Automatic Data Processing, Inc. · NASDAQ:ADP

Automatic Data Processing — ADP Webcast with HR.com: Unemployment Taxes Catapulting to New Heights (November 2011)

50 slides from Automatic Data Processing's conference presentation, Nov 8, 2011

  1. Slide 1: Unemployment Taxes Catapulting to New Heights: Help Mitigate Increases to Your Company's SUI Tax Rates

    Unemployment Taxes Catapulting to New Heights: Help Mitigate Increases to Your Company’s SUI Tax Rates In Partnership with HR.com An ADP ® Webcast Tuesday, November 8, 2011 3 PM EASTERN 1 © Copyright 2011 ADP, Inc.

  2. Slide 2: Housekeeping

    Housekeeping ƒ This is one of a number of complimentary webinars that ADP offers to finance and HR professionals each year. ƒ Today’s webinar will last for 60 minutes, ending at 4 pm. ƒ The last 10 minutes of today’s program have been reserved for Q&A. ƒ A copy (PDF format) of today’s slides is avai

  3. Slide 3: Credit

    Credit ƒ Are you planning to apply for CPE and/or RCH credits for attending today’s webinar? A. CPE Credit Only D. No B. RCH Credit Only E. Not Applicable C. Both CPE & RCH Credits NASBA® (National Association of State Boards of Accountancy) and APA (American Payroll Association) requirements for re

  4. Slide 4: About ADP

    About ADP Over 570,000 clients worldwide Pays 1 out of 6 in the U.S. 33M worldwide Founded in 1949 Went public in 1961 45,000 Associates ƒ Revenues of approximately $10 Billion In 60+ Countries ƒ Market capitalization of >$23 Billion 1 of 4 AAA Rated U.S. Industrial Companies Electronically ‘moving’

  5. Slide 5: Polling Question #1

    Polling Question #1 ƒ What area of business is your primary focus? A. Finance B. HR C. Payroll D. Risk E. Other F. Don’t know/Not Applicable NASBA® (National Association of State Boards of Accountancy) and APA (American Payroll Association) requirements for receiving CPE and/or RCH Credit: •Log in f

  6. Slide 6: Agenda

    Agenda ƒ National Economic Update ƒ Federal Unemployment Tax Act (FUTA) Review ƒ American Recovery and Reinvestment Act 2009 ƒ Unemployment Tax Management Discussion ƒ Summary ƒ Questions and Answers 6 6 © Copyright 2011 ADP, Inc.

  7. Slide 7: National Economic Update

    National Economic Update 7 © Copyright 2011 ADP, Inc.

  8. Slide 8: Key Unemployment Economic Terms

    Key Unemployment Economic Terms ƒ Total Unemployment Rate (TUR) – the rate computed by dividing Total Unemployed by the Civilian Labor Force (Bureau of Labor Statistics) ƒ Average High Cost Multiple (AHCM) – a standard measure of trust fund solvency used by the U.S. Department of Labor. A multiple o

  9. Slide 9: National Unemployment Trend

    National Unemployment Trend 11.6% 10.2% 10.0% 10.0% 9.7% 9.7% 9.9% 9.8% 9.8% 9.7% 9.7% 9.7% 9.7%9.6% 9.6% 9.6% 9.4% 9.5%9.5% 9.4%9.5% 9.4% 9.0% 9.1% 9.2% 9.1% 9.1% 9.1% 9.0% 8.9% 8.8% 8.9% 8.5% 8.1% 7.8% 7.6% 7.2% 6.5% 6.7% 6.1% 6.1% 5.8% 5.5% 5.7% 5.5% 5.1% 5.0% 4.9% 4.8% 3.9% 1.9% 0.0% 2008 2009 2

  10. Slide 10: National Unemployment Trend

    National Unemployment Trend National Prior Year National Prior Year National Prior Year Month Unemployment Variance Unemployment Variance Unemployment Variance Rate 2008 2007 vs. 2008 Rate 2009 2008 vs. 2009 Rate 2010 2009 vs. 2010 January 4.90% 7% 7.60% 55% 9.70% 27% February 4.80% 7% 8.10% 69% 9.7

  11. Slide 11: Total Unemployment Rate Third Quarter 2009

    Total Unemployment Rate Third Quarter 2009 0.0% - 3.9% TUR (1 Jurisdictions) 4.0% - 5.9% TUR (2 Jurisdictions) 6.0% - 7.0% TUR (8 Jurisdictions) 7.1% - 9.9% TUR (25 Jurisdictions) 10% > TUR (16 Jurisdictions) The Total Unemployment Rate (TUR) is the rate computed by dividing Total Unemployed by the

