UNEMPLOYMENT INSURANCE - TAXES
Purpose: The Unemployment Insurance (UI) program provides financial assistance to individuals who are temporarily out of work through no fault of their own. In California, this program is financed entirely by employers.
Experience Rating Method
METHODS OF PAYING FOR UI BENEFITS
Experience Rating Method
The experience rating method is used by the majority of employers. For a detailed explanation of the experience rating method, see “How Your UI Tax Rate Is Determined” below or obtain the Information Sheet: California System of Experience Rating (DE 231Z) by accessing EDD’s Web site at www.edd.ca.gov/taxrep/de231z.pdf, calling our automated Fax on Demand system at (877) 547-4503, or contacting the Taxpayer Assistance Center at (888) 745-3886.
Public employers and nonprofit organizations described under Section 501(c) (3) of the Internal Revenue Code have the option of becoming “reimbursable” employers. Employers electing the reimbursable method (also known as the cost-ofbenefits method) are required to reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees and charged to their account. Reimbursable employers are billed quarterly, and payment is due within 30 days of the statement date.
For public employers, financing under the reimbursable method must remain in effect for two complete calendar years. For nonprofit employers, financing under the reimbursable method must remain in effect for five complete calendar years. Employers who terminate their reimbursable coverage remain liable for UI benefits paid to their former employees covered under this program for a period of three calendar years.
For a detailed explanation of the reimbursable method, request Information Sheet: Nonprofit and/or Public Entities (DE 231NP) and Potential Liability for Unemployment Insurance Benefits When Electing the Reimbursable Method of Financing Under the California Unemployment Insurance Code (CUIC) (DE 1378F). To obtain these publications, access EDD’s Web site at www.edd.ca.gov/taxrep/taxform.htm#publications, or contact the Taxpayer Assistance Center at (888) 745-3886. For additional information, please contact:
School Employees Fund (SEF)
Public school districts (kindergarten through 12th grade) and community colleges may elect to participate in the School Employees Fund (SEF), which is a special reimbursable financing method available for school districts. For further information, access EDD’s Web site at www.edd.ca.gov/taxrep/txsefind.htm or contact the SEF Unit at (916) 653-5380.
HOW YOUR UI TAX RATE IS DETERMINED
Tax Rate Schedules
The UI tax rates are based on one of seven tax rate schedules (AA through F) established by law. The first step in the annual process of establishing the UI tax rates for the calendar year is for EDD to determine which of the seven tax rate schedules will be in effect. Employers are assigned their UI tax rates from the same rate schedule.
New Employer - UI Tax Rate and Reserve Account
A UI reserve account is a nonmonetary account that is set up when an employer registers with EDD. The new employer tax rate is 3.4 percent (.034) for up to three years. Following that time period, the UI tax rate is calculated annually based on each employer’s previous experience as reflected by UI contributions, taxable wages, benefit charges, and prorated charges and credits to their reserve account.
NOTICE OF TAX RATES
Each December, EDD will mail the Notice of Contribution Rates and Statement of UI Reserve Account (DE 2088) which shows your Unemployment Insurance (UI), Employment Training Tax (ETT), and State Disability Insurance (SDI) tax rates and taxable wage limits for the upcoming year. If you have address changes and/or agent updates, please contact EDD immediately in order to receive your notice timely.
Any item on the DE 2088 can be protested except the ETT and SDI tax rates, which are specifically set by law. Your protest must be filed in writing within 60 days of the mail date shown on the notice. An extension of up to 60 days may be granted for good cause if your request is submitted before the protest deadline.
For further information, please refer to the Explanation and Instruction Sheet (DE 2088C) included with the DE 2088 or call the Taxpayer Assistance Center at (888) 745-3886. The DE 2088C is also available on our Web site at www.edd.ca.gov/taxrep/de2088c.pdf.
