Welcome to Workforce 3 One U.S. Department of Labor Employment and Training Administration Webinar Date: May 30, 2014 Presented by: Robert Pavosevich Division of Fiscal and Actuarial Services, Office of Unemployment Insurance, Employment and Training Adminstration U.S. Department of Labor Employment and Training Administration

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3# 1.State Trust Fund Solvency Status 2.Eligibility for Interest-free Advances for Potential FUTA Credit Reduction Calculations for 2014

Moderator: Robert Pavosevich Title: Unemployment Insurance Actuary Organization: Division of Fiscal and Actuarial Services Office of Unemployment Insurance Employment and Training Administration U.S. Department of Labor 4#

36 14 Number of States that have Borrowed Number of States with Current Loan Balance $14.5 Billion Current Loan Balance $48.5 Billion Peak Amount of Loans 5 State Unemployment Insurance Financing Status

2014 Trust Fund Solvency Report State Unemployment Insurance U.S. Department of Labor Office of Unemployment Insurance Division of Fiscal and Actuarial Services May 2014 View this report online at:

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Georgia Title XII Advance History

Solvency Measures Comparing Reserves to Benefits Reserve Ratio: Benefit Cost Rate: Trust Fund Balance Total Annual wages in Covered Employment Total Benefits Paid Total Annual Wages in Covered Employment

Georgia Benefit Cost Rates ( ) (Total Benefits / Total Wages ) % of Total Wages

State Trust Fund Solvency 12) Trust Fund Compared to Benefit Costs 2013 Benefit Cost Rate High 3 Yr. Avg. Benefit Cost Rate Highest Yr. Benefit Cost Rate 13) Solvency Level Using (AHCM)

12 AVERAGE HIGH COST MULTIPLE TF Balance (as of 12/31) Covered Wages (calendar year) Benefits Paid for a calendar year Covered Wages for the same calendar year AHCM = Average of 3 highest yrs over the last 20 yrs, or last 3 recessions, whichever is longer The AHCM represents the number of years a state can pay out benefits if it paid at the rate it paid during the three highest years over the previous 20 (or over the last 3 recessions, whichever is longer) without receiving any additional revenue.

Average High Cost Multiple (12/31/2013)

Eligibility for 2014 Interest Free Borrowing Calculations of Federal Borrowing Statutes and FUTA Credit Reductions Eligibility for Interest Free Borrowing in )Last year in which State achieved a 0.5 Avg. High Cost Multiple 3 : )Lowest Percentage the Avg. Tax rate is of the Previous 5 yr. Ben Cost Rate (in the last 5 years) N/A 16)Lowest Percentage the Average Tax Rate is of the Previous Avg. Year's Tax Rate (in the last 5 years) N/A Ineligible 14

Cash Flow Loans No interest will be assessed on loans taken in a calendar year if: –The loans are repaid by Sep. 30; –No loans are taken between Oct. 1 and Dec. 31 –The state meets the funding goals specified in regulation (20 CFR ) Starts

Implementation: The Funding Goal criterion will first apply to advances taken in 2014 Phase-In: The applicable solvency requirement for 2014 advances will be an AHCM of at least 0.50 on December 31 in one of the preceding five years. Going Forward: The solvency requirement will be incremented by 0.10 in each year until it reaches 1.00 in 2019 and the Funding Goal will be fully implemented. Implementation Timeline 16

Funding Goals – Tax Effort For each year between the year in which the solvency target was last met and the year of the loan, the state’s average tax rate on total wages must be at least: 80 percent of the prior year’s average tax rate and 75 percent of the state’s five-year average benefit-cost rate 17

Funding Goal Eligibility Calculations

Benefit Cost Rate Definitions The benefit cost ratio for a year is all UI compensation paid under State law for the year plus interest paid for Title XII advances during the year divided by total wages. (See 20 CFR 606.3(c).) The five-year average benefit cost ratio is calculated by dividing the sum of the five benefit cost ratios by five. (See 20 CFR (d).) 19

Funding Goal Example 2014 Cash Flow Loan 20

FUTA tax is 6.0% of first $7,000 earned in covered employment Employers get a 5.4% tax credit if state law meets minimum Federal requirements Effective tax rate is 0.6% or a maximum of $42 per covered employee, per year Revenues are deposited into the Unemployment Trust Fund maintained by Treasury FUTA Tax 21

22 FUTA Tax Rate Credit Reduction Total 17) Due to Outstanding Loans2.7% Add-on BCR Add-on Credit Reduction FUTA Tax Rate % 0.0% 0.90% 1.5% Potential % 0.0% 0.6%1.80% 2.4% Calculation of 2014 State FUTA Tax Rate Georgia

FUTA Credit Reduction Years After First Loan Basic Credit Reduction Additional Credit Reduction Total FUTA Rate 10.0% 0.6% 20.3%0.0%0.9% 30.6%2.7 Add-on1.2% or more 40.9%2.7 Add-on1.5% or more 51.2%BCR Add-on1.8% or more **** **** **** 195.4%BCR Add-on6.0% 23

Summary of 2014 State FUTA Tax Rate FUTA Credit Reduction 2014 Final FUTA Tax Rate STATE Basic Reduction Estimated Potential 2.7 Add-on Estimated Potential BCR Add-on Total Credit Reduction ARKANSAS1.2%-0.5%1.7%2.3% CALIFORNIA1.2%-1.5%2.7%3.3% CONNECTICUT1.2%-0.5%1.7%2.3% DELAWARE0.9%-- 1.5% GEORGIA1.2%-0.6%1.8%2.4% INDIANA1.5%-1.2%2.7%3.3% KENTUCKY1.2%-1.0%2.2%2.8% MISSOURI1.2%-0.4%1.6%2.2% NORTH CAROLINA1.2%-0.5%1.7%2.3% NEW JERSEY1.2%-- 1.8% NEW YORK1.2%-0.7%1.9%2.5% OHIO1.2%-1.4%2.6%3.2% RHODE ISLAND1.2%-1.0%2.2%2.8% SOUTH CAROLINA1.5%-0.5%2.0%2.6% VIRGIN ISLANDS1.2%-1.6%2.8%3.4% WISCONSIN1.2%-0.1%1.3%1.9% 24 States With FUTA Credit Reductions

25# The application for FUTA Credit Reduction Avoidance, Credit Reduction Cap, Interest Payment Relief, and BCR waiver are due to the Secretary of Labor prior to July 1, 2014.

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Speaker:Robert Pavosevich Title:Unemployment Insurance Actuary Organization: Office of Unemployment Insurance Telephone: (202) #

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