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How Manufacturing is Tackling Unemployment Issues in Michigan

This article appeared in the September 2020 issue of MiMfg Magazine. Read the full issue and find past issues online.

State employment levels continue to improve as the Michigan Department of Technology, Management & Budget reported 269,000 additional jobs across June and July while the current 8.7 percent unemployment rate is both better than the national average and much improved from April’s post-pandemic rate of 22.7 percent. Despite this, employers will likely feel the long-term effects of COVID-19 through its impact on unemployment benefits and related programs.

Lack of Trust in the Unemployment Insurance Trust Fund

As a funding source entirely sustained through the state and federal unemployment taxes paid by Michigan employers, manufacturers keep a close eye on the health of the Unemployment Insurance Trust Fund (UITF). Funds in the UITF are used to pay unemployment benefits. After MMA led an effort to pay down long-term debt in the fund, at the beginning of 2020, Michigan’s UITF was third strongest in the nation with more than $4.66 billion in reserve. COVID-19 and its resulting economic crisis changed everything.

As employers were forced to suspend operations and make difficult workforce decisions, the UITF balance has declined rapidly. The Michigan Department of Labor and Economic Opportunity (LEO) announced projections in June that put the Fund below $2.5 billion, triggering an increase in the taxable wage limit for 2021 and eliminating nearly $57 million in annual unemployment tax savings.

A provision in the Michigan Employment Security Act intended to ensure solvency of the Fund requires the taxable wage base to increase from $9,000 per employee to $9,500 when the balance of the Fund falls below $2.5 billion.

MMA Driving Solutions to Prevent Tax Increases

To prevent an increase in employer taxes paid into the unemployment system, MMA is pushing three potential solutions:

  • MMA supported efforts by the Michigan Legislature to appropriate funds to bolster the balance of the UITF. In an early version of a supplemental appropriations bill passed earlier this year, Senate Bill 690 (Senator Jim Stamas, R-Midland), $500 million was set aside to be transferred to the UITF if it fell below the threshold. Unfortunately, sizable budget deficits created by COVID-19 forced the elimination of this provision before final passage.
  • Understanding that employers should not be held responsible for the cost of unexpected unemployment due to COVID-19, Congress and the Trump Administration are considering enacting another COVID-19 protection program that provides funds to states to fill UITF gaps. There is bipartisan recognition that the economic damage we face today is not the result of normal market functions nor the actions of specific employers. MMA and a coalition of business groups sent a letter calling on Congress to continue provisions within the Coronavirus Aid, Relief, and Economic Security (CARES) Act that would provide 100 percent federal reimbursement for extended benefits.
  • On a parallel track, MMA is pushing a policy debate in Lansing about postponing the trigger date for making a determination of the taxable wage base. As the pressure on the fund is caused by the COVID-19 pandemic, a tax increase on employers will not solve the problem and may increase financial stress on manufacturers facing cashflow challenges. Changing the trigger to January or June of 2021 could prevent employer tax increases while maintaining adequate UITF reserves.
Dealing with Unemployment During a Pandemic

The CARES Act and the Families First Coronavirus Response Act (FFCRA) provided extended benefits for those on unemployment due to a COVID-19-related layoff/furlough — adding $600 beyond the typical unemployment benefit that Michigan offers. Those benefits expired the weekend of 7/24/20.

When negotiations collapsed, President Trump issued a Memorandum of Policy on 8/8/20 to continue enhanced benefits retroactive to 8/1/20. Shortly after, FEMA approved Michigan’s application to access federal funds through the Trump memo to continue adding $300 per week in additional unemployment benefits for an estimated 910,000 residents.

The federal CARES Act also provided enhanced support for workshare programs and, under Governor Whitmer’s Executive Order 2020-76 (effective for the duration of Michigan’s declared pandemic), nearly all employers and workers are eligible to participate. Michigan’s Workshare program allows employers to keep their employees while reducing hours and wages anywhere from 10 to 60 percent, all while permitting the employee to continue receiving prorated unemployment benefits. MMA supports the state’s efforts on Workshare as it helps reduce pressure on the UITF if people are working even part-time. While the extra benefits help attract people to Workshare, we remain opposed to expanded benefits as it creates a barrier to attract workers back to work.

Inaccurate UIA Statements and Imposter Claims

Governor Whitmer’s Executive Order 2020-76 pertaining to unemployment also specifies that unemployment benefits payable to workers who were laid off or on a leave of absence during the COVID-19 crisis would not be charged to employers. However, numerous MMA members have discovered errors on their quarterly statement from the Michigan Unemployment Insurance Agency (UIA) this summer with inaccuracies and charges inconsistent with the executive order. While MMA has received assurances from the UIA that all erroneous charges will be corrected, members should closely monitor their statements and immediately protest improper charges with the Agency.

Additionally, this is a perfect time for employers to double-check for imposter claims. The sooner a fake claim is discovered, the easier it will be for everyone involved to address the potential crime.

