TEN_11_12_Att2.pdf

ETA Advisory File Text

Attachment B - Analysis of Employment and Training Administration ETA 581 Contribution Operations Report Data for Calendar Year CY 2011 Subj ect Employers Table 1 below shows the change in the number of active employers subject to state unemployment insurance UI coverage from December 31 2010 to the end of CY 2011. Chart 1 below graphs the number of active employers since the end of CY 2001. 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 2010 7 438 444 100 286 7 538 7 30 12 31 2011 7 508 131 101 058 7 609 189 Change during CY 2011 69 687 772 70 459 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 listed on Attachment A concern the timeliness with which states determine liability and establish accounts for new and successor employers. 2 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 10 years. 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 minimum level of performance for this measure is to establish 70 percent of new accounts within 90 days from the last day of the quarter in which the new entities first became liable. The U.S. Department of Labor Department in compliance with the Government Performance and Results Act GPRA of 1993 establishes a 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 percent UI Performs minimum acceptable level of performance was set higher at 86.4 percent for FY 2011 October 1 2010 to September 30 2011 . Nationally the goal was met for FY 2011 as the actual new employer timely status determination percentage for FY 2011 was 87.3 percent. The national GPRA goal for FY 2012 October 1 2011 to September 30 2012 is 86.9 percent. Chart 3 below summarizes the timeliness of new employer status determinations made within 90 days from the last day of the quarter in which the new entities first became liable. The number of new employer status determinations and the percentages of new employer status determinations made within 90 days as plotted on the chart for a quarter are based on aggregate information for four quarters i.e. that quarter and the prior three quarters . 3 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 classified as a successor. Chart 4 below summarizes the trend of successor determinations made by states since 2002. 80 000 90 000 100 000 110 000 120 000 130 000 140 000 150 000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Number of Determinations Chart 4 Number of Successor Determinations by CY 2002 -2011 4 As illustrated in Table 2 successor determinations continued to take longer than new liability determinations. 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 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 806 396 86.5 91.7 91 260 63.8 75.9 2011 884 372 87.6 92.7 87 035 61.6 74.8 Chart 5 below shows graphically the decline in the number of successor determinations made by states and the downward trend in states making the determinations within 90 days from the end of the quarter in which liability as a successor occurred. The number of successor determinations and the percentage of successor determinations made within 90 days as plotted on the chart for a quarter are based on aggregate information for four quarters i.e. that quarter and the prior three quarters . Although the Department has not established a minimum level of performance for the timely determination of successor status the data indicates that many states should take steps to improve the timeliness of successor determinations. 5 Comparison of Status Determinations to Account Inactivations Terminations Chart 6 below compares status determinations to account inactivations terminations since 2002. Status determinations include determinations to establish new accounts and successor determinations. Chart 6 provides some insight regarding the changes in total subject employers that are graphed in Chart 1 on page one of this attachment. The number of inactivations and terminations exceeded the number of new and successor determinations for both 2009 and 2010. 800 000850 000900 000950 000 1 000 0001 050 0001 100 0001 150 0001 200 000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Chart 6 Comparison of New and Successor Status Determinations to Inactivations Terminations Status Determi n ati o n s In ac ti v ati o n s Termin ati ons 6 Timely Secured and Resolved Employer Reports CM numbers 5 through 10 as listed on Attachment A summarize the promptness with which employers file quarterly contribution reports with the states. CM 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 employer reports follows 1 The percentage of timely contribution reports received by the state - This CM is for the report quarter immediately preceding the ETA 581 report. 