As our country continues to try to pull itself out of the worst economic recession in more than 40 years, business owners nationwide have experienced increased costs related to state and federal unemployment rates. The number of people out of work continues to be a critical issue for local, state and federal governments.
In our home state of Florida, as well as many other states, we continue to experience high unemployment levels. While the United States as a whole experienced a small decrease in the national unemployment rate in 2011, the percentage of unemployed workers in Florida is still more than triple what it was Âfive years ago. Consequently, the state is paying out an unprecedented amount in benefiÂts to our unemployed citizens.
The state of Florida pays unemployment benefiÂts to qualifiÂed recipients from the Unemployment Compensation Trust Fund. This fund was kept solvent through the years as a result of the state unemployment taxes paid by employers throughout the state. In August 2009, however, the trust fund balance fell to zero.
 Our state has been borrowing from the federal government to pay unemployment benefiÂts ever since. Currently, Florida has borrowed over $1.7 billion to pay benefiÂts to our unemployed workforce.
When the trust fund falls below a certain threshold, state law adjusts the unemployment tax rates to rebuild the balance in the trust fund, which was evidenced in the increase last year in unemployment tax rates. However, even with last year’s increase, the state has not yet paid off this government loan.
Federal law dictates that when a state’s unemployment trust fund loans have been outstanding for two consecutive years, the state experiences an increase in federal unemployment taxes of .3% for each additional year the loan remains outstanding. Because this is the third year that Florida has had an outstanding balance, all Florida employers’ FUTA rates will increase from .9% to 1.2% in 2012.
Interest on the federal loan will begin accruing January 1, 2012 and, by federal law, must be paid from sources other than the state trust fund account. The Florida Department of Revenue will notify state employers of the surcharge amount in the fiÂrst quarter of 2012. We will keep you posted as information becomes available.
In an attempt to generate more revenue for the Unemployment Compensation Trust Fund, the minimum State Unemployment tax rate in Florida has risen steadily from .12% in 2009 to .36% in 2010, 1.03% in 2011, and now 2.02% for 2012. While that is now the lowest rate available for any company in our state, most companies have rates much higher than that.
Along with higher tax rates for many employers, the state is attempting to balance out the Unemployment Compensation Trust Fund by raising the taxable wage limit from $7,000.00 per employee to $8,500.00 per employee. However, the maximum state unemployment tax rate of 5.40% remains unchanged. With unprecedented amounts of money and resources needed to handle the number of unemployment claims, these changes still may not be enough to balance out the fund. There are several factors working against the state including the increase in the length of time people are eligible for beneÂfits and the growing number of employers already at the maximum state unemployment rate.
As an employer funded system, there is no way around the fact that rising unemployment rates are going to impact all employers. However, there are steps you can take to help control costs to the greatest extent possible. For example, documentation and record keeping of employee issues will assist in avoiding unnecessary or invalid unemployment claims. The use of job descriptions and performance appraisals can help when establishing cause for terminations. Also, be on the lookout for fraud. According to unemployment insurance (UI) experts, as much as ten percent of all costs in the UI system are attributed to fraud.
At WCCOP, we are doing all we can to you understand and absorb these rising costs. While no one is sheltered from the effects of this economic climate, we are here to help in any way we can by providing you with the knowledge, insight, and expertise needed to manage unemployment claims and pay unemployment taxes.
With regards to workers’ compensation insurance rates in the state of Florida, the vast majority of workers’ compensation classifiÂcations have experienced an increase to their standard rate (an average of 8.9% over last year’s rates). Effective January 1, 2012, many clients will experience an increase to their Florida workers’ compensation rates. These rate changes will vary for individual clients based on the workers‘ compensation categories that their employees are classifiÂed within.
One of the primary reasons the state of Florida, in conjunction with the National Council for Compensation Insurance, has increased workers’ compensation rates is the rising cost of health care and rehabilitative services. Also contributing to this year’s increase is the fact that from 2004 through 2010, workers’ compensation rates in Florida steadily decreased to the point where the premium generated was insufficient to cover claims. Now, the state is attempting to balance the revenue and cost by increasing the cost for workers‘ compensation insurance for all carriers in our state. Officials appointed with the responsibility of setting workers’ compensation rates in the state of Florida have worked with actuaries to determine the proper rates for the various job classifiÂcations in our state and have provided all workers’ compensation insurance carriers with the new rates for 2012. In most cases, these rates are higher than 2011, but still signifiÂcantly lower than they were several years ago.
Thank you for your time and understanding. If you have any questions or concerns, please contact us at 1-813-684-5684.
1. “Unemployment Compensation Rate Update.†Florida Association of professional Employer Organizations. 12 Dec. 2011.
2. “Bureau of Labor Statistics Data.” Labor Force Statistics from the Current Population Survey. Web. Dec. 2011.
3. “FL Dept Rev – Employer Information on UC Law.” Florida Department of Revenue. 2011 Unemployment Compensation
Tax Rates Fact Sheet. Web. Dec. 2011.