  12. Slide 12: Total Unemployment Rate Second Quarter 2011

    Total Unemployment Rate Second Quarter 2011 0.0% - 3.9% TUR (1 Jurisdictions) 4.0% - 5.9% TUR (7 Jurisdictions) 6.0% - 7.0% TUR (5 Jurisdictions) 7.1% - 9.9% TUR (30 Jurisdictions) 10% > TUR (9 Jurisdictions) The Total Unemployment Rate (TUR) is the rate computed by dividing Total Unemployed by the

  13. Slide 13: Unemployment Trust Fund Solvency Third Quarter 2008

    Unemployment Trust Fund Solvency Third Quarter 2008 Only 8 States with Title XII Loans Above Average > .71 AHCM (25 States) plus DC Average .53 - .70 AHCM (2 States) Potential Risk .31 - .52 AHCM (11 States) Watch States < .30 AHCM (4 States) Title XII Outstanding Loans (8 States) Average High Cost

  14. Slide 14: Unemployment Trust Fund Solvency Assessment as of October 6, 2011

    Unemployment Trust Fund Solvency Assessment as of October 6, 2011 Currently 28 States with Title XII Loans Solvent Trust Funds (23 Jurisdictions) Insolvent Trust Funds (28 Jurisdictions) At Risk Trust Funds (2 Jurisdictions) * Jurisdictions include 50 U.S. States, DC (Solvent), PR (Solvent), and VI

  15. Slide 15: Federal Unemployment Tax Act (FUTA) Review

    Federal Unemployment Tax Act (FUTA) Review 15 © Copyright 2011 ADP, Inc.

  16. Slide 16: Federal Unemployment Tax Act (FUTA) Review

    Federal Unemployment Tax Act (FUTA) Review ƒ Federal tax used for administration of state unemployment programs. ƒ Since 1976, employers paid 0.8% of the first $7,000 each employee earns in a calendar year up to $56 per employee. As of July 1, 2011 employers will now pay 0.6% of the first $7,000 or

  17. Slide 17: Federal Unemployment Tax Act (FUTA) Review

    Federal Unemployment Tax Act (FUTA) Review Effective 10/1/76 - 6/30/2011: FUTA Tax Rate FUTA Taxable Wage Base FUTA Tax 6.2% $7,000 $434 Per Employee If employer pays state SUI taxes timely and in full, a 5.4% credit is granted: FUTA Tax Rate FUTA Tax Credit FUTA Tax Rate (less credit) FUTA Tax 6.2%

  18. Slide 18: Federal Unemployment Tax Act (FUTA) Review

    Federal Unemployment Tax Act (FUTA) Review Effective 7/1/2011: FUTA Tax Rate FUTA Taxable Wage Base FUTA Tax 6.0% $7,000 $420 Per Employee If employer pays state SUI taxes timely and in full, a 5.4% credit is granted: FUTA Tax Rate FUTA Tax Credit FUTA Tax Rate (less credit) FUTA Tax 6.0% 5.4% 0.6%

  19. Slide 19: Polling Question #2

    Polling Question #2 ƒ How many billions of TITLE XII loans are outstanding as of 2011? A. $157B B. $15B C. $38B D. $86B E. Don’t know/Not Applicable NASBA® (National Association of State Boards of Accountancy) and APA (American Payroll Association) requirements for receiving CPE and/or RCH Credit: •

  20. Slide 20: Federal Unemployment Trust Fund

    Federal Unemployment Trust Fund 20 © Copyright 2011 ADP, Inc.

  21. Slide 21: Outstanding Federal Loan Title XII Loans

    Outstanding Federal Loan Title XII Loans As of October, 2011 State Outstanding Loan Balance State Outstanding Loan Balance Indiana $1,905,122,714 New Jersey $1,458,039,356 Michigan $3,181,759,874 New York $3,153,040,099 South Carolina2 $851,315,716 North Carolina $2,551,614,221 Alabama $50,062,546 O

  22. Slide 22: Potential FUTA Credit Reduction

    Potential FUTA Credit Reduction Loan Balance Actual Potential FUTA Effective Tax Rate State 2011 2011 October 6, 2011 2010 20121 20131 20141 1/1-6/30 7/1-12/311 Indiana $1,905,122,714 1.10% 1.40% 1.20% 1.50% 1.80% 2.10% Michigan $3,181,759,874 1.40% 1.70% 1.50% 1.80% 2.10% 2.40% South Carolina2 $851

