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Changes Ahead for North Carolina’s Unemployment Insurance System

February 11, 2013

To assess how this proposed legislation might impact your business, contact Alexander P. “Sandy” Sands, a former North Carolina state senator, who leads firm's Public Policy and Governmental Affairs Group in Raleigh. ssands@nexsenpruet.com or 919.755.1800. 

Attorneys Zeke Creech and David Robinson are also available to answer questions. Creech is a former hearings officer (unemployment insurance appeals) with the N.C. Employment Security Commission. Robinson is special counsel with the Employment and Labor Law Group in Raleigh.

Members of the North Carolina General Assembly introduced sweeping legislation on January 30 to overhaul the state’s unemployment insurance (UI) system. House Bill 4, with a short title of “UI Fund Solvency & Program Changes,” has already passed the House. The Senate is anticipated to take up the bill this week and, if passed, Governor Pat McCrory is expected to sign it into law.

A helpful House Finance Committee summary of the legislation was recently circulated. Some of the key legislative points from that summary are:

Fund Changes  

Employment Security Reserve Fund

Restrict uses and Cap fund at $50 million or the amount of interest paid the previous year; excess transferred to UI Fund.

Worker Training Trust Fund & Training and Employment Account

Eliminate these accounts. Transfer any balance in these accounts to the UI Fund.

Special Employment Security Administration Fund

Appropriate $10 million of the $16 million balance to the UI Fund.

Financing Change

SUTA Changes

Increase the minimum and maximum contribution rate by .06. Move to a formula, as opposed to tax tables.

20% surcharge

Trigger "off" surcharge when UI Fund equals or exceeds $1 billion. Does not apply to reimbursing employers.

Reimbursable Entities

Require governmental employers that elect to reimburse benefits paid to maintain an account balance equal to 1% of taxable wages. Treat all nonprofits the same: require 1% reserve if choose to reimburse; remove options of surety bond and other special payments.

Benefit Changes

Benefits Duration

Reduce maximum duration of benefits from 13 to 26 weeks to 13 to 20 weeks. This range would vary based on total unemployment. With 5.5% unemployment or less, the range would be 5 to 12 weeks.

Calculation of WBA

Base on average of last two quarters worked, rather than high quarter.

Maximum WBA

Statutorily set amount of $350, rather than formula (current amount is $535).

Program Changes

Partial weekly benefit

Disregard 20% of WBA, rather than 10% of AWW in highest quarter of base period.

Waiting week

Require waiting week for all new claims. Remove all waivers of the waiting week.

Extended base period

Repeal.

Extended benefit triggers

Retain the two OPTIONAL triggers but only when 100% federally funded.

Attached claims

Must have positive-credit balance. Reimburse. Limited to one time per employee for no more than 6 weeks.

Disqualification

Disqualification based on each application for UI.

Substantial fault and good cause provisions

Retain domestic violence and spousal relocation due to military reassignment. Eliminate substantial fault. Eliminate most other good cause provisions, unless federally required.

Suitable work

Define suitable work as any work after 10 weeks of UI benefits.

[Acronyms: UI (Unemployment Insurance), WBA (Weekly Benefit Amount), AWW (Average Weekly Wage)]

The bill is advancing rapidly. Stay up-to-date on its status online through the Legislature’s Daily Calendar.

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