Data Exchange Alternative - Magnetic Media
Employer representatives may obtain their clients’ UI tax rates on magnetic tape or diskettes. In addition, employers and their representatives may obtain benefit charges on magnetic media.
For information on receiving UI tax rates or benefit charges via magnetic media, contact:
FEDERAL UNEMPLOYMENT TAX ACT (FUTA) CERTIFICATION
The Internal Revenue Service (IRS) uses the Federal Unemployment Tax Act (FUTA) certification process to verify that the total taxable wages claimed on the Employer’s Annual Federal Unemployment (FUTA) Tax Return (Form 940) or the federal Household Employment Taxes (Form 1040, Schedule H) was actually paid to the State. Under this “dual” system, you are subject to both the State and federal payroll tax requirements.
You are required to file reports and pay Unemployment Insurance (UI) taxes with EDD. You are also required to file a Form 940 with IRS to report total taxable UI wages and pay any Federal Unemployment Tax due. Generally, you can take a federal credit against your FUTA tax for the UI taxes you paid to California.
On an annual basis, IRS and EDD compare amounts reported on your IRS Form 940 to the Total Subject Wages (Line C) and UI Taxable Wages (Line D2) reported on your EDD Annual Reconciliation Statement (DE 7). When an “out-of-balance” condition exists, a reconciliation must be made or an assessment may be issued by either IRS or EDD.
If you have questions regarding the FUTA certification process, please contact EDD’s FUTA Certification Unit at (916) 654-8545.
RESERVE ACCOUNT TRANSFERS
When an employer acquires all or part of an ongoing business and continues to operate the business without substantial reduction of personnel resulting from the acquisition, the employer may request the previous owner’s UI reserve account balance be transferred to the new ownership by completing an Application for Transfer of Reserve Account (DE 4453) form. If EDD approves the transfer, the UI tax rate will be redetermined and may result in an immediate rate reduction. For furtherinformation regarding reserve account transfers, please contact the Contribution Rate Group at (916) 653-7795 .
• When a UI reserve account transfer has been approved, the employer requesting the transfer will receive a revised DE 2088 stating the UI tax rate for the remainder of the year.
• Employers who receive a reserve account transfer accept responsibility for the UI benefit charges for the previous owner’s former employees. This may increase your UI tax rate in future years.
• A reserve account transfer cannot be reversed once it has been completed. • There are time limits to qualify for a reserve account transfer. Apply for a reserve account transfer immediately after
purchasing an ongoing business.
INTERSTATE RECIPROCAL COVERAGE ELECTIONS FOR MULTISTATE WORKERS
When an individual performs services in two or more states, and the services are not localized in any one state, under the provisions of California Unemployment Insurance Code (Sections 602 and 603), the employer may request to report the individual’s services to one state. Upon approval for unemployment and disability insurance purposes, the employer may report to any state in which (a) services are performed, (b) the employee has residence, or (c) the employer maintains a place of business. NOTE: special reporting may be required for California Personal Income Tax withholding purposes. For additional information, please obtain Information Sheet: Multistate Employment (DE 231D) by accessing EDD’s Web site at www.edd.ca.gov/taxrep/de231d.pdf, calling our automated Fax on Demand system at (877) 547-4503, request Document No. 3060, or contacting the Taxpayer Assistance Center at (888) 745-3886.
TIPS FOR REDUCING YOUR UI TAX RATE
The UI tax works like any other insurance premium. An employer may pay a lower rate when former employees make fewer claims on the employer’s account. The following steps may help reduce your UI tax rate:
• Maintain a stable workforce. High employee turnover increases the potential for benefits to be charged to your reserve account. This could also save Unemployment Insurance taxes.
• Submit your UI payments within the required time limits along with accurately completed Payroll Tax Deposit (DE 88) coupons to ensure your payments are included in calculating your UI tax rate for the following year.
• Respond timely to the Benefit Audit (DE 1296B and DE 1296 NER). It may lead to the reversal of related charges to your reserve or reimbursable account. For additional information, refer to “Benefit Audits to Determine Fraud” on page 106.
