1.4 2010 7 499 042 74 990 106 788 1.4 Page 10 of 12 Factor 2 of the Effective Audit Measure P ercent of Total Wages Changed from Audits Factor 2 Percent of Total Wages Changed from Audits has been a CM in the past and it will continue to be a CM as part of the Effective Audit Measure. In order to pass the Effective Audit Measure a state s Percent of Total Wages Changed from Audits will need to equal or be greater than 2 . There will be no change to the method for computing the Percent of Total Wages Changed from Audits. The objective of factor 2 is to encourage states to target the ir audits in order to maximize the discovery of improper employer reporting. National data for the last 10 years is provided in Table 7 below. Table 7 Summary of Changes in Total Wages Discovered Through Audits - Factor 2 of the Effective Audit Measure Year Underreported Total Wages Overreported Total Wages Gross Change Total Wages Pre-Audit Percent of Change 2001 1 351 751 285 331 322 102 1 683 073 387 38 062 129 532 4.4 2002 1 815 968 012 352 167 432 2 168 135 444 41 899 696 644 5.2 2003 2 022 483 640 577 708 747 2 600 192 387 52 750 229 942 4.9 2004 2 242 798 141 604 335 021 2 847 133 162 56 006 782 965 5.1 2005 2 235 658 270 387 940 990 2 623 599 260 50 888 266 056 5.2 2006 2 570 351 349 494 602 132 3 064 953 481 57 858 654 573 5.3 2007 9 290 360 049 412 040 929 9 702 400 978 79 488 705 708 12.2 2008 3 006 424 911 550 434 537 3 556 859 448 55 438 722 612 6.4 2009 3 279 120 322 856 774 910 4 135 895 232 60 963 400 481 6.8 2010 4 435 985 969 1 154 275 871 5 590 261 840 78 002 957 689 7.2 Note The percentage of 12.2 for CY 2007 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. Factor 3 of the Effective Audit Measure Percent of Total Wages Audi ted Factor 3 Percent of Total Wages Audited which has been a CM in the past will be part of the Effective Audit Measure. In order to pass the Effective Audit Measure a state s Percent of Total Wages Audited will need to equal or be greater than 1 . There will be no change to the method for computing the Percent of Total Wages Audited. One purpose of factor 3 is to encourage audits of larger employers. National data for the last 10 years is provided in Table 8 bel ow. Page 11 of 12 Table 8 Summary of Total Wages Paid in Prior Calendar Year That Were Audited - Factor 3 of the Effective Audit Measure Year Total Wages Post Audit Total Audits Completed Total Quarters Audited Total Wages Paid in Prior CY by Contributory Employers Percent Total Wages Audited 2001 39 069 414 428 107 429 489 349 3 708 482 586 378 0.9 2002 43 363 497 224 110 987 504 440 3 765 374 350 853 1.0 2003 54 195 004 835 116 281 524 614 3 727 960 525 472 1.3 2004 57 645 246 085 120 243 544 224 3 797 379 555 665 1.3 2005 52 735 983 336 116 124 528 532 4 012 702 188 252 1.2 2006 59 934 403 790 116 463 534 474 4 231 961 542 651 1.2 2007 88 367 024 828 117 487 531 689 4 513 875 778 285 1.7 2008 57 894 712 986 108 693 490 543 4 770 245 645 343 1.1 2009 63 385 745 893 108 147 491 182 4 824 513 291 876 1.2 2010 81 284 667 787 106 788 485 184 4 500 500 580 605 1.6 Notes regarding Table 8 follow 1. The total wages paid in the prior CY were reported by states to the Bure au of Labor Statistics as part of the Quarterly Census of Employment and Wages program. 2. Example regarding Total Wages Paid in Prior CY by Contributory Employers The total wages in the amount of 4 500 500 580 605 that were used to compute the percent of total wages audited for CY 2010 1.6 were paid by contributory employers in CY 2009. Factor 4 of the Effective Audit Measure Average Number of Misclassi fied Employees per Audit Factor 4 Average Number of Misclassified Employees is a new CM and is part of the Effective Audit Measure beginning for CY 2011. The computation is the sum of misclassified employees for a CY divided by the sum of audits completed for the CY. In order to pass the Effective Audit Measure a state will be required to detect on average at least one misclassified worker per audit. UIPL No. 02-11 Changes to the Employment and Training Administration ETA 581 Contribution Operations Report and Related Handbooks advised states to begin reporting unreported off-the-books workers discovered in audits in addition to workers misclassified as independent contractors on the ETA 581 report beginning in CY 2011. As a result the average number of misclassified employees beginning in CY 2011 should increase from prior years. Table 9 below summarizes the national average number of misclassified employees discovered in audits in each of the last ten years. Page 12 of 12 Table 9 Average Number of Misclassified Employees Detected per Audit - Factor 4 of the Effective Audit Measure Year Total Misclassified Employees Discovered Total Audits Completed Average Number of Misclassified Employees per Audit 2001 107 210 107 429 1.0 2002 125 262 110 987 1.1 2003 123 044 116 281 1.1 2004 139 554 120 243 1.2 2005 132 965 116 124 1.1 2006 160 000 116 463 1.4 2007 151 039 117 487 1.3 2008 209 067 108 693 1.9 2009 191 765 108 147 1.8 2010 209 626 106 788 2.0 Effective Audit Measure Although the Effective Audit Measure was not implemented for CY 2010 a CM based on CY 2010 data is provided in National Summary Table Number 14 at http www.ows.doleta.gov unemploy pdf UI taxinfo 2010 AuditMeasure.pdf for informational purposes. A further breakdown of state performance regarding the Effective Audit Measure for CY 2010 is provided in Table 10 below. Table 10 - Summary of Pass Fail Performances - Effective Audit Measure - All States Factor 1 Percent of Contributory Employers Audited Pass if 1 Factor 2 Percent Change in Total Wages from Audits Pass if 2 Factor 3 Percent Total Wages Audited Pass if 1 Factor 4 Average Number of Misclassified Workers per Audit Pass if 1 Factor 5 Effective Audit Measure Total Score Pass if 7 Effective Audit Measure Results Number of States Passed 47 42 39 30 38 20 Number of States Failed 6 11 14 23 15 33 Note Factor 5 Effective Audit Measure Total Score is the sum of the scores for Factors 1 2 3 and 4. This blended score must be greater than or equal to 7 for a state to pass the Effective Audit Measure.