DWD Contact Information

Unemployment Insurance
Employer Handbook

The Unemployment Insurance (“UI”) program is administered by the Indiana Department of Workforce Development (“IDWD”). This guide is issued by IDWD to help employers understand how they are affected by the law governing the UI program in Indiana. This guide explains the following:

• How IDWD opens and maintains an employer account;
• Employers’ tax obligations;
• The conditions under which former employees can collect UI benefits; and
• An employer’s responsibilities when a former employee files a claim for benefits.

How to Use the Employer Handbook:

This guide is divided into twelve (12) areas of interest. These areas are:

1. Getting Started
2. Quarterly Employer Reporting
3. Introduction to UI Tax
4. Tax Rate Computation
5. Your Employer Experience Account
6. Your Former Employee Files a Benefits Claim – What to Expect
7. Seasonal Employment
8. The Appeals Process
9. Maintaining Integrity in the UI Program
10. Buying or Selling a Business
11. Frequently Asked Questions
12. Glossary

If at any time you encounter a term that is unfamiliar, please turn to the glossary for an explanation. This will improve your understanding of this information.

Statements in this booklet are intended for general information and do not have the effect of law or regulation. This guide is not designed to cover all phases of the law or to answer all questions.

To obtain copies of the laws relating to IDWD, please visit www.in.gov/dwd or call IDWD at 1- (800) 891-6499 or in Marion County, (317) 232-7436.

UI at a Glance - 2006

I. Introduction to Unemployment Insurnace Tax

A. UI Taxes – In General

UI is a federal-state program jointly financed through federal and state employer payroll taxes (federal and state UI tax). These programs are regulated under the Federal Unemployment Tax Act and the State Unemployment Tax Act.

Federal Unemployment Tax (FUTA)

Most employers liable for state unemployment taxes are also liable for federal unemployment tax (“FUTA”). The current federal taxable wage base is the first $7,000 paid to an employee during the calendar year.

FUTA is designed to produce federal revenue to pay administrative costs of operating state unemployment compensation programs and public employment services. It also pays the federal share of extended benefit costs. FUTA is paid directly to the IRS.

Employers who submit complete payroll reports on time and pay their state unemployment taxes on time are given a substantial credit against the total FUTA tax owed. FUTA taxes can be reduced from 6.2% to 0.8% when these conditions are met.

State Unemployment Tax Act (SUTA)

Employers liable under SUTA are required to pay unemployment taxes to the state. UI is a tax paid by the employer without deduction from the wages of any employee.

Factors, including benefits paid to former employees, voluntary payments made, and the employer’s partial sale or purchase of other businesses, also impact your rate. Your tax rates may also be affected by provisions of the law concerning how long you have been subject to SUTA, your recent reporting activity, and your tax or reporting delinquency.

These taxes are deposited in the state UI Trust Fund. Monies from this fund are used exclusively to pay UI benefits to those eligible under SUTA requirements.

Certification

Annually, the IRS requires that IDWD certify to the IRS all taxable wages and all tax payments made by each employer to IDWD for a particular calendar year. The certification also indicates the rate paid and whether or not payments were timely for IRS purposes.

If the taxable wages and tax payments you reported on your annual IRS Form 940 do not match what you reported and paid to IDWD, you may receive a discrepancy letter from the IRS or IDWD requesting an explanation. You must correct the discrepancy by filing a corrected IRS 940 or correcting your wage information with IDWD. This will enable you to receive a recertification.

Method of Payment

There are two (2) methods for making payments under the SUTA tax provisions – reimbursement and contributions. Reimbursement is covered in section II-G.

Most employers are contributing employers who pay taxes (contributions) at a specified rate on a quarterly basis. All contributing employers pay taxes at a rate based on their “experience.” Taxes not paid when due are subject to interest charges and other associated collection costs.

II. Getting Started

A. Employer Qualifications

You are liable for payment of UI tax under the Indiana Department of Workforce Development Act (“IDWD Act”) if you meet any of the following definitions of employer:

Regular Business Entity (Ind. Code § 22-4-7-1)

Complete Acquisition (Ind. Code § 22-4-7-2(a))

Partial Acquisition (Ind. Code § 22-4-7-2(b))

Entity with FUTA Liability (Ind. Code § 22-4-7-2(f))

.
Voluntary Election (Ind. Code § 22.4-7-2(d))

• You have agricultural employees and pay $20,000 or more in cash wages in a calendar quarter; or
• You have ten (10) or more agricultural employees for some part of a day in each of twenty (20) weeks during a calendar year.