• Respond timely to the Notice of Unemployment Insurance Claim Filed (DE 1101CZ or DE 1101ER), if you believe that a former employee does not meet the UI eligibility criteria. A timely response to a DE 1101CZ may reduce charges to your reserve account.
• Respond timely to the Notice of Wages Used for Unemployment Insurance (UI) Claim (DE 1545), if you believe the wages used to establish a claim are incorrect, the employee is still working, or if you believe a former employee does not meet the UI eligibility criteria. A timely response to a DE 1545 may reduce charges to your reserve account.
• Conduct and document an exit interview to help you to understand why the employee is leaving. This may result in changes to your policies or procedures that will assist you in retaining your employees.
• Permit leaves of absence because they may help keep fully trained personnel.
• Keep good personnel records to justify any action(s) taken. Give written warnings prior to discharging an employee and keep a copy of these warnings and other supporting information.
• Protest UI benefit claims for former employees who you believe are not eligible for benefits (i.e., employee voluntarily quit or was discharged for misconduct, etc.). Written documentation of the exit interview may be important in establishing your protest.
• Answer UI claim notices promptly, accurately, and in detail.
• Rehire former employees who are currently receiving UI benefits that may be charged against your reserve account.
• Report refusals of work to EDD.
• Provide clear, specific answers to telephone interview questions from EDD personnel.
• Review your Statement of Charges to Reserve Account (DE 428T) and report inaccuracies within the protest time limits.
• Bring witnesses with firsthand knowledge of pertinent facts when attending a hearing.
For additional information on the UI program or assistance in reducing UI costs, download the Managing Unemployment Insurance Costs (DE 4527) booklet on EDD’s Web site at www.edd.ca.gov/uirep/de4527.pdf.
FRAUD PREVENTION, DETECTION, AND REPORTING
We recognize your concerns about imposter fraud and the threat of identity theft. Imposter fraud and identity theft occurs when someone steals your employees’ employment or personal information and uses that information. We actively investigate cases of imposter fraud and are committed to taking the steps necessary to protect the integrity of the UI Fund. To assist in these efforts, you may receive a Request for Additional Information (DE 1326ER) asking you to validate information provided to us by an individual when we suspect a UI claim may have identity or imposter issues. Completing and returning the DE 1326ER with the requested information will assist us in resolving these issues promptly. For more information on our fraud detection and prevention activities, access EDD’s Web site at www.edd.ca.gov/uirep/uifp.htm.
We also encourage you to take all necessary steps to protect your employees’ social security numbers (SSNs) and other identifying information. A key way to protect yourself and your employees is by properly disposing of your old payroll records. California law requires you to properly destroy (i.e., shred, erase, etc.) the personal information on all records under your control. Your employees may sue for civil damages if you fail to protect their confidential information. For more information on California privacy legislation and protecting yourself and your employees from identity theft, visit the Office of Privacy Protections’ Web site at www.privacyprotection.ca.gov.
To minimize potential fraud and protect your UI reserve account, we urge you to carefully review each statement and EDD notice and respond as directed in a timely manner to any items for which you have questions. If you suspect your payroll or personnel data has been compromised, please report the incident immediately to our toll-free Fraud Hotline at (800) 229-6297 or submit the fraud reporting form online at https://eapply4ui.edd.ca.gov/eddcomm/frmFraudStart.htm.
Additionally, the Social Security Administration (SSA) offers employers and authorized agents services for verifying employees’ SSNs. For information on how to access SSA’s SSN verification service, access SSA’s Web site at www.ssa.gov/employer/ssnv.htm or contact your local SSA office.
To learn what steps you can take to fight imposter fraud, protect your employees, and control your UI costs, download the How You Can Prevent UI Imposter Fraud (DE 2360ER) brochure from EDD’s Web site at www.edd.ca.gov/uirep/de2360er.pdf.
