Overview of the Department of Unemployment Assistance

Additional information about the department and its responsibilities.

Overview

The Executive Office of Labor and Workforce Development (EOLWD) is authorized by Section 1 of Chapter 23 of the Massachusetts General Laws and operates under the direction of the Secretary of Labor and Workforce Development, who is appointed by the Governor. EOLWD comprises five departments that offer a wide range of programs and resources for both employers and job seekers: the Department of Career Services, the Department of Industrial Accidents, the Department of Labor Relations, the Department of Labor Standards, and the Department of Unemployment Assistance (DUA). EOLWD also oversees Commonwealth Corporation, which offers programs and services to help citizens of the Commonwealth secure employment.

As part of EOLWD, DUA is responsible for administering the Unemployment Insurance (UI) Program in the Commonwealth. It provides financial assistance and transitional services to unemployed Massachusetts citizens who are able to work, available to work, and looking for employment, with the goal of helping them become re-employed. The Commonwealth provides up to 30 weeks of UI benefits during the period that an individual is unemployed.

The federal Social Security Act of 1935 created the UI Program as a joint federal-state partnership, with each state responsible for designing its own program within broad federal guidelines. The US Department of Labor oversees the system, and each state administers its own program. In 1937, Congress passed the federal Unemployment Tax Act, which authorized the Internal Revenue Service (IRS) to collect an annual federal employer tax used to fund state workforce agencies and cover the costs of administering the UI Program in all states. The federal government sets broad guidelines for coverage and eligibility, but states vary in how they determine eligibility. Within these federal constraints, individual states are allowed to establish their own UI payment requirements for employers and run their own programs.

According to DUA’s website, most employers that do business in Massachusetts must pay UI contributions if they have one or more individuals working permanently, temporarily, or part time on one or more days in any 13 weeks during a calendar year or pay wages of $1,500 or more in any calendar quarter. Businesses that employ agricultural workers must make UI contributions if they pay wages of $40,000 or more in any calendar quarter or employ 10 or more individuals on any day in any 20 weeks in a calendar year. In addition, the IRS levies a payroll tax on employers in each state to fund things such as benefit payments to former federal government and military employees, administrative costs related to the operation of state unemployment assistance agencies like DUA, and loans to eligible states whose financial resources do not allow them to meet their UI obligations.

DUA paid UI benefits totaling $2.1 billion in fiscal year 2014, $1.6 billion in fiscal year 2015, and $1.47 billion in fiscal year 2016. DUA’s operating expenditures for the same fiscal years were $88 million, $84 million, and $70 million, respectively. As of February 2017, DUA had 444 full-time employees.

Massachusetts Unemployment Insurance Law

The Massachusetts Unemployment Insurance Law (Chapter 151A of the General Laws) governs all aspects of the UI Program. Specifically, it addresses all aspects of unemployment compensation, including employer contributions to the Commonwealth’s Unemployment Compensation Fund and the rates used; nonprofit organizations and governmental employers and their liability for payments; failure to file and collection of overdue payments; unemployment benefit claims; payment of and eligibility for benefits, claims, and appeals; records and reports; a state advisory council and its powers and duties; the charge-off of uncollectible amounts; and the jurisdiction of action to enforce the law.

Massachusetts Regulations Regarding Unemployment Assistance

Chapter 430 of the Code of Massachusetts Regulations (CMR) establishes all provisions regarding DUA. Responsibilities incumbent upon businesses are set forth in 430 CMR 5.00, including reporting requirements, contribution reports, wage reports, work records, experience rating,¹ and payment in lieu of contributions.² According to 430 CMR 5.06(5),

All non-profit organizations and governmental employers which have elected to make payments in lieu of contributions pursuant to M.G.L. c. 151a, § 14A shall file in the form and manner as prescribed by the Commissioner [the director of DUA] a quarterly report on wages and employment. The due date for filing the reports shall be the last day of the first month succeeding the date on which the quarter ended.

DUA Employers

Once an employer has registered with DUA and it has been determined that the employer is required to pay UI contributions, the employer’s information is maintained in its individual account at DUA. The account is a record of the wages subject to contribution, the contributions actually paid by the employer, the UI benefits charged to the employer, and any account balance adjustment. DUA uses the account information to determine an annual contribution rate for that employer. DUA describes the state contribution as “experience rated,” meaning the amount of the unemployment contributions an employer pays, based on the assigned rate, is directly related to the amount of UI benefits paid to its employees.

For the contribution rate to be calculated correctly, employers are required to provide DUA with information about total wages paid quarterly. If an employer does not report its quarterly wages paid, DUA may estimate the amount of contributions due and assess and collect contributions, penalties, and interest accordingly.

Employers must pay their contributions quarterly. If an employer does not pay by the due date, a penalty is assessed and a Demand for Payment is sent. As of December 31, 2016, there were 212,590 active contributing employers and 2,649 active reimbursing employers in Massachusetts.³ Except where noted in law, contributing employers include all non-reimbursing employers paying more than $1,500 in quarterly employee wages. Contributing employers pay DUA quarterly on the first $15,000 of each employee’s income. DUA annually calculates the rate for each employer based on several factors, including the employer’s history of filing unemployment claims.

