If employers think state unemployment taxes are taking a bite out of their bottom line now, they might want to
“tighten their britches” in 2010 and beyond. Several recent news reports are projecting unemployment taxes
to double or even triple in 2010, as more and more states request sizable loans from the federal government to
replenish their unemployment trust funds.
This is even more reason for Davis-Bacon contractors to implement bona fide benefit plans with the fringe portion
of the prevailing wage. Every dollar paid as cash wages to hourly workers will be subject to these higher tax rates,
putting a squeeze on already slender profit margins.
So far 26 states have outstanding loans with the Federal Unemployment Account, and the state of Georgia
announced on December 17th it would request $70 million to sustain its dwindling unemployment trust fund. The
states with the largest outstanding loan balances are California, with over $5.8 billion; Michigan, with over $3 billion;
New York, with over $2 billion; and Pennsylvania, Ohio, North Carolina, Indiana, and Texas – all with over $1 billion
in outstanding loans.* A complete listing of states with outstanding loan balances
can be found here.
These loans must all be repaid. And while some states received interest-free loans
under ARRA, if those loans are not repaid within two years, states with outstanding
balances will lose a portion of their FUTA credit for each year the loan remains unpaid. In
order to repay these loans, states have few options other than raising their unemployment taxes,
and these increases may be necessary to replenish state unemployment trust funds well after employment improves.
Some states, such as Virginia, impose automatic rate increases across the board when the unemployment trust
fund falls below a certain level. Others, such as Michigan and Texas, use an “experience rate” which imposes higher
taxes on companies which have a history of more layoffs and claims. In some states, such as Florida, employers
will see an increase on both the taxable base** and the minimum tax rate for unemployment. The impact to Florida’s
employers is projected to be between 70 and 1200 percent. Because of the increase to both the taxable base and
the minimum tax rate, even employers with excellent claims histories and no lay-offs in the previous six fiscal quarters
will still receive an increase of 21% to their unemployment taxes.
According to the Texas Workforce Commission, unemployment taxes in that state will nearly double across the board
in 2010. In Washington, the increase in the tax rate will be smaller – however, it is charged on a much larger portion
of an employee’s wages. Texas taxes the first $9,000 in earnings, while Washington taxes the first $36,000. In
Virginia, the state unemployment tax that business pay on each employee will increase from an average of $95 per
employee per year to an average of $171 per year in 2010, $234 in 2011 and $263 in 2012, based on an additional
levy of .2 percent to be included in the final tax rate assignment, according to the Fredericksburg Free-Lance Star.
Needless to say, these increases come at a time when many businesses, especially smaller businesses, are already
struggling. Removing these taxes from the fringe portion of the wage on Davis-Bacon jobs has always been a sound
financial decision. In light of the increased state unemployment taxes which are being predicted, making this move is
one way to put some breathing room in an employer’s budget.
* Loan amounts accurate as of December 29, 2009. **State unemployment taxes are based on two factors: the taxable base as determined by the state and an
individual employer’s tax rate, which varies within a range of rates set by the state.
TWENTY UPCOMING MILITARY & ARENA/CONVENTION CENTER CONSTRUCTION PROJECTS
Reed Construction Data recently published a list of 20 upcoming military and arena/convention center construction
projects which are in the planning stages: View the list here.
ARRA REPORTING PERIOD COMING SOON
The second reporting period for recipients of American Recovery and Reinvestment Act awards began January 1,
2010. Here is some helpful information for your clients who are working on ARRA jobs.
FIRST-TIME REPORTERS — REGISTER HERE! You must register and report if:
You were awarded a grant, or loan of more than $25,000 under the Recovery Act in the period of September
30 to December, 31, 2009 – even if you have not yet received the funds.
You have invoiced under a federal contract, including orders, of any dollar amount, funded in whole or in part
by the Recovery Act.
RETURNING REPORTERS: You must report if:
• You reported in October 2009 and the project is not complete
• You reported in October 2009 and the project was completed after October 30, 2009.
• You reported in October 2009 on a federal contract, grant, or loan award and have still not received the funds.
For additional information, see FAQs for Recipients.
IMPORTANT — NEW REPORTING DATES
Recipients are required by the Recovery Act to report from January 1 to January 10,
2010. FederalReporting.gov — the website where recipients submit reports-- will be available for reporting
from January 1 to January 15, 2010.
IMPORTANT ENHANCEMENTS TO FEDERALREPORTING.GOV
• Returning Reporters will have the option to “copy forward” their first report, so only certain fields will need
updating.