UI RATE MANIPULATION
There are several types of schemes businesses use to unlawfully lower their UI contribution rates. UI rate manipulation schemes typically involve a business with a high UI tax obtaining a lower UI rate through creation of a new corporate entity or purchase of a shell business with a low UI rate. The practice of UI rate manipulation threatens the stability of California’s UI Fund and creates an unfair advantage for those businesses that use these schemes to lower their rates.
In 2005, California implemented a new law to prevent UI rate manipulation; it requires employers who are illegally lowering their UI rates to pay at the highest rate provided by law plus an additional 2 percent. The new law also provides for the greater of a $5,000 penalty or 10 percent of underreported contributions, penalty, or interest for anyone knowingly advising another person or business to violate California’s UI rate and reporting laws.
It also makes changes in the law regarding the transfer of UI reserve account balances. It specifies that whenever a business transfers all or part of its business or payroll to another employer the reserve account attributable to the transferred business will also be transferred if they are under common ownership, management or control. It also provides that the transfer will be denied if the acquisition was for the purpose of getting a lower UI rate.
For more information about UI rate manipulation, please access our Web site at www.edd.ca.gov/taxrep/txueosd.htm or contact the Taxpayer Assistance Center at (888) 745-3886. If outside U.S. or Canada, call (916) 464-3502.
UNEMPLOYMENT INSURANCE (UI) FUNDING
The California UI program is funded through taxes paid by employers. These taxes are placed in the UI Fund and benefits are paid to qualified claimants from this fund. The individual reserve account established for each employer has no monetary value. The reserve account is an accounting device used to keep track of payments and charges made against the employer’s account to determine their annual UI tax rate. For additional information, please refer to “Unemployment Insurance - Taxes” on page 97.
The maximum amount of UI benefits payable to a claimant during a regular benefit year is 26 times the claimant’s weekly benefit amount or one-half of the total base period earnings, whichever is less. The benefit year is a 52-week period starting on the effective date of a new UI claim. After establishing a benefit year, a claimant who interrupts the claim (by returning to work and having excessive earnings, being disqualified for benefits, or by failing to certify for benefits for an extended period of time) may request to claim benefits again by filing an additional or reopened claim during the benefit year. The base period on which the amount of benefits is determined is a 12-month period that is determined by the effective date of a UI claim. The quarter in which the claimant earned the highest wages determines the weekly benefit amount received.
To be eligible for UI benefits, claimants must:
• Be unemployed through no fault of their own.
• Be totally or partially unemployed and registered for work with EDD, as required.
• Be physically able to work in their usual occupation or in other work for which they are reasonably qualified.
• Be available for work, which means ready and willing to immediately accept suitable work in their usual occupation,
or in an occupation for which they are reasonably qualified.
• Be actively seeking work on their own behalf.
• Have received a minimum amount of wages during the base period. (For additional information, please refer to
“Qualifying UI Wages” on page 102.)
• Comply with regulations in regard to filing claims.
Once a claim is filed, EDD staff will determine if there are eligibility issues. Staff may call employers as well as claimants to resolve eligibility issues.
A claimant may be ineligible for UI benefits if the claimant:
• Was discharged for misconduct connected to his/her work. (Proof of misconduct rests with the employer.)
• Voluntarily quit without “good cause” (includes quitting for personal reasons, to go to school, or to move).
• Files a UI claim during a recess period, if he/she worked for a school employer and had reasonable assurance of
returning to work for a school employer.
• Refused suitable work without “good cause.”
• Failed to take part in reemployment services.
• Failed to apply for a job when referred by a public employment office.
• Failed to make reasonable efforts to look for work.
• Failed to comply with regulations.
• Made false statements or withheld information for the purpose of receiving UI benefits.
• Is not legally entitled to work in the U.S.
• Is not able to work or is not available for work.
• Is working full-time or earns wages totaling more than 25 percent of their weekly UI benefit amount.
