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January 2012

Up the Down (Unemployment) Staircase

Up the Down (Unemployment) Staircase PayReel

The U.S. economy’s jobless recovery has improved over the past few months to a mostly jobless recovery.  While most pundits are cautiously optimistic about the employment outlook, employers in many states are still facing increases in unemployment insurance taxes.  Yes, you read that right.  Unemployment is down and unemployment insurance taxes are going up.

Like you, I have a pretty good idea of how the unemployment insurance system is funded … via taxes that employers pay into a dedicated state account.  But what happens when those accounts run dry?  Because of our economy’s tepid recovery, ongoing claims for unemployment insurance remain high.  In some states, the cash reserves to pay these claims have long since been depleted.

Yet people in these states continue to receive unemployment checks.  Where’s the money coming from?

Title XII of the Social Security Act allows states to borrow money from the U.S. Treasury to cover the cost of these claims.  Now, however, Uncle Sam wants his money back.  If it takes your state longer than two years to make good on its Title XII loan, you can expect an increase in the federal portion of your unemployment insurance tax (FUTA).  If your company is located in Indiana, Michigan, or South Carolina you already know what I’m talking about.  Plus, some state constitutions require an increase in their SUTA (and other) rates to accelerate repayment of Title XII loan balances.

By my count, 22 states have outstanding balances more than two years old and are facing increased FUTA rates. So, forewarned is forearmed.  Keep an eye on your state’s Title XII balance.  You can find it at the following DOT website:


Sneaking a peek at 2012

Sneaking a peek at 2012 150 150 PayReel

Now that most of us are well onto our new year’s diets and beginning to rationalize away the more strenuous of our resolutions, let’s take a look at some topics that promise to be interesting reading in 2012 …

  • Unemployment is down, but state and federal unemployment insurance tax rates are still heading up.  What’s up with that?
  • Fed and states continue to step up enforcement of employee misclassification penalties.  A hot topic gets even hotter.
  • The “YouTube Effect” – That shaky cell phone video has already redefined how information is consumed.  Now it’s evolving and finding its way into the corporate boardroom.  What does that mean for the future of corporate communications?
  • An Audience of One? – Don’t be your “independent” contractor’s only client.  If you’re alone, the IRS may take a seat right behind you.
  • SCOTUS is on the case.  The Supreme Court hears arguments on the constitutionality of the Affordable Health Care Act (aka “ObamaCare”).  With all due respect to Messrs. Ali and Frazier, this is shaping up to be “The Thrilla On the Hilla.”
  • Bold as ICE – Immigration and Customs Enforcement is serious about properly documenting workers.  Is an audit or (shudder) a site visit in your future?
  • Managing independent contractors and corporate red tape can be a neat trick.  What are some best practices from people who lived through it?

And like last year, from time to time I’ll hand over my keyboard to some guest bloggers.  So buckle up, stay tuned, and Happy New Year!


PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail perfectly while making sure their clients think nothing of it. Relax. We got it.