• Recipients will not be allowed to submit a report if:
> The recipient enters more money spent than funds received
> The zip code + 4 does not match the state code
> The congressional district doesn’t match the zip code + 4 entry
CONSTRUCTION STARTS REBOUND IN NOVEMBER
An article published December 29, 2009 by Reed Construction Data shows a 7% increase in construction starts from
October 2009 to November 2009. The article goes on to say that heavy project starts are up 15% year to date, with
starts in the small bridge, airport and dams/marine sector all up more than 50% year to date.
VIRGINIA BECOMES SECOND STATE TO SIGN CONTRACTS FOR WATER QUALITY
PROJECTS FUNDED BY ARRA
Gov. Timothy M. Kaine announced Tuesday that signed loan agreements are in place for all of Virginia’s water
quality funds received from the American Recovery and Reinvestment Act, and 35 projects are under contract or
construction. Read more here.
OBAMA PROMOTES HOME ENERGY EFFICIENCY PROGRAM
According to a recent article on CNNMoney.com, President Obama has proposed
a new program that would reimburse homeowners for energy-efficient appliances
and insulation, part of a broader plan to stimulate the economy. This program
would present opportunities for insulation contractors.
The administration didn’t provide immediate details, but said it would work with Congress
on crafting legislation. Steve Nadel, director at the American Council for an Energy-Efficient
Economy, who’s helping write the bill, said a homeowner could receive up to $12,000 in rebates.
The proposal is part of the President’s larger spending plan, which also includes money for small businesses,
renewable energy manufacturing, and infrastructure.
We know energy efficiency “creates jobs, saves money for families, and reduces the pollution that threatens our
environment,” Obama said. “With additional resources, in areas like advanced manufacturing of wind turbines and
solar panels, for instance, we can help turn good ideas into good private-sector jobs.”
The program contains two parts: money for homeowners for efficiency projects, and money for companies in the
renewable energy and efficiency space.
The plan will likely create a new program where private contractors conduct home energy audits, buy the necessary
gear and install it, according to a staffer on the Senate Energy Committee and Nadel at the American Council for an
Energy-Efficient Economy. Big-ticket items like air conditioners, heating systems, washing machines, refrigerators,
windows and insulation would likely be covered, Nadel said.
It’s not clear how the home efficiency plan would be administered - the government may issue rebates to consumers
directly, homeowners might get a tax credit, or the program could be run via state agencies.
To keep consumers from having to spend thousands of dollars before getting reimbursed, Nadel said, one idea is to
have contractors or big box retailers pay part of the cost up front. Fraud issues could also come up, Kreutzer said.
“Any program that is going to run through a third party and is going to distribute billions of dollars needs to have lots
of checks and balances to make sure there’s not abuse,” he said. Nadel noted that as a way to guard against fraud,
contractors would have to be certified to participate.
Energy company boost
Obama’s new spending plan also calls for renewable energy companies to get additional support. That could come in
the form of loan guarantees - basically, money the government uses to secure loans for startups.
In the original stimulus bill passed last year, $6 billion was earmarked for such loan guarantees. But then lawmakers
took away $2 billion to fund Cash for Clunkers - the popular program that paid people to turn in their old cars.
The $4 billion from the original bill has funded about $40 billion in loans, said the staffer on the Senate Energy
Committee. Meanwhile, firms are hoping for another $4 billion in loan guarantees, since they have another $40 billion
worth of projects that need funding.
A bill on energy efficiency reimbursements already has supporters in the Senate. “Not only will [such legislation]
increase our energy security and transform our energy infrastructure to a modern, clean and efficient one,” Senate
Energy Committee Chairman Jeff Bingaman, D-N.M., wrote in a recent op-ed column in the Hill, a Capitol Hill
newspaper. “But it also will position the United States to lead in the development of clean energy technologies.”
What’s New at Fringe Benefit Group
Nearly 600 people registered for the ABC webinar presented by Adam Bonsky and Karen
deMontigny December 9th. Those attending represented a good cross-section of contractors
across the country. A list of questions asked during the webinar was compiled, and FBG staff are working to provide
answers to those who asked them. A FAQ will then be developed and posted to the website.
SCA SELL SHEET NOW AVAILABLE
We’ve developed a sell sheet specifically for SCA prospects. You can find it on our website in the “Newsroom”
section. If you’d like hard copies of the sell sheet, please contact Justin West.
FRINGE BENEFIT GROUP IN THE NEWS
Fringe Benefit Group and The Contractors Plan are featured in the December 2009 issues of Independent Agent and
CFMA’s Building Profits magazine. We’re scheduled to have articles published in the February issue of Construction
Executive magazine and the March issue of Agents Sales Journal.
We sincerely thank you for partnering with us and we appreciate your business. If you have ideas or suggestions for
how we can help you be more successful, please let us know.
NATIONAL ABC WEBINAR WELL-ATTENDED