Governmental Employer* (Ind. Code § 22-4-7-2(g))

• Service is performed by an individual in the employment of this state or any government entity, for any amount of wages.
• Exclusions include: elected officials, members of a legislative or judiciary body, members of the state National Guard or Air National Guard, employees serving on a temporary, emergency basis, and individuals designated in major non-tenured policy-making or advisory positions.
• Government employers are required to pay UI taxes starting with the first dollar of payroll.

See section XIII for a chart listing special types of employment and payments and their status regarding UI tax liability.

Not-for-Profit Employer* (Ind. Code § 22-4-7-2(h))

• You are a corporation, community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of your activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals (26 U.S.C. 3306(c)(8), 501(c)(3));
• No part of your net earnings go to the benefit of any private shareholder or individual; and
• You employ four (4) or more individuals for some portion of a day in each of twenty (20) different weeks during the calendar year.

Domestic Employer (Ind. Code § 22-4-7-2(i))

• You have hired household help of any kind and have paid a total of $1,000 or more in wages in any calendar quarter in a calendar year.

  * If you are a Governmental or Not-for-Profit employer you may opt to become a Reimbursable Employer, as opposed to a typical taxable employer. See section II-G for more details.

B. Employee Qualifications

An employee is an individual who performs a service for you under a contract of hire for payment. In order for this individual to count toward your employer qualification, as well as to be eligible for UI benefits, the individual must be an employee, not an independent contractor.

Individuals providing services for you in return for wages will be considered “employees” for the purposes of the UI program unless all of the following are met:

1. The individual is free from control and direction in connection with the performance this service;
2. The service is performed outside your usual course of business, and the individual’s usual area of employment within your business; and
3. The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature of the work she/he does for you or is a sales agent who is paid on commission only and has complete control over his/her own time and effort.

Note: It is the right to control that is important. It is not necessary that the control is ever exercised.

See section XIII for a chart listing special types of employment and payments and their status regarding UI tax liability.

C. Multi-State Employment

When an employee performs services in more than one state, a determination must be made regarding in which state(s) the employee earnings must be reported. The determination shall be made by applying the following test in the sequence indicated:

D. Employer Registration

You may register by completing State Form 2837 (Report to Determine Status). There are two (2) ways to obtain this form:

Return the form by mail to:

Indiana Dept. of Workforce Development
10 N. Senate Ave., RM SE 106
Indianapolis, IN 46204-2277

Once you register with IDWD, you will be assigned an individual account number and will be sent pertinent information for new employers. This will include information regarding quarterly reporting requirements, which are described in part D below.

Failure to register does not relieve you of the responsibility to remit UI taxes timely. Failure to register and pay the appropriate taxes will result in penalties and interest as discussed below in section VI-E.

E. Required Poster

All employers liable for UI taxes must prominently display a poster where all employees can see it. To meet this requirement, posters should be posted in a sufficient number of locations at each work site, so that employees will have an opportunity to read them. Upon request, you must give employees information necessary for them to obtain their full UI rights and benefits under the law.

Contact IDWD to obtain the appropriate poster at no cost to you. You can also download the posters in English and Spanish at http://www.in.gov/dwd/ (click on Employer, Unemployment Insurance, then Forms).

If you don’t have a permanent worksite regularly accessed by your employees, IDWD can provide you with individual notices to give your employees.

F. New Employer Tax Rate

New government employers are taxed at a rate of 1.0%. All other new employers are taxed at the rate of 2.7%. New employers will remain at this rate until they have:

Once the above criteria have been met, you are qualified for an experience rating, also known as a merit rate. Experience rates are discussed in detail in Section VI-A.

G. Reimbursable Employers

Not-for-profit and governmental employers (defined in part A above) may choose to reimburse the UI Trust Fund for benefit payments charged by their employees. They can do this by:

• Providing IDWD with a copy of their Internal Revenue Service (“IRS”) 501(c)(3) exemption status letter; and
• Submitting a completed State Form 1065 (Election to Pay Tax or to Become Liable).

