APA Needs Your Help to Assess Monthly Wage Reporting BurdenBy Curtis Tatum, Esq.
Monthly UI wage reporting is once again becoming a hot topic for payroll professionals. Illinois, the only state that currently requires monthly wage reporting, will complete its phase-in of the reporting requirement this summer. In May, New Jersey became the latest state to consider legislation that would require monthly wage reporting. While these provisions are intended to help reduce unemployment fraud through timely wage reporting, they ignore the fact that similar information should already be available through new-hire reporting. The APA's Unemployment Insurance Subcommittee of the Government Affairs Task Force (GATF) will continue to monitor the latest legislative effort and will work to minimize any administrative burden that the New Jersey proposal may cause. But the subcommittee needs your help in determining the actual administrative burden created by mandatory monthly wage reporting.
Illinois Monthly Wage Reporting
Monthly wage reporting became mandatory in January 2013 for Illinois employers with 250 or more employees. Since then, two additional phase-in periods have occurred, one for employers with 100-249 employees and another for employers with 50-99 employees. This July marks the final phase-in period and applies the requirement to employers with 25-49 employees, with the first monthly report due in August. The Illinois Department of Employment Security (IDES) has a webpage for employers dedicated to explaining the monthly wage reporting requirement. Under the new requirement, not only must employers continue to file the usual quarterly contribution and wage reports, they must also file eight additional monthly reports each year.
Reporting Intended to Fight Fraud
An IDES news release issued on February 25, 2013, stated that the purpose of the Illinois monthly wage reporting was to "fight fraud in unemployment, Medicaid and Affordable Care Act" and claimed that the state will save $100 million a year by "stopping fraud before it starts."
The release further indicated that monthly wage reporting will allow for "more informed eligibility decisions" when reviewing applications for these programs. Jay Rowell, IDES Director, stated that "the best way to fight fraud is to prevent it before it starts. These monthly wage reports will help do exactly that."
Proposed New Jersey Legislation
On May 15, 2014, New Jersey Assembly Member Wayne DeAngelo introduced legislation that, if enacted, will require monthly wage reporting by employers who had 50 or more employees in the prior year. These reports would be due 20 days after the end of each month rather than 30 days after each quarter-end. The legislative statement accompanying the bill provides a similar justification to the one provided by Illinois. The legislative statement indicates that "the purpose of this bill is to provide a more timely system for the reporting of wages to the department to ensure that unemployed individuals are collecting an accurate level of benefits and to assist the department in identifying individuals who may be collecting benefits for which they are not eligible."
APA's Unemployment Insurance Subcommittee will monitor the status of the legislation and will reach out to legislators and to the New Jersey Department of Labor and Workforce Development (NJ DLWD) to explain the administrative burden that monthly wage reporting may cause employers.
Monthly wage reporting not only creates a new administrative burden for employers but is redundant. The information that the NJ DLWD hopes to capture through monthly wage reporting is already available through new-hire reporting. Currently, employers who report new hires to New Jersey must file their reports within 20 days of the date of hire of any new full-time, part-time, seasonal, or temporary employee. The 20-day deadline ensures that new-hire reports filed in New Jersey will provide employment information to the NJ DLWD as fast or faster than the proposed monthly wage reports, which would be due 20 days after the end of each month. Even information about New Jersey employees who work for multistate employers that report all new hires to another state is available in a timely fashion. Generally, multistate employers will be subject to a state reporting deadline that is equal to or more stringent than New Jersey's deadline. Further, multistate employers that choose to file electronic reports must file two reports per month with due dates that range from 12 to 16 days apart. Once a state receives a new hire report, it has five business days to process the data and another three business days to forward the date to the National Directory of New Hires (NDNH). The NDNH then has two business days to post the information to the directory so that authorized users such as the NJ DLWD can access the new hire information.
In its FAQ concerning new-hire reporting, the NJ DLWD acknowledges the effect of the short deadline, stating that "when you immediately report new hires, there is an improved chance of locating the individual while employed and the required child support action can be promptly taken. In addition, fraudulent unemployment insurance, workers compensation, and welfare benefit payments can be quickly detected."
Additional Administrative Burden
By definition, a new monthly reporting requirement will cause an additional administrative burden. This burden may be heightened in New Jersey because of the extensive wage information that must be reported. On its instruction page for contribution reports, the NJ DLWD includes a very broad definition of wages to include "every form of remuneration" and specifically lists several types of payments that employers may find difficult to calculate on a monthly rather than a quarterly basis. These payments include some types of dependent care payments, stock options, room and board plans, and meal plans.
The actual costs associated with monthly wage reporting are difficult to quantify. If you have been reporting monthly in Illinois or have an idea of the costs associated with complying with a monthly wage reporting requirement in New Jersey, APA's Unemployment Insurance Subcommittee would like to hear from you. Contact Curtis Tatum, Esq., APA's Manager of Government Relations, with any information concerning monthly wage reporting.