An individual is not eligible for UI benefits if he/she voluntarily left work because of a trade dispute. Because EDD must decide whether a claimant is disqualified from receiving benefits in a trade dispute situation, certain facts are needed. During a trade dispute, regulations require employers to respond to notices from EDD.
Certain types of employees are not covered for UI benefits. For additional information, please refer to the “Types of Employment” table on page 16 and “Types of Payments” table on page 26.
QUALIFYING UI WAGES
To have a valid UI claim, individuals must have earned:
• $1,300 or more in covered employment in one quarter of the base period, or
• $900 or more in covered employment in the base-period quarter with the highest earnings and earned at least 1.25 times the high quarter earnings during the entire base period.
Certain types of payments made to employees are not considered covered employment (wages) for UI purposes. For additional information, refer to the “Types of Payment” table on page 26. The table shows if certain types of jobs and types of income are taxable for UI. If the table shows that a job or type of income is “not subject” to UI tax, then that income is excluded from establishing a UI claim.
UI ELIGIBILITY DETERMINATION
The EDD schedules fact-finding interviews when there are eligibility questions regarding a claim. Our staff will talk to the claimant, employer, and anyone else necessary to make a decision. Based on the decision, benefits will either be paid or denied. If benefits are denied, a notice will be issued to the claimant. If the employer responds timely to the first notice sent by the Department and addresses the issue being decided, a notice will also be sent to the employer.
NOTE: The maximum amount an employer can be charged on a regular claim is $11,700. (See “Benefit Award” on page 101.) In addition, an employer’s reserve account may be subject to charges for benefits paid on a Training Extension (TE) claim. Claimants who have been approved for California Training Benefits may be eligible for a TE claim. A claimant with a TE claim is eligible to receive a maximum of 52 times his/her weekly benefit amount on the regular claim, which includes the maximum benefit award of the regular claim.
HOW TO DESIGNATE AN AGENT
Public entity employers and their agents may elect to have the notice of new or additional claim filed sent to a designated single address. Requests for designation of a single address should be sent to:
HOW TO REQUEST AN ELECTRONIC DE 1545
Employers and their agents may obtain the Notice of Wages Used for Unemployment Insurance (UI) Claim (DE 1545)electronically. To obtain information about Electronic Data Interchange (EDI), contact:
Responding to Notices
Employers need to respond in writing to the Notice of Unemployment Insurance Claim Filed (DE 1101CZ or DE 1101ER), Notice of Wages Used for Unemployment Insurance (UI) Claim (DE 1545), or the Notice of Potential Increased Liability For Training Extension Benefits (DE 1545TE) if:
• The claimant was terminated or voluntarily quit.
• You have knowledge of information that might affect the claimant’s eligibility for UI benefits.
• The claimant’s name and social security number are not correct.
• You want a written decision of eligibility that provides you appeal rights to the Department’s decision.
If you believe the claimant is not entitled to benefits, it is important to protest in writing when you receive the first notice. Your response must include any facts that may affect the claimant’s eligibility for UI benefits or the potential liability of your UI reserve account for benefits paid to the claimant.
Protests may be written on the notice or included in a separate letter and should contain the following information:
• Employer’s EDD account number, name, and address.
• Claimant’s name and social security number.
• Beginning date of the claim.
• Date of separation from employment.
• Dates of separation(s) and rehire(s) during and following the quarters shown on the DE 1545.
• Information supporting your belief of the claimant’s ineligibility. (See page 102 for a list of disqualifying events.)
Protests should include specific facts and circumstances. General statements (e.g., “employee was fired for misconduct” should be supported with specific events and documentation). This will result in better eligibility decisions based on the facts.
• Protests to the DE 1101C/Z, DE 1101ER, DE 1545, or DE 1545TE should be in writing and mailed to the address noted on the form.
• If the wage information listed on the DE 1545 or DE 1545TE is incorrect, please inform EDD in writing at:
Include the following information with your correction of wage information:
- Employer’s EDD account number, name, and address.
