Friday, May 09, 2008
| About Unemployment Insurance |
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UI MN Home Page | Site Map Friday, May 09, 2008
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Questions Employers Frequently Ask About Unemployment Insurance (UI)
Answers to Frequently Asked Questions
What is Unemployment Insurance (UI)? The U.S. Department of Labor's Unemployment Insurance (UI) programs provide unemployment benefits to eligible workers who become unemployed through no fault of their own, and meet certain other state eligibility requirements. Unemployment Insurance is a federal program that is administered by state agencies, like the Minnesota Department of Employment & Economic Development (DEED). The Federal Unemployment Tax Act (FUTA), along with state unemployment systems, provides for payments of unemployment benefits to workers who have lost their jobs. Most employers pay BOTH a federal and a state unemployment tax. The funds to pay unemployment benefits are provided by state UI taxes paid by employers based on their layoff history. The employer is directly responsible for paying the UI tax; deductions cannot be made from an employee's wages to cover these taxes. Federal unemployment taxes (often referred to as FUTA) are a separate tax to pay for the administration of the program. FUTA taxes are collected by the Internal Revenue Service on behalf of the U.S. Department of Labor. Minnesota UI taxes and the Minnesota Unemployment Insurance Law are administered by the Minnesota Unemployment Insurance Program. Minnesota employers pay a quarterly UI tax on gross wages paid to each employee, up to the taxable wage base for that year. The tax is deposited in the Minnesota Unemployment Insurance Trust Fund, which is used to pay unemployment benefits to eligible applicants who are unemployed.
What is an Unemployment Insurance (UI) Employer Account? An UI Employer Account is an account assigned by the UI Program to every employer who is required to report wages paid to their employees.
Who needs to have an UI Employer Account? Any person or organization that hires an employee in Minnesota and pays wages must have an UI Employer Account. Other rules apply to employers of agricultural or domestic employees, religious and non-profit organizations.
How do I register for an UI Employer Account? Employers can register for an UI Employer Account using the Minnesota Unemployment Insurance Employer Self-Service System available online at www.uimn.org - click on Employer Login. For detailed information on establishing an employer account, refer to the Registration section of the Employer Self-Service System User Guide.
What wages do I need to report? Wages include all payments to employees for services performed. Wages can include salary, cash wages, commissions, bonuses, tips, profit sharing, the value of meals and lodging, and other compensation. Under Minnesota Unemployment Insurance Law, officers of any corporation who perform services for the corporation are considered employees of the corporation. Therefore, their wages are also subject to unemployment insurance tax. (see Officer Exclusion information). Reference the Reportable Wages and Exclusions section of the Employer Handbook for more information.
When do I need to report the wages I paid my employees? All covered employers are required to file a wage detail report after the end of each calendar quarter, listing all wages paid during the quarter. The total wages paid by the employer are used to compute the unemployment tax. This information must be filed after the end of each quarter until the business is sold, transferred or discontinued, or until the employer no longer meets the Minnesota UI tax liability requirements, even if no wages were paid in the calendar quarter. Wages are taxed at a rate assigned at the beginning of each calendar year, based on the employer’s employment experience record. The wage detail report and payment are due on the last day of the month following the end of each calendar quarter. Reports and payments must be received and accepted by the due date to be considered timely. If that day falls on a weekend, or state holiday, the due date is the next state business day. Employers with an active employer account must submit a wage detail report electronically using the Minnesota Employer Self-Service System.
What if my employees perform services (work) in more than one state? The Employment In More Than One State section of the Employer Handbook answers the question of where (which state) wages paid to the employee are reportable for unemployment insurance purposes.
Why did the Minnesota UI Program move to mandatory electronic wage reporting? As part of a broader effort to make government more efficient for the benefit of taxpayers and, in this case, employers, the UI Program developed an Employer Self-Service System. In line with this effort, there are two options for filing UI wage reports: An online interface, and an automated telephone system. We did this because electronic transactions are more cost efficient and accurate than paper-based transactions. This movement to self-service gives employers more access to, and control of, their own UI accounts. It also provides employers with immediate access to information about unemployment benefit requests filed by former employees that may affect their unemployment account and/or tax rate.
How are UI rates determined for new employers? New employers are assigned a New Employer Tax Rate, which is essentially the average cost rate of all Minnesota employers. New employers in certain industries that routinely result in high unemployment rates are assigned a higher rate. After an employer has reported wages for approximately two years, an experience rating will be assigned. Reference the Tax Rate Information section of the Employer Handbook for more information.
How are UI rates determined for existing employers? Unemployment insurance tax rates are assigned each calendar year. Rates for existing employers are made up of two parts; the base rate, which is the same for all employers, and the experience rating, which can be different for each employer. The base rate is set by state statute and fluctuates with the balance in the Minnesota UI Trust Fund. The experience rate is based on each employer's 4-year history of employment and layoffs (i.e. those where UI Benefits were paid), up to the maximum rating allowed by law. The amount due each quarter is calculated as follows: Quarterly UI Tax + Additional Assessment + Workforce Development Fee. Reference the Experience Rate Information section of the Employer Handbook for more information.
How is an experience rating computed? Similar to your automobile insurance policy, an experience rating is in effect for those employers who have been liable under the law for a sufficient period of time to measure their experience with unemployment. The lower the unemployment benefits an employer's workers have collected, the lower the employer's UI rate will be. An experience rating for a given year is based on a 48-month period that ends on June 30 of the previous year. The UI Program divides 125 percent of the unemployment benefits charged to the UI Employer Account by the total taxable wages reported by the employer for the same period. Only taxable wages for which the tax due was paid by September 30 of the preceding year are used. The experience rating is computed to the nearest tenth of a percent. See an example of the calculation immediately below:
Reference the Experience Rate Information section of the Employer Handbook for more information.