  23. Slide 23: Potential FUTA Credit Reduction

    Potential FUTA Credit Reduction Loan Balance Actual Potential FUTA Effective Tax Rate State 2011 2011 October 6, 2011 2010 20121 20131 20141 1/1-6/30 7/1-12/311 New Jersey $1,458,039,356 1.10% 0.90% 1.20% 1.50% 1.80% New York $3,153,040,099 1.10% 0.90% 1.20% 1.50% 1.80% North Carolina $2,551,614,221

  24. Slide 24: Federal Unemployment Tax Act (FUTA)

    Federal Unemployment Tax Act (FUTA) ƒ 2011 Federal Unemployment Taxable Wage Base - $7,000 ƒ FUTA surtax of .02% extended through 2010 and first 6 months of 2011 ƒ FUTA TWB projected to increase to $15,000 ƒ Individual State TWB cannot be lower than FUTA State Unemployment Taxable Wage Bases < $10,0

  25. Slide 25: American Worker Assistance and UI Integrity

    American Worker Assistance and UI Integrity 25 © Copyright 2011 ADP, Inc.

  26. Slide 26: ARRA - Unemployment Insurance (UI) Impact

    ARRA - American Recovery & Reinvestment Act – Unemployment Insurance (UI) Impact ƒ Unemployed Worker and Struggling Family Assistance – Emergency Unemployment Compensation Extension (EUC08) – Temporary full federal funding of State Extended Benefits (EB) – UI Modernization – special funding to state

  27. Slide 27: Emergency Unemployment Compensation Program

    Emergency Unemployment Compensation Program ƒ Supplemental Appropriations Act, 2008 signed into law on June 30, 2008 ƒ Act created Emergency Unemployment Compensation Program (EUC08) ƒ EUC08 extends unemployment benefits up to 13 additional weeks ƒ EUC08 Program amended 11/21/08 (the Extension Act)

  28. Slide 28: State Extended Benefits (EB)

    State Extended Benefits (EB) ƒ Extended Benefits provisions contained in all state laws: – Tied to state unemployment rate triggers – Normally provides 13 – 20 additional weeks – 50% federally funded and 50% state funded – States normally charge their 50% portion to employers – ARRA provides tempora

  29. Slide 29: Unemployment Compensation – Weekly Benefit Review

    Unemployment Compensation – Weekly Benefit Review Traditional Unemployment Benefits 26 13 - 20 = 46 weeks Maximum weeks in most states State extended benefits Emergency Unemployment Compensation Program (EUC 08) 26 13 13 - 20 = 59 weeks EUC 08 Program (Amended) – The Extension Act 26 13 7 13 13 - 20

  30. Slide 30: UI Integrity

    UI Integrity 30 © Copyright 2011 ADP, Inc.

  31. Slide 31: Polling Question #3

    Polling Question #3 ƒ How much of the $38B in outstanding TITLE XII loans were paid in error in 2010? A. $7.1B B. $6.6B C. $4.5B D. $8.3B E. Don’t know/Not Applicable NASBA® (National Association of State Boards of Accountancy) and APA (American Payroll Association) requirements for receiving CPE an

  32. Slide 32: UI Integrity – Purpose

    UI Integrity – Purpose ƒ Improve program efficiency Primary ƒ Reduce UI overpayment rates Purpose – Accuracy – Assist with compliance ƒ Modernize UI tax and benefit systems Goal ƒ Prevent, detect and recover UI overpayments 32 © Copyright 2011 ADP, Inc.

  33. Slide 33: UI Integrity Compliant States

    UI Integrity Compliant States * Added 2011 33 © Copyright 2011 ADP, Inc.

  34. Slide 34: UI Integrity Informed and Support Compliance

    UI Integrity Informed and Support Compliance 34 © Copyright 2011 ADP, Inc. Proprietary and Confidential Information.

  35. Slide 35: Overpayments by State 3-Year Average

    Overpayments by State 3-Year Average (7/1/2008 – 6/30/2011) Overpayment Rate Above 14% 12.00 – 13.99% 10.00 – 11.99% 8.00 – 9.99% 6.00 – 7.99% 4.00 – 5.99% Source: U.S. Department of Labor 35 © Copyright 2011 ADP, Inc.