- Claimant’s name and social security number.
- Beginning date of the claim.
- Correction to the wage information. Please provide supporting documentation to the correction, such as a copy of
the Quarterly Wage and Withholding Report (DE 6) or Tax and Wage Adjustment Form (DE 678).
- Name, signature, and telephone number of the employer or employer representative preparing the wage
- Date of the wage correction.
• The protest should be signed by the person having personal knowledge of the facts or having access to records containing the facts.
REMEMBER: If a written protest is not submitted, you waive your right to protest your UI reserve account’s potential liability for benefits paid to the claimant and your right to appeal.
Subsequent Benefit Year
If you receive a notice that a subsequent benefit year has been established, you must resubmit any facts you furnished on the initial DE 1101C/Z to be entitled to a determination and/or ruling based on such facts for the later benefit year.
NOTE: If you respond late to an EDD notice, explain the reason for the delay because the above time limits may be extended for “good cause.” If the reason is determined not to be for “good cause,” a Response To Employer Communication (DE 4614) will be issued. This form can be appealed if you do not agree with the determination.
NOTICES OF DETERMINATION, RULING, OR MODIFICATION
You will receive one of the following DE 1080 notices in reply to eligibility issues you reported on the DE 1101C/Z, DE 1101ER, or DE 1545:
Notice of Potential Increased Liability For Training Extension Benefits (DE 1545TE). This form provides base period employers with a timely notice of maximum amount of potential unemployment insurance (UI) benefits, including training extension benefits that may be charged to their accounts. This form is mailed to base-period employers only when a former employee has been approved for the California Training Benefits (CTB) program. When protesting a claimant’s eligibility for the CTB program, employers should address the particular criteria that individuals must meet under UI Code Section 1269.
REMEMBER: Employers who finance UI coverage under one of the reimbursable financing methods receive Notices of Determination, but do not receive Notices of Ruling because they do not have a UI reserve account.
UI BENEFITS - APPEAL RIGHTS
You have the right to file an appeal if you do not agree with a decision made by EDD about your:
• Former employee's right to receive UI benefits.
• UI reserve account being charged for benefits paid to a former employee.
You must send your written appeal to EDD within 20 days of the date the decision was mailed to you. The EDD will send you an acknowledgment of receipt and registration of your appeal with the telephone number for the Office of Appeal hearing the case. The Office of Appeal will schedule a hearing with an Administrative Law Judge (ALJ). Both you and your former employee will be notified of the date, time, and place of the hearing at least 10 days before the hearing date. If you are filing an appeal to a Notice of Ruling (DE 1080EZ), the employee is not considered a party to the proceeding and is not notified of the hearing. The ALJ will conduct a hearing and give all interested parties the opportunity to present their evidence. The ALJ will consider the facts presented at the hearing and issue a written decision that is mailed to all concerned parties.
If you do not agree with the ALJ's decision, you may appeal to the California Unemployment Insurance Appeals Board (CUIAB). The CUIAB reviews appeals to decisions rendered by ALJs. Both the CUIAB and the ALJs operate impartially and independently of EDD.
The CUIAB provides the following publications to assist in filing an appeal and preparing for an administrative hearing:
• Unemployment Appeals - A Guide for Claimants, Employers, and Their Representatives (DE 1434).
• Appeals Procedure (DE 1433).
For copies of these publications, write to the California Unemployment Insurance Appeals Board at the address listed below.
If you have any questions about filing an appeal, please contact EDD at (800) 300-5616.
NOTE: An Employment Development Department Appeal Form (DE 1000M) is enclosed with all DE 1080s and is used to appeal an EDD decision. To download a DE 10000M form, access EDD’s Web site at www.edd.ca.gov/uirep/de1000m.pdf.