Once an employer qualifies as a reimbursable employer, the status is effective for a period of two (2) full calendar years, at which time the employer may elect to become a taxable employer. Like taxable employers, reimbursable employers must also file quarterly reports UC-1 (reporting gross wages only) and UC-5 as described in part E below.

Reimbursable employers who elect to make payments in lieu of contributions shall be charged for all benefit payments which are attributable to service in their employ.  See Section VII for more information on how benefit payments are charged to employers.

table of contents

III. Quarterly Employer Reporting

A. Tax and Wage Quarterly Reports (UC-1 and UC-5)

After you (the employer) have been issued an account number, quarterly reports UC-1 (Quarterly Contribution Report) and UC-5 (Quarterly Wage Report) will be automatically forwarded to your business address at the end of each calendar quarter. It is your responsibility to monitor the receipt of quarterly reports. If you do not receive these reports, call 1-800-891-6499 or (317) 232-7436 to request the missing report(s).

B. Reporting Payroll

For UI tax purposes, if you are liable for any part of a calendar year, you are liable for the entire year. So, if you qualify in only one quarter during the calendar year, you must report all payrolls during that entire calendar year. You will receive quarterly reports based on information provided to IDWD during your employer registration. If you receive a quarterly report for a quarter in which you have no payroll to report, write “Nothing to Report” on the quarterly report and return via mail. You may report using paper or magnetic media.

Payroll must be reported for the quarter in which it was paid. Benefits are determined based on quarterly wages; therefore, payroll cannot be reported in only one quarter for the entire year.

You are required to file a quarterly report even if you have no payroll to report. If this is the case, submit the required reports marked “Nothing to Report.” If IDWD finds that you have failed to file any payroll report, IDWD will make an estimate based on the best reasonable evidence.

Corrections to quarterly reports need to be made for each quarter in which an error was made. It is your responsibility to notify IDWD of any changes in your address, adjustments to quarterly reports, or the selling, purchasing, or closing of your Indiana operations. This can be done by completing State Form 44954 (Employer’s Contribution Adjustment Report) or sending a letter referencing your account number, the quarter to be corrected, and the problem to:

Indiana Dept. of Workforce Development
10 N. Senate Ave., RM SE 106
Indianapolis, IN 46204-2277

If you need assistance or information, visit http://www.in.gov/dwd/ or call (800) 891-6499.

C. Covered Employers

Coverage of your employees continues as long as you meet IDWD qualifications. If you fail to meet employer qualifications for the preceding year, you have until the following January 31st to file a written request to terminate coverage.

For UI tax purposes, there is no distinction between a full-time employee and a part-time employee. If an employee works for any amount of time during a calendar week, you must count that week as a “week of employment” when considering the twenty (20) week qualification.

There is also no distinction between S-Corporations and business corporations (C-corporations). All corporate officers must report all payments for services.

D. Report Due Dates

All active employers must file a quarterly report by the report due date for that quarter. Reports are mailed the third month of the quarter and are due as follows:

Quarterly UC-1 / UC-5 Report Due Dates

Failure to receive notice to file a report does not relieve you of the responsibility for timely filing of that report.

E. Retroactive Payments

You are required to file a notice when you make a retroactive payment of income to an employee that would reduce the employee’s benefit amount (includes wages, vacation pay, severance pay, etc.). If you make such a payment to an individual who is claiming or has claimed benefits during the period covered by the retroactive payment, notify IDWD immediately. Please report the week(s) during which both the retroactive payment and the UI benefit payment occurred. A letter or memo may be used to furnish this information.

F. Remittance of Amounts Due

Remittance of the total amount due should be submitted with your quarterly reports. The amount due will include taxes and administrative assessment, if applicable, but should also include any penalty and interest due if the report is filed past the due date. You also have the option of paying by credit card or electronic check payment at http://www.in.gov/dwd/ (click on Employers, Unemployment Insurance).

table of contents

IV. Buying or Selling Your Business

A. Complete Transfer of Indiana Operations (Ind. Code § 22-4-7-2(a))

If you are new to the State of Indiana, or if you are already paying Indiana UI taxes, and you:

You immediately qualify for UI coverage and assume the tax position of the previous owner/disposer. You (the acquirer) receive the experience account balance and tax rate of the previous owner and are entitled to consider the wages previously reported by the disposer when computing the $7,000 tax base per employee, per calendar year of those employees you retain.

