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LABOR NEWS |
| By Rod Chapel, Director Missouri Department of Labor and Industrial Relations |
For release the week of: September 25, 2006
Recent Law Changes Target Unemployment Insurance Fraud
Last year Governor Blunt signed legislation closing loopholes which allowed employers to dodge some of their unemployment insurance taxes. The legislation was in response to the federal “SUTA Dumping Prevention Act of 2004” which was signed by President Bush a year earlier.
Through a practice called SUTA (state unemployment tax act) dumping, some employers have been able to lower their unemployment taxes by shifting their payrolls to a new corporation or by buying a different firm and using that company’s lower tax rate. In either case, employers are using unethical if not illegal schemes to pay less in taxes.
House Bills 500 & 533 passed last year requires that the unemployment experience rate transfer with a business if both employers involved in the transfer have substantially common ownership, management, or control of the business and the transfer was made to lower the rating. The rate and liabilities of both employers will be recalculated. In addition, if an employer knowingly violates, attempts to violate, or knowingly advises another in a manner that results in a violation of the provisions relating to the determination of an unemployment experience rate, the employer's rate will be the greater of the maximum rate or the employer's rate plus 2 percent for the current year and the following three rate years.
SUTA dumping harms all employers by dumping the unemployment costs of such employers on the shoulders of others. It also creates an unfair competitive cost advantage for those who SUTA dump and threatens the integrity of the state’s unemployment insurance trust fund.
The Missouri Division of Employment Security, the agency responsible for administering the unemployment insurance program, is responsible for ensuring all employers comply with the law. By enforcing the program’s integrity, the division can help to maintain solvency within the state’s unemployment insurance trust fund, which assists those who need and are entitled to unemployment benefits.
If you think someone is committing fraud or engaging in SUTA dumping, please report it to the Missouri Division of Employment Security at (573) 751- 3331.
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