2 The percentage of secured 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 employers submitted by 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 reports that are resolved by the end of the report quarter - This CM measures 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 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 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. Because resolved reports items 8 and 11 on the ETA 581 report include all of the secured reports submitted 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. Employer Reports Contributory Employers Table 3 below provides a comparison of the national aggregate CM numbers 5 6 and 7 as listed on Attachment A for the last 10 years. Table 3 Employer Reports Contributory Employers Calenda r Year Timely Secured Resolved 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 89.2 92.9 96.1 20 11 90.8 94.6 98.2 7 Employer Reports Reimbursing Employers Table 4 below provides a comparison of the national aggregate CM numbers 8 9 and 10 as listed on Attachment A for the last 10 years. Note Regarding Table 4 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. Receivables Contributory and Reimbursing Combined Chart 7 below tracks the amount of contributions past due from contributory employers and the amount of reimbursable benefit payments past due from reimbursing employers as of the end of each CY from 2001 to 2011. The amounts were reported by states on quarterly ETA 581 reports. Table 4 Employer Reports Reimbursing Employers Calendar Year Timely Secured Resolved 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 87.7 93.0 94.3 2008 89.5 94.6 96.0 2009 90.9 95.6 97.8 2010 92.8 97.4 99 .0 2011 91.8 96.5 99.0 8 0 100 200 300 400 500 600 700 800 900 1 000 1 100 1 200 1 300 1 400 1 500 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Millions Chart 7 Ending CY Receivable Balances CY2001 -CY2011 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 2002. Table 5 Rec eivable 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 Total Past Due from Previous CY Percentage Change from Previous CY 2002 589 738 905 74 204 420 663 943 325 - 56 098 971 -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 75 708 553 896 615 006 109 603 676 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 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 865 803 381 226 510 813 1 092 314 194 125 853 924 13.0 2011 1 141 762 457 233 671 403 1 375 433 860 283 119 666 25.9 9 Chart 7 and Table 5 show a significant increase in the dollar amount of receivables outstanding at the end of CY 2011 from the end of CY 2010. Data plotted in Charts 8 and 9 below indicate that the change in receivable balances between the years is primarily due to an increase in amounts due from employers. Charts 8 and 9 show that the percentages at which employers paid amounts due by their respective due dates i.e. timely payments have remained relatively constant. Note National Summary Tables numbers 4 and 5 on ETA s Web site for CM numbers 11 and 12 as listed on Attachment A summarize state percentages of amounts paid timely and note the formula for computing amounts due from contributory or reimbursing employers as Amounts Deposited plus Determined Receivables minus Receivables Liquidated. 0 5 10 15 20 25 30 35 40 45 50 85 86 87 88 89 90 91 92 93 94 95 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Billions Chart 8 Percent of Contributions Due from Contributory Employers Paid Timely CY2002 - CY2011 Contributions Due Percent Paid Timely 05001 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 78 79 80 81 82 83 84 85 86 87 88 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Millions Chart 9 Percent of Amounts Due from Reimbursing Employers Paid Timely CY2002 - CY2011 Amounts Due Percent Paid Timely 10 Audit Activity The UI employer audit program has been historically measured by the number of audits completed annually. With the issuance of Unemployment Insurance Program Letter UIPL No. 03-11 Implementation of the Effective Audit Measure ETA 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. However full implementation of the Effective Audit Measure as a UI Performs Core Measure will occur for audits performed during CY 2013. States that fail the measure will not be required to write a Corrective Action Plan until the FY 2015 SQSP which will use CY 2013 Effective Audit Measure results. UIPL No. 03-11 is available on the ETA Web site at https www.ows.doleta.gov dmstree uipl uipl2k11 uipl 0311.pdf . CM numbers 17 through 21 as listed on Attachment A summarize information on audit activity. Additional information on audit activity is presented below according to the factors that comprise the Effective Audit Measure. Factor 1 of the Effective Audit Measure Percent of Contributory Employers Audited Prior to January 1 2011 states were expected to audit two percent of their contributory employers each year. As part of the Effective Audit Measure states are now required to audit one percent of their contributory employers each year. To compute the number of audits required per year states should multiply one percent 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 one percent audit penetration rate. Table 6 Audit Penetration - Fa ctor 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 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 74 990 106 800 1.4 2011 7 409 593 74 096 95 703 1.3 11 Factor 2 of the Effective Audit Measure Percent of Total Wages Changed from Audits Factor 2 Percent of Total Wages Changed from Audits has been a CM in the past and it continues to be a CM as part of the Effective Audit Measure. There is no change to the method for computing the Percent of Total Wages Changed from Audits. To pass the Effective Audit Measure a state s Percent of Total