Transforming the Unemployment Insurance Industry with Modern Technology Solutions

The unemployment insurance sector has been a laggard in adopting modern technology. It is time this trend changes.

by David Minkkinen, Sagitec Solutions / June 17, 2018
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Using IT systems is integral to any organization today – private or government. State Unemployment Insurance (UI) agencies are no different. They rely almost entirely on IT systems to collect UI taxes and pay benefits. 

In a 2010 NASWA/ITSC study, over 90% of states reported using such systems running on outdated hardware and software. The study found that the numbers are so poor, only eight states have a modernized benefits system, only three have a modernized tax system, and only one has modernized benefits and tax systems. Today, the state of UI IT systems is still not great. As of 2017, only about 30% of states have a modernized benefits and tax system. 

Many states also have trouble scaling up when workloads surge because they depend on antiquated legacy systems. These outmoded legacy technologies are much less flexible than modern technologies, so a task as straightforward as scaling up, adding a data element, or adding a new program is difficult and time-consuming. These limitations make future changes significantly challenging. 

Benefits of an Innovative, Modern IT System 

The risks of using antiquated technology and manual processes for such core UI functions include limited access to data, poor data integrity, increased errors and fraud, low customer service and adoption rates, and system failures that can disrupt important services for citizens and businesses. 

Modernized benefits and tax systems enhance customer service through intuitive web interfaces, improve overpayment prevention and detection, reduce administrative costs, and allow agencies to incorporate changes to the law and new technology seamlessly. 

According to the NASWA/ITSC study mentioned above, states with modernized benefits and/or tax systems (accompanied by re-engineered business processes) generally report: 

  • Better staff productivity.
  • Improved customer service, including shorter wait times.
  • Faster and more accurate benefit payments.
  • Quicker and more accurate implementation of new laws/programs.
  • Lower costs. 

Case Study: How SC DEW became the first UI Agency in the Nation to Implement a Cloud-Based Tax System 

The South Carolina (SC) Department of Employment and Workforce (DEW) required a comprehensive, modern, UI Tax system to replace a legacy tax system and integrate with its UI benefits system. 

SC DEW had certain objectives while planning for their system modernization: 

Self-service for employers and Third-Party Administrators (TPAs): Develop a new and enhanced web portal for employer self-service using a single sign-on with South Carolina’s Business One-Stop (SCBOS) to improve employer self-service usage. SC DEW sought a streamlined process for employers to submit wage and tax information and to communicate with the UI Tax department. 

Hosting: According to the NASWA/ITSC study, most states find it difficult to scale-up when workloads surge as the capacity of their legacy systems is limited. SC DEW wanted a hosted solution that provides 24-7-365 availability and had the ability to handle the fluctuating volumes of tax functions and levels of activity. 

Eliminate manual processes: Eliminate most manual tax calculations by introducing enhanced automation. Also reduce manual intervention scenarios, ultimately improving data quality and minimizing human error. 

Easy reporting: A system that could help in creating static and ad-hoc reports reducing reliance on SC DEW technical staff to generate data queries, thus, allowing business users speed and flexibility in accessing and interpreting tax data. 

Compliance: A system to enhance system integrity via real-time error messaging and compliance with South Carolina state and federal IT policies. 

Avoid technology obsolescence: Utilize a commercial off-the-shelf (COTS) solution to reduce project implementation time and maximize supportability. Utilize software and hardware components that are scalable, adaptable, modular, and interoperable to improve system maintenance and support. 

SC DEW took Sagitec’s help in meeting their objectives by implementing their Microsoft Azure for Government Neosurance™ solution – one that serves over 105,000 employers, over 1,700 third-party agents, and approximately 100 internal staff users. 

The first quarter of 2017 was processed in the new system achieving significant results and meeting all the stated objectives. In the first quarter of implementation, the following results were achieved:

  • 97% self-service adoption rate for employer wage reporting significantly reducing paper-based wage filings.
  • Over 90,000 employers submitted wage detail records through the employer tax portal by the reporting deadline, during the first quarter of implementation.
  • 98% self-service adoption rate for employer registrations.
  • 86% self-service adoption rate for employer account updates.
  • Over 90% of tax payments were processed using electronic payment processes virtually eliminating paper checks in the first quarter of implementation.

We are excited about the new tax system and the early results we are seeing. This system gives employers more access to their accounts and is easy to navigate,” said Jamie Suber, DEW assistant executive director who heads the Unemployment Insurance division. “It was a pleasure partnering with Sagitec in the implementation of this system that gives South Carolina businesses a state-of-the-art self-service portal in which to file their wage reports and contributions. The system will ensure South Carolina and its businesses stay in compliance with federal regulations.

Gaining this high-level of self-service adoption rate by employers within the first month of production is quite extraordinary. Usually, it takes multiple quarters in a year to achieve this level of self-service and automation. Having employers access the system using self-service portals provides SC DEW with significant administrative savings by not having to manually enter wages, process payments, register employers, and make changes to employers’ accounts. In addition, the accuracy of the data increases by having the employers and TPAs perform these actions through data validation and rules built into the self-service portals.

SC DEW is just one example of the way in which the increased use of technology in today’s society has altered how claimants, employers, and TPAs want to conduct business with government agencies. Adopting technology modernization within the UI sector will allow state agencies to reap the benefits of this technology revolution. It can truly transform the operations of UI agencies and in turn help service the citizens of the country more efficiently. 

David Minkkinen is a Senior Partner at Sagitec Solutions, LLC and heads the Unemployment Insurance practice. He has over 20 years of experience in the UI industry. Sagitec Solutions delivers tailor-made unemployment insurance, pension, provident fund, and healthcare and life sciences software solutions to government sector clients. Learn more about Sagitec Solutions and their innovative UI solution NeosuranceTM.