What is the Workforce Development Fee? The workforce development fee is a special revenue fund established to fund the state Dislocated Worker Program and is deposited in the Minnesota Workforce Development Fund (§116L.20). See UI Tax Rates for current rate information.
What is the special assessment, and how is it calculated? When the Minnesota Unemployment Insurance Trust Fund has to borrow federal funds to pay unemployment benefits, a special assessment to pay interest on the loan is incorporated into the tax rate computation. See UI Tax Rates for current rate information.
What is the additional assessment, and how is it calculated? If the balance in the Minnesota UI Fund on March 31 falls below certain levels, an additional assessment takes effect for the following year. See UI Tax Rates for current rate information.
How do I access the UI tax information needed to process my Federal Form 940? The Information Needed to Process Federal Form 940 section of the Employer Self-Service System User Guide answers the question of how to access UI tax information needed to process the Federal Form 940.
How do I know if unemployment benefits have been charged to my UI Employer Account? After the end of every calendar quarter, we mail a benefit charge statement to each employer whose account has been charged with unemployment benefits. The statement will list each former employee who has collected unemployment benefits during the quarter and the amount of unemployment benefits paid. The charge statement details the dollar amount being charged to the employer's account and the percentage of unemployment benefits paid to each individual charged to that employer.
How does an application for unemployment benefits affect my UI Employer Account? If an applicant was involuntarily separated from your employ due to lack of work, some or all of the unemployment benefits paid to the applicant will be charged to your account. The experience rating portion of your UI rate is determined by dividing benefits charged to your account by taxable payroll that you report. Therefore, the effect of any benefit account on your UI rate depends on the amount of unemployment benefits collected by the applicant and the amount of your total taxable wages. A single benefit account will have little or no impact if you have a very large payroll, but may cause a large increase in your UI rate if you have a very small payroll. In no event will your UI rate be greater than the maximum rate, regardless of the amount of benefits charged to your account.
If you pay less than $500 to the employee, none of the unemployment benefits paid to that person will be charged to your account.
What reports am I required to submit? Employers with an active employer account must submit a Wage Detail Report electronically using the Minnesota Employer Self-Service System. The Wage Detail Report is used to report the wages paid to each employee during the quarter. Some non-profit employers and governmental units do not pay tax; instead, they reimburse the UI Fund when a former employee collects unemployment benefits. These employers must also file a Wage Report following the end of each quarter.
How do I submit required reports and make a payment? Employers can submit unemployment Wage Detail Reports and pay taxes electronically using the Minnesota Employer Self-Service System. For step-by-step instructions, reference the Tax and Wage Detail Reporting section of the Self-Service System User Guide.
What happens if I don't submit a wage report on time? If a wage detail report is submitted late, an administrative fee will be assessed. Employers should submit their wage detail report as soon as possible. The information contained on this report is used to authorize the payment of unemployment benefits, so the timeliness of the information is critical. Reference Fees and Penalties section of the Employer Handbook for more information.
How do I submit my quarterly wage detail report? Employers can submit their unemployment Wage Detail Report and and make any required payment electronically using the Minnesota Employer Self-Service System. For step-by-step instructions, reference the Tax and Wage Detail Reporting section of the Self-Service System User Guide.
Can I pay my UI taxes annually? No. This option has been eliminated, effective January 1, 2008.
How do I correct an error on a report that I have already submitted? We encourage that adjustments to prior reports be reported via our self-service online system at www.uimn.org whenever possible. A telephone option is also available at 651-296-6141 for employers who do not have access to the Internet.
Why can't I treat my workers as independent contractors? The status of your workers is determined by the amount of control that you have over the manner in which they perform services for you. Generally, if you control the way the services are performed and have the right to discharge the worker, you are an employer. DEED will issue worker status opinions upon request. For more information on this topic, reference the Independent Contractors section of the Employer Handbook.
Your corporation is a legal entity that employs you. Covered wages that you earn from the corporation may be usable as wage credits if you ever need to file an application for unemployment benefits. However, effective January 1, 2005, wages paid to corporate officers who own 25 percent or more of the corporation are no longer be subject to Minnesota UI tax (i.e. these excluded wages are NOT covered wages for the purpose of establishing a UI benefit account). The amount and duration of unemployment benefits available to you will depend on whether or not the wages you received from the corporation were covered wages, and the conditions of your separation from employment. For more information on this topic, reference the Reportable Wages and Exclusions section of the Employer Handbook and Officer Exclusion information.
What records do I need to keep? How long do I need to keep them? Your records for each employee must include first and last name, Social Security number, location where services were performed, rate of pay, actual days and number of hours worked, gross earnings and the amount of wage paid. Records must be retained for eight years.
How was I picked to be audited? Minnesota Unemployment Insurance Tax Auditors are authorized by law to review employment records. Accounts to be audited are selected by a random program from the pool of all UI Employer Accounts in the state.
I disagree with a determination sent to me by the UI Program. How do I appeal? All notices, determinations and decisions regarding UI rates, worker status issues, and benefit charges offer appeal rights, and specify the appeal period. We respond in writing to all appeals. If necessary, an appeal hearing will be conducted in person, or by telephone. All appeal decisions can be appealed to a higher level of review.
How do I notify you of a change in my business? Changes can be reported using the Employer Self-Service System available online at www.uimn.org or by phone at 651-296-6141, for employers who do not have access to the Internet.
How do I contact you regarding other issues about my UI Employer Account? Employer customer service contact information is available on the Contact UI Web page.
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