Contact David Q. Worthams

David Q. WorthamsDirector of Human Resource Policy
Call 517-487-8511
E-mail worthams@mimfg.org

This article appeared in the September 2020 issue of MiMfg Magazine. Read the full issue and find past issues online.

State employment levels continue to improve as the Michigan Department of Technology, Management & Budget reported 269,000 additional jobs across June and July while the current 8.7 percent unemployment rate is both better than the national average and much improved from April’s post-pandemic rate of 22.7 percent. Despite this, employers will likely feel the long-term effects of COVID-19 through its impact on unemployment benefits and related programs.

Lack of Trust in the Unemployment Insurance Trust Fund

As a funding source entirely sustained through the state and federal unemployment taxes paid by Michigan employers, manufacturers keep a close eye on the health of the Unemployment Insurance Trust Fund (UITF). Funds in the UITF are used to pay unemployment benefits. After MMA led an effort to pay down long-term debt in the fund, at the beginning of 2020, Michigan’s UITF was third strongest in the nation with more than $4.66 billion in reserve. COVID-19 and its resulting economic crisis changed everything.

As employers were forced to suspend operations and make difficult workforce decisions, the UITF balance has declined rapidly. The Michigan Department of Labor and Economic Opportunity (LEO) announced projections in June that put the Fund below $2.5 billion, triggering an increase in the taxable wage limit for 2021 and eliminating nearly $57 million in annual unemployment tax savings.

A provision in the Michigan Employment Security Act intended to ensure solvency of the Fund requires the taxable wage base to increase from $9,000 per employee to $9,500 when the balance of the Fund falls below $2.5 billion.

MMA Driving Solutions to Prevent Tax Increases

To prevent an increase in employer taxes paid into the unemployment system, MMA is pushing three potential solutions:

  • MMA supported efforts by the Michigan Legislature to appropriate funds to bolster the balance of the UITF. In an early version of a supplemental appropriations bill passed earlier this year, Senate Bill 690 (Senator Jim Stamas, R-Midland), $500 million was set aside to be transferred to the UITF if it fell below the threshold. Unfortunately, sizable budget deficits created by COVID-19 forced the elimination of this provision before final passage.
  • Understanding that employers should not be held responsible for the cost of unexpected unemployment due to COVID-19, Congress and the Trump Administration are considering enacting another COVID-19 protection program that provides funds to states to fill UITF gaps. There is bipartisan recognition that the economic damage we face today is not the result of normal market functions nor the actions of specific employers. MMA and a coalition of business groups sent a letter calling on Congress to continue provisions within the Coronavirus Aid, Relief, and Economic Security (CARES) Act that would provide 100 percent federal reimbursement for extended benefits.
  • On a parallel track, MMA is pushing a policy debate in Lansing about postponing the trigger date for making a determination of the taxable wage base. As the pressure on the fund is caused by the COVID-19 pandemic, a tax increase on employers will not solve the problem and may increase financial stress on manufacturers facing cashflow challenges. Changing the trigger to January or June of 2021 could prevent employer tax increases while maintaining adequate UITF reserves.
Dealing with Unemployment During a Pandemic

The CARES Act and the Families First Coronavirus Response Act (FFCRA) provided extended benefits for those on unemployment due to a COVID-19-related layoff/furlough — adding $600 beyond the typical unemployment benefit that Michigan offers. Those benefits expired the weekend of 7/24/20.

When negotiations collapsed, President Trump issued a Memorandum of Policy on 8/8/20 to continue enhanced benefits retroactive to 8/1/20. Shortly after, FEMA approved Michigan’s application to access federal funds through the Trump memo to continue adding $300 per week in additional unemployment benefits for an estimated 910,000 residents.

The federal CARES Act also provided enhanced support for workshare programs and, under Governor Whitmer’s Executive Order 2020-76 (effective for the duration of Michigan’s declared pandemic), nearly all employers and workers are eligible to participate. Michigan’s Workshare program allows employers to keep their employees while reducing hours and wages anywhere from 10 to 60 percent, all while permitting the employee to continue receiving prorated unemployment benefits. MMA supports the state’s efforts on Workshare as it helps reduce pressure on the UITF if people are working even part-time. While the extra benefits help attract people to Workshare, we remain opposed to expanded benefits as it creates a barrier to attract workers back to work.

Inaccurate UIA Statements and Imposter Claims

Governor Whitmer’s Executive Order 2020-76 pertaining to unemployment also specifies that unemployment benefits payable to workers who were laid off or on a leave of absence during the COVID-19 crisis would not be charged to employers. However, numerous MMA members have discovered errors on their quarterly statement from the Michigan Unemployment Insurance Agency (UIA) this summer with inaccuracies and charges inconsistent with the executive order. While MMA has received assurances from the UIA that all erroneous charges will be corrected, members should closely monitor their statements and immediately protest improper charges with the Agency.

Additionally, this is a perfect time for employers to double-check for imposter claims. The sooner a fake claim is discovered, the easier it will be for everyone involved to address the potential crime.

Contact David Q. Worthams

David Q. WorthamsDirector of Human Resource Policy
Call 517-487-8511
E-mail worthams@mimfg.org
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