Recent Michigan Employment Security Act Amendments

By now most Michigan employers have received a letter from the Unemployment Insurance Agency regarding the bills that were signed into law on December 19, 2011. These bills amended the Michigan Employment Security Act. As a result of these amendments, the 2012 tax rate determination letters will be delayed. In addition, these changes will impact both employers and employees. Below are some  of the changes that will affect employers:

• Taxable wage limit (for the purpose of determining the amount of contributions due from an employer) has increased from $9,000 to $9,500 beginning January 1, 2012. If the Unemployment Compensation Fund reaches 2.5 billion, the taxable wages will be reduced to $9,000 for non-delinquent employers.
• Allow employers with 25 or less employees to pay their first quarter contribution due equally over the four quarters if an election is made. The employer must also have incurred 50% or more of its total previous year’s contribution obligation in the first quarter of that year. This will apply to contributions beginning in the 2013 tax year.
• Contribution rates of each contributing employer will be calculated using wages paid over a three-year experience rating period (previously five-year experience rating). This reduction will be phased in.
• Phase in the requirement for all employers to file quarterly wage reports electronically.
• Unemployment benefits based on services by a seasonal worker are payable only for weeks of employment that occur during the normal seasonal work period. Employers may apply to the UIA for designation as a seasonal employer.
• As of January 1, 2013, the UIA will use the IRS 20-factor test to determine if services performed by individuals create an employer-employee relationship. If a business requests a determination from the UIA regarding whether services are in covered employment before January 1, 2013, wages paid after the determination will be used for benefit purposes. Penalties and interest will accrue only on contributions based on those wages.
• Sanctions for willful violations of this act now include ‘officers’ and ‘directors’.
• Noncompliance reporting is now subject to a $50 fine for each report filed within 30 days after the due date. The fine is $250 if the report is filed more than one calendar quarter after the due date and an additional $250 for each additional quarter that the report is late.

Amendments to this Michigan Employment Act that will affect workers will be discussed in future posts.