FALSE STATEMENT PENALTY
The California Unemployment Insurance Code (CUIC) Section 1142(a) provides an employer may be assessed a cash penalty from 2 to 10 times the claimant’s weekly benefit amount if it is determined that the employer, employer representative, employer officer, or employer agent willfully made a false statement or representation or failed to report a material fact concerning the claimant’s termination of employment.
CUIC Section 1142(b) provides an employer may be assessed a cash penalty from 2 to 10 times the claimant’s weekly benefit amount if it is determined that the employer, employer representative, employer officer or employer agent willfully made a false statement or representation or willfully fails to report a material fact concerning the claimant’s reasonable assurance of reemployment as defined in CUIC Section 1253.3.
Effective January 1, 2007, Section 1142.1 has been added to the CUIC to provide that an employer may be assessed a cash penalty from 2 to 10 times the claimant’s weekly benefit amount if it is determined that the employer, employer representative, employer officer or employer agent, where the claimant was performing services for an educational institution as defined in Section 1253.3, willfully makes a false statement or representation or fails to report a material fact concerning the claimant’s termination of employment or regarding any week during which services were performed (as provided in Section 1253.3) or any time granted to the claimant for professional development while working for that employer.
If you are not in agreement with the Notice of Assessment (DE 241), you may file a Petition Rights from Notice of Assessment (DE 2350) to an Administrative Law Judge (ALJ) of the California Unemployment Insurance Appeals Board (CUIAB). The CUIAB, established separate and apart from EDD, reviews, hears, and renders impartial and independent decisions in tax and benefit matters related to the CUIC.
Prepare an original and a copy of the petition. The petition may be informal but must be in writing and should:
• Show your EDD employer account number and the date of the assessment. (For faster processing, enclose a copy of the DE 241 with your petition.)
• Provide the claimant’s name and social security number.
• Clearly indicate that it is a “Petition for Reassessment.”
• Describe the reason for the petition and specify the facts or grounds for requesting a reassessment.
• Be signed by you or your authorized agent.
• State your address or that of your agent, if any.
To be timely, the petition must be mailed or delivered to the office shown below within 30 days from the date of assessment. The time to protest can be extended by an ALJ for not more than 30 days but only if “good cause” for the delay is shown. Mail or deliver the original and a copy of your petition for reassessment to:
BENEFIT AUDITS TO DETERMINE FRAUD
Each quarter, as part of EDD’s fraud detection efforts, Benefit Audit (DE 1296B) forms are mailed to employers to request wage information for specific weeks that their employees may have worked. In addition, once a year EDD identifies all outstanding Benefit Audit forms for which a reply was not received. A replacement audit form is sent to those employers for each outstanding quarter identified.
The benefit audit identifies individuals who may have improperly received UI benefits for weeks in which they actually worked and had earnings. The audit process leads to the recovery of unauthorized benefit payments and the reversal of related charges to the employer’s reserve or reimbursable account.
As part of our continuing efforts to detect and deter fraud, EDD cross matches the social security number and Start-of Work Date (SWD) from the New Employee Registry (NER) information reported by employers with UI benefit payment information. An accurate SWD (not the hire date) is particularly important for this cross match process. If a match is identified, an audit form will be sent to the employer requesting earnings and eligibility information. The returned employer information is used to identify benefit overpayments and to recover the unauthorized benefit payments. The NER audit enables the Department to detect fraud up to six months sooner than the quarterly Benefit Audit Process and protects the UI Fund by reducing overpayments. Employers who have responded to the NER benefit audit form will not receive a Benefit Audit (DE 1296B) form for the same employee for the same quarter.
NOTE: Employers are required by law to respond to the Benefit Audit (DE 1296B and DE 1296NER) forms. Your cooperation is essential to detect fraud and to protect the integrity of the UI program.
Questions or comments about the benefit audit process should be sent to:
BACK PAY AWARD
Employees who receive UI benefits and later receive back pay awards or settlements for the same period must repay EDD an amount equal to the UI benefits received. Since back pay is considered wages and should be reported in the period the employees were discharged, a determination must be made regarding who is responsible to repay EDD for the overpaid benefit amounts. If the back pay award agreement states that the employer will withhold overpayment amounts from the back pay award or settlement, the employer is responsible for submitting the amounts withheld to EDD to clear the overpayment.
