The Michigan Unemployment Insurance Agency administers the unemployment insurance program.
A. NAME OF PERMIT OR APPROVAL:
A reimbursing employer is a liable employer that pays to the UIA, dollar-for-dollar, the amount the UIA paid in benefits in that calendar quarter (including the state portion of Extended Benefits) to its former workers who receive unemployment benefits based on wages paid to the worker by the reimbursing employer.
B. STATUTORY AUTHORITY:
UIA is responsible for carrying out the provisions of the Michigan Employment Security (MESC) Act which is Act No. 1 of the Public Acts of 1936, Extra Session, as amended. Sections 421.13a through 421.131 cover reimbursing employers.
C. APPLICABLE REGULATION:
Unemployment Insurance Agency (UIA) Administrative Rules
D. SUMMARY OF PERMIT/APPROVAL PROCESS:
A reimbursing employer does not pay regular quarterly taxes to the UIA. Most reimbursing employers receive a bill from the UIA after each calendar quarter in which unemployment benefits were paid to the employer's former employees.
A governmental entity (such as a city, county, township, and school district) is, by law, a reimbursing employer and is considered reimbursing form the beginning of its liability as an employer but may elect, with the permission of the UIA, to become a contributing employer. A governmental entity makes reimbursement payments to the UIA annually.
A non-profit organization is, by law, a contributing employer but may elect, with the permission of the UIA, to become a reimbursing employer. Effective April 29, 2002, all Federally recognized Indian Tribes are considered reimbursing employers under the same terms and conditions as other reimbursing employers unless contributing status is elected. Indian Tribes and Tribal Units are billed annually for unemployment benefits paid to former employees.
Any nonprofit organization requesting reimbursing employer status must submit a copy of their 501(C)3 designation from the IRS to UIA before a reimbursing account can be assigned. Form 1023 to apply for recognition of 501(C)3 exemption can be obtained at the Internal Revenue Service web site: http://www.irs.gov.
A security is requested for all non-profit employers whose reimbursing accounts were established effective 12-21-1989, or later, with an annual gross payroll in excess of $100,000, pursuant to Section 13a(4) of the MES Act. Administrative Rule 421.601 describes the bonding requirement for reimbursing employers. The security must be provided for the first year it is required (current) and two consecutive succeeding calendar years. Thereafter, it must be renewed for two-year periods. The security must be in the form of a surety bond, irrevocable letter of credit, or other banking device acceptable to the Agency. It is the employer's responsibility to notify the UIA within 60 days when their payroll reaches $100,000 or more. The security must be 4% of the employer's annual gross payroll for the 12-month period ending June 30th of the year before the year the security is required or 4% of the estimated total annual wage payments, whichever is greater.
Surety Bonds UIA accepts surety bonds for the statutory security requirements pertaining to nonprofit employers and Indian tribes and tribal units. The following is a checklist to use when determining if a surety bond is an acceptable security:
1) The text of the bond must duplicate the sample provided by UIA upon request in all relevant areas.
2) There must be a Begin Date on the bond.
3) There must be an Expiration Date on the bond. As the security must be good for the current year and two succeeding calendar years, the Expiration Date must follow this directive. All Expiration dates must be December 31.
4) There must be the proper Dollar Amount shown on the security.
5) The Surety Number must appear on the bond.
6) The bond must be accompanied by a Power of Attorney Form for the bonding company.
7) The State of Michigan, Department of Licensing and Regulatory Affairs, Unemployment Insurance Agency, must be listed as the Obligee.
8) The Principal and Surety Company must be listed with addresses.
9) The bond must be the original copy with signatures in ink and surety company seal, if applicable. A copy is not acceptable.
UIA accepts bonds from various providers, including insurance companies. If employers need assistance in finding a list of approved surety providers, they can be directed to the 'US Department of Treasury' website http://www.fms.treas.gov/c570/c570.html to view Department Circular 570. Surety bond providers charge employers a percentage of the face value of the bond for the term of the bond.
Letters of Credit Irrevocable Standby Letters of Credit (LOC's) are provided by banks and credit unions. Often, employers have an established relationship with a financial institution and can obtain a letter of credit on this basis. The following is a checklist to use when determining if a LOC is an acceptable security:
1) The text of the LOC must duplicate the sample provided by UIA upon request in all relevant areas.
2) There must be a Begin Date on the LOC.
3) There must be an Expiration Date on the LOC. As the security must be good for the current year and two succeeding calendar years (unless automatically renewed), the Expiration date must follow this directive. All Expiration Dates must be December 31.
4) There must be the proper Dollar Amount shown on the security.
5) The LOC number must appear on the LOC.
6) The LOC must be printed on the letterhead of the financial institution providing it.
7) The State of Michigan, Department of Licensing and Regulatory Affairs, Unemployment Insurance Agency, must be listed as the Beneficiary along with the address.
8) The Bank and the Applicant must be listed with addresses.
9) The LOC must be the original copy with signatures in ink. A copy is not acceptable.
After the LOC expires, it is to be renewed for the statutory two-year periods or automatically renewed. When an LOC is automatically renewed, the Agency is given assurance by the bank through language on the LOC document that the LOC is has been extended for an additional year past the expiration date, then each extended date, unless the Agency is informed otherwise by the bank.
All major banking chains and credit unions provide LOC's. The costs to the employers seem to vary widely. Some charge a percentage of the face value of the LOC; some require that a certificate of deposit for the amount of the LOC must be in place prior to the issuance of the LOC, and then an annual fee is charged. Some employers report that smaller banks are more flexible with terms. Employers are advised to shop around for the most favorable terms.