  36. Slide 36: Polling Question #4

    Polling Question #4 ƒ Given the current economic situation do you think that you can effectively manage your SUI costs? A. Not likely B. Likely C. Very likely D. Don’t know/Not Applicable NASBA® (National Association of State Boards of Accountancy) and APA (American Payroll Association) requirements

  37. Slide 37: Unemployment Tax Management Discussion

    Unemployment Tax Management Discussion 37 © Copyright 2011 ADP, Inc.

  38. Slide 38: Unemployment Tax Review

    Unemployment Tax Review ƒ Unemployment claims management ƒ Verify annual unemployment tax rates ƒ Analyze the profitability of voluntary contributions ƒ Unemployment tax cost forecasting – 2011 and beyond ƒ Helps ensure employment tax compliance on mergers, acquisitions and reorganizations ƒ Quantif

  39. Slide 39: Unemployment Tax and Benefit Review

    Unemployment Tax and Benefit Review State Taxes Voluntary Contributions $$$ Reserve Administrative Errors Benefit Payments 39 © Copyright 2011 ADP, Inc.

  40. Slide 40: Unemployment Tax Cost – State Example

    Unemployment Tax Cost – State Example Illinois 2011 Experience Rating MAX 8.4% $12,740.00 Taxable Wage Base $ 1,070.16 Maximum $ Per Employee Employer Rate $ 89.18 Minimum $ Per Employee $ 13,806.00* Maximum Claim Liability *$17,258 with Extended Benefits MIN 0.7% 40 © Copyright 2011 ADP, Inc.

  41. Slide 41: Unemployment Tax Cost Projections

    Unemployment Tax Cost Projections Nov. Feb. Nov. Feb. Nov. Feb. Nov. Feb. 1/1/09 1/1/10 1/1/11 1/1/12 Account Experience State Factors Legislative Changes FUTA Credit Reduction ƒ Unemployment Claims ƒ Taxable Wage Base ƒ Federal Level ƒ Based on Title XII Loans ƒ Unemployment Tax Paid ƒ Rate Tables

  42. Slide 42: Unemployment Taxes – Claims Management

    Unemployment Taxes – Claims Management New Claims Higher Rate/Bracket Current Rate/Bracket Current Claims 42 © Copyright 2011 ADP, Inc.

  43. Slide 43: Voluntary Contribution Planning

    Voluntary Contribution Planning States Allowing Voluntary Contributions Arkansas Massachusetts New York Benefit Arizona Michigan Ohio Contributions Colorado Minnesota Pennsylvania Payments Georgia Missouri South Dakota Indiana Nebraska Texas Kansas North Carolina Washington Kentucky North Dakota Wis

  44. Slide 44: Joint Account (Common Rating) Planning

    Joint Account (Common Rating) Planning ƒ Planning and Design – Define states allowing Joint Account option Company – Review legal entity structure A – Evaluate employment tax savings – Analyze all possible rate combinations – Compliance requirements ƒ Review of state statute ƒ Duration and filing de

  45. Slide 45: Merger and Acquisition Considerations

    Merger and Acquisition Considerations Type of Transaction – Stock, Asset and/or Merger ƒ Employment Tax Compliance Measures – Risk management assessment – Planning and design – Implementation – Post implementation ƒ Filings and Paperwork – State unemployment (registrations, status change, closures)

  46. Slide 46: Summary

    Summary ƒ National unemployment tax rate – Key metric for employers ƒ Total Unemployment Rate (TUR) – Impacts state trust funds ƒ Trust Fund Solvency – Impacts Title XII loan activity ƒ Title XII Loans – Impact employer FUTA taxes ƒ Economic Conditions – Impact employer unemployment costs ƒ UI Integ

  47. Slide 47: Q&A

    Q&A 47 © Copyright 2011 ADP, Inc.

  48. Slide 48: Thank You for Joining Us Today

    Thank You for Joining Us Today ƒ For information on any of the ADP products or services referenced during today’s webinar: – Phone 800-CALL-ADP or visit www.adp.com ƒ For a complete listing of ADP webinars and webinar recordings, go to: – adp.com | tools & resources | events | webinars 48 © Copyrigh

  49. Slide 49: Please Tell Us How We're Doing

    Please Tell Us How We’re Doing Your input will be used to improve and plan future webinars The ADP Logo and ADP are registered trademarks of ADP, Inc. In the Business of Your Success is a service mark of ADP, Inc. All other marks are the property of their respective owners. 49 © Copyright 2011 ADP,

  50. Slide 50: Thank You for Attending.

    Thank You for Attending.

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