At the employer’s request, EDD will determine the amount of UI benefits to be repaid, establish an overpayment, and notify the claimant and employer. (“Employer” refers to both tax-rated and reimbursable employers.) Reimbursable employers will receive credits against their future charges only after the liability has been paid. For further information, contact:
WORKERS’ COMPENSATION BENEFITS
Employees who received UI benefits and later receive Workers’ Compensation benefits in the form of Temporary Total Disability (TTD) benefits, Vocational Rehabilitation Maintenance Allowance (VRMA), or settlements for the same period must repay EDD an amount equal to the UI benefits received. For further information, contact:
STATEMENT OF CHARGES
Each October, the annual Statement of Charges to Reserve Account (DE 428T) is mailed to you. This statement notifies you of the Unemployment Insurance (UI) benefit charges and credits to your reserve account for the prior one-year period from July 1 through June 30. Charges are itemized and based on the UI benefits paid to your former employees. Charges to your reserve account may increase your UI contribution rate for the next tax year. It is important to review your statement carefully and respond timely if you do not agree with the charges. You have 60 days from the mail date on your statement to protest any charges you believe are incorrect. An extension of up to 60 days may be granted for good cause if your request is submitted before the protest deadline. If you have address changes and/or agent updates, inform EDD immediately in order to receive your DE 428T timely. For further information, please refer to the Explanation and Instruction Sheet (DE 428C) included with the DE 428T or call our Taxpayer’s Assistance Center at (888) 745-3886. The DE 428C is also available on our Web site at www.edd.ca.gov/taxrep/de428c.pdf, or request Document No. 2110 from our automated Fax on Demand system at (877) 547-4503.
Partial UI Claims
The Partial UI Claim program enables employers to keep trained employees who are partially employed during slow business periods. Employers may use the Partial UI Claim program if employees are temporarily working reduced hours or have been placed on layoff status for no more than two consecutive weeks. If the employee has no wages (does not work) for two consecutive weeks, the claim changes to a regular UI claim. Participation in this program may increase the employer’s UI tax rate.
For more information about partial UI claims, please call one of the toll-free UI telephone numbers on page 120 or access EDD’s Web site at www.edd.ca.gov/uirep/uifaq11.htm.
Work Sharing Program
The Work Sharing program is available to employers who reduce employee wages and hours as an alternative to a temporary layoff. The affected work force or work unit(s) must consist of two or more employees. At least 10 percent of the total work force or 10 percent of the specified work unit(s) must participate in the program. The employer must sign a sixmonth Work Sharing plan with EDD. If, during the period of the plan, the employer does not meet the Work Sharing requirements, the business will be taken off the program. Participation in this program may increase the employer’s UI tax rate. If you are interested in participating in the program or would like additional information, access EDD’s Web Site at www.edd.ca.gov/eddws.htm or contact:
Employment Development Department
Special Claims Office
P.O. Box 419076
Rancho Cordova, CA 95741-9076
Fax: (916) 464-3333
NOTICE OF LAYOFF
Employers with at least 100 employees who plan plant closures or mass layoffs of 50 or more full-time employees during any 30-day period at a single site of employment must give affected employees at least 60 days written notice. Please refer to “Plant Closure or Mass Layoff (WARN)” on page 92 for additional information.
In the event of a layoff or business closure involving 10 or more employees, EDD’s Wages Notice Group will investigate and post Electronic Wages Notices (EWNs) for staff in EDD offices to use. The EWNs contain wage findings (e.g., findings on in lieu of notice pay, and bonuses) to ensure consistent determinations when several employees may be affected by the same set of facts. For additional information, access EDD’s Web site at www.edd.ca.gov/uirep/uiml.htm.