Wages Changed from Audits needs to equal or be greater than two percent. The objective of factor 2 is to encourage states to target their 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 2002 1 351 751 285 331 322 102 1 683 073 387 38 062 129 532 4.4 2003 1 815 968 012 352 167 432 2 168 135 444 41 899 696 644 5.2 2004 2 022 483 640 577 708 747 2 600 192 387 52 750 229 942 4.9 2005 2 242 798 141 604 335 021 2 847 133 162 56 006 782 965 5.1 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 3 211 615 738 773 253 914 3 984 869 652 60 963 400 481 6.5 2010 4 440 967 653 543 135 181 4 984 1 02 834 78 002 957 689 6.4 2011 3 335 254 629 487 061 334 3 822 315 963 58 050 397 834 6.6 Note Regarding Table 7 The percentage of 12.2 percent 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 Audited Factor 3 Percent of Total Wages Audited which has been a CM in the past is a part of the Effective Audit Measure. There is no change to the method for computing the Percent of Total Wages Audited. To pass the Effective Audit Measure a state s Percent of Total Wages Audited needs to equal or be greater than one percent. One purpose of factor 3 is to encourage audits of larger employers. National data for the last 10 years is provided in Table 8 below. 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 2002 39 069 414 428 107 429 489 349 3 765 374 350 853 0.9 2003 43 363 497 224 110 987 504 440 3 727 960 525 472 1.0 2004 54 195 004 835 116 281 524 614 3 797 379 555 665 1.3 2005 57 645 246 085 120 243 544 224 4 012 702 188 252 1.3 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 63 401 762 305 108 147 491 182 4 824 513 291 876 1.2 2010 81 900 790 161 106 800 485 184 4 500 500 580 605 1.6 2011 60 898 591 129 95 703 451 586 4 592 308 796 724 1.1 Note Regarding Table 8 The total wages paid in the prior CY were reported by states to the Bureau of Labor Statistics as part of the Quarterly Census of Employment and Wages program. Factor 4 of the Effective Audit Measure Average Number of Misclassified Employees per Audit Factor 4 Average Number of Misclassified Employees is a new CM and has been part of the Effective Audit Measure since CY 2011. The computation is the sum of misclassified employees for a CY divided by the sum of audits completed for the CY. To pass the Effective Audit Measure a state must detect on average at least one misclassified worker per audit. Table 9 below summarizes the national average number of misclassified employees discovered in audits in each of the last 10 years. 13 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 2002 107 210 107 429 1.0 2003 125 262 110 987 1.1 2004 123 044 116 281 1.1 2005 139 554 120 243 1.2 2006 160 000 116 463 1.4 2007 151 039 117 487 1.3 2008 209 067 108 693 1.9 2009 192 287 108 147 1.8 2010 209 909 106 800 2.0 2011 243 711 95 703 2.5 Note 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 with the quarterly reports for CY 2011. This explains why the total number of misclassified employees discovered in CY 2011 is larger than prior years even though the number of audits completed in CY 2011 decreased. The number of completed audits decreased in CY 2011 because states were expected to audit one percent of their contributory employers in CY 2011 instead of the previous two percent requirement. Effective Audit Measure Although the Effective Audit Measure is not designated as a UI Performs Core Measure for CY 2011 a CM based on CY 2011 data is provided in CM number 21 as listed in Attachment A. A summary of state performance regarding the Effective Audit Measure for CY 2010 and CY 2011 is provided in Table 10 below. Table 10 - Summary of Effective Audit Measure - Number of States Passed Year 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 Effective Audit Measure Total Score Pass if 7 Effective Audit Measure Results 2010 47 42 39 31 38 21 2011 45 44 37 36 38 25 14 Notes Regarding Table 10 1. The 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 seven for a state to pass the Effective Audit Measure. 2. Table 10 shows that 21 states passed the Effective Audit Measure for CY 2010 based on data as of April 25 2012. Attachment A shows that 20 states passed the Effective Audit Measure for CY 2010 based on data from National Summary Tables that were posted to ETA s Web site as of May 5 2011. One state passed the Effective Audit Measure after the National Summary Tables for CY 2010 were posted because the state amended its ETA 581 reports regarding audit activity after May 5 2011 but before April 25 2012. State Unemployment Tax Act SUTA Dumping SUTA Dumping is the practice where employers shift workforce payroll to avoid poor unemployment experience and high tax rates. States follow their written procedures to identify and investigate employers who may be SUTA dumping. States transfer unemployment experience adjust tax rates and assess contributions when SUTA dumping is detected. UIPL No. 02-11 required states to report data on SUTA dumping activity on the quarterly ETA 581 report beginning in CY 2011. States have reported data as shown in Table 11 below. Table 11 - Summary of SUTA Dumping Data Reported on ETA 581 Reports Year Number of Mandatory Transfers Number of Prohibited Transfers Total Net Contributions Due 2011 2 800 69 40 847 686