Delinquent Account Collection Process

As noted above, funding for UI benefits comes from quarterly contributions paid by the state’s employers to DUA. DUA is responsible for the initial collection efforts—specifically, generating a monthly automated billing statement—for all employers that are delinquent in their UI contributions. If an employer’s contribution has not been made within 30 days after the due date, the account becomes delinquent, and interest and penalties may be assessed. An interest rate of 12% per year, or the interest rate established by the Department of Revenue as of January 1 of the calendar year, whichever is higher, is assessed. Billing statements are initiated when debt is past due because of nonpayment based on filed wages, upward adjustments to filed wages made by the employer, or adjustments resulting from field audits.⁴ If contributions are not collected by 45 days after an employer’s UI quarterly contribution is due, employers with accounts exceeding $10,000 are referred to DUA’s Revenue Enforcement Department for more aggressive collection actions, including contacting the employer by phone, establishing payment plans for the employer based on its outstanding balance, filing real and/or personal property liens, executing Notices of Levy,⁵ and seeking civil or criminal judgments through the Massachusetts Office of the Attorney General. Action is not taken against accounts less than $10,000 in arrears; those accountholders can continue to accumulate debt. It should be noted that DUA has the authority to refer all employers with delinquent UI contributions, regardless of the amounts owed, to its Revenue Enforcement Department. Another recovery option available to DUA and other state agencies is the Payment Intercept Program, whereby state payments due the employer, including tax refunds, are intercepted and transferred to DUA to pay off delinquent accounts. Regarding account levies, Section 15A(a) of Chapter 151A of the General Laws states,

If any employer fails to pay any amount required under this chapter within ten days from the date notice to satisfy a judgment has been mailed to such employer, the Commissioner [the director of DUA] may levy upon the account of such employer being maintained by any bank or other depositary in the commonwealth.

As of June 30, 2016, DUA’s records identified approximately $414.6 million in delinquent contributions and interest owed by Massachusetts employers to DUA. This information was extracted from DUA’s records, and we did not assess the collectability of these delinquent contributions and their related interest. However, using DUA’s records, we adjusted this amount, and we estimate up to $284.4 million, as of December 31, 2016, to be a more accurate representation of DUA’s delinquent contributions’ account balance,⁶ as detailed below.

Employers with Delinquent UI Contributions and Interest

Outstanding Balance	Number of Employers	Amount Owed
$100,000 +	370	$    126,324,337
$50,000–$99,999.99	464	31,884,181
$10,000–$49,999.99	3,449	71,151,332
$1,000–$9,999.99	13,727	45,774,474
$10.01–$999.99	43,737	9,241,344
$0.01–$10	77,006	77,751
Total	138,753	$ 284,453,420*

*    This total was rounded to the nearest dollar.

UI Online

UI Online is an automated system that enables employers to conduct business with DUA electronically. UI Online transactions involve processing employers’ contributions to the UI Program. These contributions become part of the revenue pool from which claimants who qualify for UI may be paid. Because of various automation problems with UI Online, which are discussed in the Other Matters section of this report, letters issued as part of the debt collection process, including Certified Assessments, Requests for Judgment, Notices of Lien, and Notices of Levy, are created by the Revenue Enforcement staff outside UI Online, in Microsoft Word, and must later be scanned into UI Online to maintain evidence that they were generated.

A Certified Assessment is a notice sent to an employer by DUA’s Revenue Enforcement Department staff, using registered or certified mail, to ensure that the employer is aware of its outstanding UI debt. The employer has 10 days to appeal the assessment; if it does not, DUA can make a Request for Judgment to a court, which extends the statute of limitations for collections from 6 years to 20 years. A Request for Judgment also permits DUA to use stronger enforcement tools for its collection process, including a Notice of Lien and/or Notice of Levy. DUA can place liens on the properties of employers that fail to pay off outstanding UI debt. A lien allows DUA to keep possession of an employer’s property until the owed amount has been paid in full. DUA can also levy the bank accounts of employers that fail to pay off outstanding UI debt to DUA. A levy requires that the bank surrender any money available to pay the past-due debt in a sum equal to the amount owed. DUA may also levy a state agency that is making payments to an employer with outstanding UI debt (see Sections 15, 15A, and 16 of Chapter 151A of the General Laws).

DUA staff members enter information associated with their collection activity first in DUA’s Microsoft Access database and then in UI Online. DUA management stated that entry in UI Online does not always happen, leading to missing information and/or documentation related to collection activity in the UI Online system.

1. New employers’ contribution rates become “experience rated,” as DUA refers to them, in the third year their UI accounts exist. A UI account is a record of the contributions paid to DUA and the amount of UI benefits paid to an employer’s workers or former workers. It is maintained to determine the annual tax rate for each employer. A history of properly paid contributions and fewer layoffs means a better experience rating.

2. Payments in lieu of contributions are payments due the Commonwealth’s Unemployment Compensation Fund.

3. A reimbursing employer reimburses DUA dollar for dollar for UI benefits paid to the employer’s staff. Reimbursing employers include nonprofit organizations, governmental entities, and Native American tribes and tribal units.

4. In a field audit, DUA field auditors review employer payrolls and check for accuracy of their wage reporting.

5. Notices of Levy are notifications to an employer’s bank/s requiring the bank/s to withdraw funds held by the employer to satisfy its UI debt.

6. DUA records include billings for UI contributions as of June 30. These billings are considered earned revenue (accruals) and were not included as possibly collectible, as one cannot predict what percentage of these accruals will be paid on time. In addition, DUA records include payments received that could not be applied to a specific employer because of missing information, known as unmatched allocations, which were therefore not included in DUA’s delinquent UI contribution balance. 

 

 

Date published:	June 15, 2018