© 2021 American Payroll Institute, Inc. APA Comments on Federal Unemployment Insurance Improvement Act The APA Government Relations Task Force Unemployment Insurance Workgroup submitted comments on S. 2865/H.R. 5507, the Unemployment Insurance Improvement Act, in late October. The APA supported the bill sponsors’ goal of improving the unemployment insurance (UI) system in the U.S., but highlighted concerns about the increased administrative burden on payroll professionals and their employers. The legislation is a pared down version of a bill that the sponsors released in the spring and seeks to tackle the most significant weaknesses in the UI infrastructure, many of which were highlighted by the economic difficulties brought on by the COVID-19 pandemic, such as fraud and the length of time to process claims. Key provisions with payroll impact The bill focuses on increased access to UI benefits for qualified individuals through new employer data reporting requirements. The bill would require all state UI agencies to implement a system for employers to “provide information regarding claim-filing for unemployment compensation to employees upon separation from employment.” APA members pointed out that complying with the new reporting requirement could prove difficult for employers that do not have direct contact with or a valid address for a separated worker, leaving the employer exposed to penalties for failure to provide employees with the required claim filing information. Short-term and temporary employees may be eligible to receive UI benefits, but employers are even less likely to have current contact information to provide instructions about UI benefits. In fact, state UI agencies would have the most accurate information for terminated employees, as individual UI claimants are required to complete a form with current contact information. In addition, it seems more appropriate for the state, and not employers, to explain state UI claim procedures. The bill also would call for state UI agencies to require employers to notify state workforce agencies of employees who may apply for unemployment compensation. If this provision of the bill becomes law, the reporting burden could greatly increase the workload of payroll professionals. At present, employers respond to state UI agencies’ requests for information on an as-needed basis, when the state wants to confirm an individual’s UI benefit claim. APA proposes solutions The APA offered two solutions: (1) To address the issue of reporting UI data, APA urged legislators to consider the use of the State Information Data Exchange System (SIDES). SIDES is a web-based electronic information system developed by the National Association of State Workforce Agencies and the U.S. Department of Labor. The APA encouraged Congress to adopt use of SIDES to create uniformity in state UI programs and to offer employers an electronic means of communicating with state UI agencies. This would potentially reduce the administrative burden on employers, make processing claims easier on states, and prevent fraud. (2) The APA recommended that legislators use the existing federal taxation structure to manage unemployment compensation taxes for independent contractors. Contractors are responsible for paying their own employment taxes, which would be a better approach to UI than requiring businesses that hire contractors to withhold from payments. There are too many variables in employer payments to contractors, making tracking through multiple employers inefficient. For example, unemployment taxes would be paid by multiple employers in varying amounts for each contractor. State UI management systems would need to identify and compile all of the tax payments for an individual to determine an appropriate benefit amount. A contractor already compiles revenue from multiple arrangements and could more easily identify its required UI taxes than contracting employers. Should Congress seek to institute a UI program for independent contractors, adopting existing requirements familiar to employers and contractors is the best way to achieve that goal, APA said. APA Engages With House Financial Services Committee The APA submitted comments to Congress on earned wage access (EWA) following a hearing of the House Financial Services Committee’s Task Force on Financial Technology in November. During the hearing, “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL (Buy Now Pay Later) and Other Emerging Fintech Cash Flow Products,” representatives questioned witnesses about consumer protections, which employees may benefit from EWA, and whether EWA is different from a payday loan. The APA acknowledged the need to balance consumer protections with December 2021 A Supplement to Payroll Currently, Issue 12, Volume 29
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