Alternative Securities Section 13a(4) of the Act refers to "surety bond, irrevocable letter of credit, or other security as approved by the Agency?" as being acceptable devices to secure payment of reimbursing obligations under the Act.
At this time, the "other security as approved by the Agency" is the Joint Savings Account or Joint Uncertificated Certificate of Deposit. This security type is offered to employers with annual gross payroll of $100,000.00 to $150,000.00 only. As with the Letters of Credit option outlined above, financial institutions provide this option. Specific contract language is required. The financial institutions providing the alternative securities options require that an authorized Agency representative signs signature cards. Currently, these signature cards can be signed by the Agency Director only.
Aside from the Joint Savings Account or Joint Uncertificated CD option, Tax Office management must approve any other alternative security options proposed by employers.
Original copy of a required security with signatures can be sent US mail to: Unemployment Insurance Agency, Reimbursing Unit, 3024 W Grand Blvd Ste 11-500, Detroit, MI 48202.
Non-profit Elections
Non-profit contributing employers with a 501(C)3 designation from the IRS may elect to change their payment status to reimbursing if they submit a timely request (defined as no later than 30 days prior to the start of the calendar year in which the change is to be effective) and an appropriate security is provided if the employer's annual gross payroll is $100,000 or more. Before the Agency can approve any request for conversions, the non-profit employer electing reimbursing status must comply with the following:
1) Submit in writing a request for conversion in payment status from contributing to reimbursing, received no later than December 2 of the year before the year in which the conversion is to be effective.
2) Provide the Agency with a copy of the documentation from the IRS granting 501(C)3 status.
3) File and pay any missing Forms UIA 1028, Employer's Quarterly Wage/Tax Report.
4) Pay any delinquencies in taxes, interest and penalties.
5) For employers with gross annual payroll in excess of $100,000.00, provide the Agency with a security or letter of credit equal to 4% of the gross annual payroll.
6) Complete and submit Form 518, Michigan Business Taxes Registration along with Schedules A and B to obtain the most current information about the employer.
7) Pay any negative reserve balance on the contributing account as of December 31 of the year prior to conversion.
Mail all documents to Unemployment Insurance Agency, Reimbursing Unit, 3024 W Grand Blvd Ste 11-500, Detroit, MI 48202.
A non-profit reimbursing employer may elect to convert to contributing status by meeting the following requirements:
1) Submit in writing a request for conversion in payment status from reimbursing to contributing, received no later than December 2 of the year before the year in which the conversion is to be effective.
2) Employer has been in reimbursing status for at least 2 calendar years.
3) Any benefit charges on the reimbursing account prior to conversion are paid in full.
4) Any missing Form UIA 1028 Employer's Quarterly Wage/Tax Report are submitted prior to conversion.
5) Complete and submit Form 518, Michigan Business Taxes Registration along with Schedules A and B to obtain the most current information about the employer.
Mail all documents to Unemployment Insurance Agency, Reimbursing Unit, 3024 W Grand Blvd Ste 11-500, Detroit, MI 48202.
Governmental Elections
Local governmental units include Counties, Townships, Villages, Cities, Other Jurisdictions (i.e.: Road Commissions, Libraries, Conservation Districts, Planning Commissions, District Courts, Local Airport Boards & Local Government Authorities), Community Colleges, Community Hospitals, and School Districts. Local governmental units are considered reimbursing unless contributing status is elected. Contributing status can be selected during initial registration by selecting the check box C in the Governmental Agency section of Schedule A of Form 518, Michigan Business Taxes Registration Booklet.
Section 13e of the MES Act states that two or more reimbursing employers may file a joint application with the Agency for the establishment of a group account for the purpose of sharing the cost of benefits that are charged to the group employers. The joint application shall identify and authorize a representative to act for the group for the purposes of the Act. The group account shall remain in effect for not less than 2 calendar years and thereafter until terminated at the discretion of the Agency or upon application by the group.
Upon written notice (from the group), an employer shall be added to or removed from the group account. The employer must remain a member of the group account for not less than 2 calendar years (24 months). Groups may be composed of governmental entities as well as nonprofit employers. For more information on establishing a group account, Questions regarding establishing a group account please contact Office of Employer Ombudsman at our toll-free hotline during the hours 1-855-4UIAOEO (855-484-2636), 8:30 a.m. to 4:30 p.m. weekdays or via email at OEO@michigan.gov
Allow a minimum of 3 weeks for registrations and conversions.
Not applicable.
None.
Any determination issued by the Unemployment Insurance Agency will be considered final unless the Agency receives a written request for a redetermination within 30 calendar days after the date of mailing of the determination. If the 30th day falls on a Saturday, Sunday, or legal holiday, the request for redetermination must be received by the end of the next day which is not a Saturday, Sunday, or legal holiday.
Use Form UIA 1471-L, Protest of a (Re)Determination to protest a determination of liability.
Any redetermination issued by the Unemployment Insurance Agency will be considered final unless the Agency receives a written appeal for a hearing before an Administrative Law Judge within 30 days after the date of mailing of the redetermination. If the 30th day falls on a Saturday, Sunday, or legal holiday, the appeal must be received by the end of the next day that is not a Saturday, Sunday, or legal holiday. Form UIA 1471-L can also be used to request an appeal.
Suspected fraud can be reported to UIA through UIA 2-Minute Fraud Reporting Form or via telephone at 1-800-822-1122.
Check out the Agency website, www.michigan.gov/uia for scheduled Employer Seminars and public hearings.
Please contact Office of Employer Ombudsman at our toll-free hotline during the hours 1-855-4UIAOEO (855-484-2636), 8:30 a.m. to 4:30 p.m. weekdays or via email at OEO@michigan.gov
Revised: 12/2013