All outstanding tax liabilities are also carried forward from the previous owner to you, the new owner.

You, the successor/acquirer, must complete State Form 2837 (Report to Determine Status), and the predecessor/disposer must complete State Form 46799 (Report of Transfer – Complete Sale).

These forms can be found at http://www.in.gov/dwd/ (Click on Employer, Unemployment Insurance, and Forms).

B. Partial Transfer of Indiana Operations (Ind. Code § 22-4-7-2(b))

If you:

The predecessor/disposer must transfer a proportionate portion of the experience balance and the merit rate to you (the successor/acquirer). This must be done within thirty (30) days from the date of disposition, or not later than ten (10) days after notification from IDWD. Employers must complete State Form 23299 (Report of Transfer-Partial Sale). Failure to complete this form will result in a IDWD-mandated flat 50% percent transfer of the disposer’s experience balance to your experience balance.

If the transfer occurs during a calendar quarter, two (2) quarterly reports must be filed: the UC-1 and UC-5. The predecessor/disposer must report its wages paid from the first date in the quarter until the date of disposition. These forms and the resulting UI tax are due immediately following the disposition date.

You (the successor/acquirer) file the UC-1 and UC-5 from the date of disposition to the end of the quarter on the due date, thirty (30) days after the quarter ends.

If the successor/acquirer has an existing account with IDWD, the successor/ acquirer's merit rate will be retained for the calendar year of the acquisition. These forms can be found at http://www.in.gov/dwd/.

table of contents

V. Seasonal Employment

A. Qualifying as a Seasonal Employer

A seasonal employer operates all or part of a business for recurring periods of less than twenty-six (26) weeks in a calendar year due to either the seasonal nature of the business or climatic conditions.

In order to be considered a seasonal employer for UI tax purposes, you must file Form 2003 (Request for Seasonal Determination Status)with IDWD. The IDWD’s determination will be made within ninety (90) days after receipt of the request. Seasonal employers must reapply every two (2) years to keep their seasonal status.

After IDWD approval, an employer becomes a seasonal employer effective the first day of the next calendar quarter.

In order to qualify as a seasonal employer for a portion of your business, that portion must be identifiable as a functionally distinct operation. For example, a municipally owned golf course would be considered a portion of the operation of the municipality, and if it is in operation less than 26 weeks each calendar year, the golf course could qualify as a seasonal employer.

B. Loss ofSeasonal Employer Status

If your seasonal operation exceeds twenty-five (25) weeks in a calendar year, you must give IDWD written notice that the seasonal period has been exceeded within thirty (30) days after the end of the twenty-sixth (26th) week of operation.

Your seasonal status is automatically lost for the period of operation after that calendar quarter. Wages you paid in this period are usable by your employees as regular wages to establish UI claims.

If you have lost the designation of "seasonal employer" you may apply to IDWD for reinstatement in any calendar year after the year in which the designation was revoked.

Your seasonal status will automatically be revoked after two (2) years and you must resubmit the Request for Seasonal Determination to maintain seasonal status. You may call IDWD to request one be mailed to you.

C. Seasonal Employment

Seasonal employment is service performed for an approved seasonal employer during the approved seasonal period of less than twenty-six (26) weeks.

You must inform IDWD of the number of positions you have classified as seasonal within the approved seasonal portion(s) of your business. Opening and closing dates of each seasonal operation must also be specified. IDWD provides special forms for this information. Please call IDWD to request one.

You must keep an accurate account of wages paid to seasonal workers within the approved seasonal period. Wages should continue being reported quarterly. IDWD provides special wage reporting forms with coding for seasonal employees.

UI benefits may be paid to individuals on the basis of service performed in seasonal employment only if the claim is filed within the approved seasonal operating period. If the claim is filed outside the seasonal operating period, benefits may be paid only on the basis of non-seasonal wages.

table of contents

VI. Tax Rate Computation

A. How to Determine Your Tax Rate

The UI tax rate is determined based on a combination of the solvency of the UI Trust Fund and each individual employer’s account status (as of June 30th of each year).

If you have recently bought or sold all or a portion of a business, please see section IV for important information about your tax rate calculation.

Your tax rate is determined by following three steps:

These steps are discussed in detail below.

1. Determine the applicable rate schedule
The applicable rate schedule is based on the UI Trust Fund’s fund ratio for the preceding year. The fund ratio is a numerical evaluation of the trust fund that compares the balance in the Trust Fund as of September 30th to the total payroll of all UI tax-liable Indiana employers for the preceding calendar year. The fund ratio is applied to the Fund Ratio Schedule to determine the applicable rate schedule.

Once you’ve determined the Fund Ratio, use it to select the applicable rate schedule from the Fund Ratio Schedule below.

*In rare circumstances, the Legislature may declare that schedule E shall be in effect. In this event, you will be paying based on schedule E regardless of the rate applicable based on the fund ratio.

2. Determine whether or not you are eligible for a merit rate

There are three (3) types of UI tax rates:

3. Determine your experience rate ratio and tax rate

Your merit rate is based on the status of your IDWD employer experience account. The experience account is where IDWD keeps track of all taxes (contributions) paid into your account and all benefits charged against your account. Your employer experience account is discussed in more detail in section VII.

Your experience account will have one of the following status designations:

If you have a credit reserve balance, the credit reserve ratio shall be used to determine your merit rate. If you have a debit balance, the debit reserve ratio shall be used to determine your merit rate. These ratios are discussed below.

Next, find your tax rate following the instructions below based on the status of your account.

Credit Reserve Balance Accounts

Credit reserve balances are evaluated using the Credit Reserve Ratio, which compares the credit reserve balance (including all timely contribution payments made for the quarter in which the computation occurs) to the prior thirty-six (36) months’ total taxable wages reported by the employer (or the employer’s predecessor). It is used to determine your tax rate according to the rate schedule for accounts with credit balances.

Next, use the credit reserve ratio (above) and the rate schedule (determined in step 1) to find your applicable merit rate in the chart below. In 2006, Schedule A is applicable.

Debit Balance Accounts

Debit balance accounts are evaluated using the Debit Reserve Ratio, which compares the experience account debit balance (including all timely tax payments made for the quarter in which the computation date occurs) to the total payroll of the employer (or the employer’s predecessor) during the thirty-six (36) months immediately preceding the computation date. It is used to determine your tax rate according to the rate schedule for accounts with debit balances.

Next, use the debit reserve ratio (above) and the rate schedule (determined in step 1) to find the applicable merit rate in the following chart. In 2006, Schedule A is applicable.

• A penalty charge of 10% of the quarterly tax amount will be assessed;
• You will be charged 1% interest on the tax amount due for each month the tax amount is outstanding; and
• A penalty of 50% of the outstanding amount will be assessed if it is found that you committed fraud with the intent to evade payment.

• Making a false statement to prevent or reduce payment of benefits;
• Encouraging or inducing an individual to waive or forego benefits rights; or
• Failing to testify or answer any lawful inquiry.

i. Earn sufficient wage credits during his/her base period;
ii. Be unemployed through no fault of his/her own; and
iii. Be able, available, and actively seeking full-time work.

• Refuses a suitable offer of work;
• Fails to go to a job referral made by his/her local WorkOne Center;
• Cannot show proof that he/she is actively searching for work according to IDWD work search requirements; or
• Is temporarily not available for work due to illness, injury, leave of absence, or suspension due to work-related misconduct.

VIII. Your Former Employer Files a Benefits Claim - What To Expect

1. Review the statement carefully;
2. Make sure that charges listed are correct; and
3. Contact IDWD by telephone or writing as soon as possible if you find incorrect charges or have questions.

• Quit voluntarily or was absent for reasons unknown;
• Was discharged for just cause (see section VII-C);
• Was discharged for gross misconduct (see section VII-C);
• Is entitled to vacation pay, pay in lieu of vacation, “standby pay,” or wagesin lieu of notice;
• Is receiving or will receive retirement pay; or
• Is otherwise ineligible.

• Substantially common ownership, management, or control of two (2) employing units; and
• One employing unit transfers its trade or business (including its workforce), or a portion thereof, to the other employing unit.