Last updated: September 15, 2021 (changes since last update on August 20, 2021 will begin with **NEW**)
In this article:
Potential Impact of COVID-19 on 2021 SUI Tax Rates
Solvency of the SUI System
Average High Cost Multiple
Minimum Adequate Level of Financing
State Trust Fund Balances
Federal Title XII Advances
FUTA Credit Reductions
Annual Taxable Wage Bases
Insights Gained from the Great Recession
Legislative Actions Impacting 2022 SUI Tax Rates
Extension of Non-Charging of Benefits into 2021
American Rescue Plan Act of 2021
State Actions Impacting 2022 SUI Tax Rates
Potential Impact of COVID-19 on 2021 SUI Tax Rates
Most states acted in mid to late 2020 and early 2021 in response to the COVID-19 pandemic to help mitigate some of the financial risks (i.e., increases in SUI tax costs) potentially impacting employers in calendar year 2021. The most pervasive of these actions related to the non-charging of COVID-19 related benefits not funded by the federal government. In addition, states took other actions to help mitigate risks, including:
Maintaining 2020 tax rate tables and rating calculation factors
Removal of non-COVID related benefit charges from the rating calculation (or the shortening of the “look-back” period to exclude benefits charges and/or taxable payroll from the rating calculation)
Lowering or removal of surcharges relating to trust fund solvency or socialized charges (i.e., those benefits not charged to specific employer accounts)
Cash infusions into trust funds from sources other than tax contributions (e.g., CARES Act Coronavirus Relief Funds)
Maintaining 2020 annual taxable wage base limits
Establishment of special tax credits
Deferral of the tax payment due dates
The above is not intended to suggest that all states acted to mitigate risk. Some states allowed their rating calculations, surcharges, and wage bases to adjust by operation of law or policy, which generally increased SUI tax rates. Even in those states that enacted non-charging of COVID-19 related benefits, many employers realized significant increases in calendar year 2021 SUI tax rates.
A good example of this is New York. The state has not charged employers for COVID-19 related benefits since March 9, 2020, but because its trust fund had been depleted, the rate table moved to the maximum allowed under law (i.e., moved six rate tables). The minimum rate from 2020 to 2021 went from 0.60% to 2.10% (a 256.0% increase) and the maximum rate went from 7.90% to 9.90% (a 27.5% increase). Per a recent employer notification issued by the New York Department of Labor, the rate table change “means unemployment rates have adjusted upward for all employers in 2021”. See the Equifax 2021 Tax Guide for additional state-specific details. Barring a law change, New York is not expected to charge employers for benefits in 2021, which are used to calculate 2022 SUI tax rates.
Although all calendar year 2021 rates have been issued, there remain a few rates that may be subject to revision:
Texas - The Texas Workforce Commission issued 2021 SUI tax rates in late June of 2021. Texas may have inadvertently included certain COVID-19 related charges in the calculation of the 2021 rates. As such, employers are encouraged to view and appeal charges you deem inappropriate, which may result in a revised rate. Per a recently issued email notification to employers:
“If the chargeback total on your notice is what you expected, no further action would be necessary in that regard. If it is not what you expected, you can get a list of those chargebacks using your Unemployment Tax Services (UTS) account online (see https://twc.texas.gov/businesses/unemployment-tax-services for information on and access to that system).
Once you get that list, you can check those chargebacks against your records of chargeback notices and determinations from the past year. Any chargebacks that you disagree with that you have not already appealed, you may appeal at this point. Multiple chargebacks can be appealed in one letter. If you are concerned that your appeal might be late, be sure to explain the reason for the late appeal in your letter.
Any chargeback appeals in which your company prevails will cause a recalculation of your company's tax rate for 2021, which will eventually result in a credit balance on your company’s account. A credit balance can be used for offsetting future unemployment taxes, or else refunded.”
Massachusetts - After the issuance of 2021 SUI tax rates, the Department of Unemployment Assistance (DUA) announced that the 2021 solvency rate decreased from 9.23% to 1.12%. As a result, employers that were charged a solvency assessment on their 2021 rate notice will be credited back a portion of the solvency assessment to their account’s experience-rating reserve balance, resulting in an adjusted 2021 SUI tax rate. Adjusted 2021 SUI rates were recently issued and will be retroactive to January 1, 2021.
However, experience-rated employers will be charged a quarterly COVID-19 “recovery assessment.” The recovery assessment rate is equal to 10.50% of an employer’s 2021 adjusted SUI tax rate [e.g., if your adjusted 2021 rate is 3.09%, the recovery assessment is .324% (3.09% x 10.50%)]. The COVID-19 recovery assessment is retroactive to January 1, 2021.
Q1 and Q2 2021 tax contributions will be recalculated using adjusted 2021 SUI rates and the new COVID-19 recovery assessment rate for every employer that previously filed the Q1 and Q2 Employment and Wage Detail report. Any credits generated will be applied to future tax liabilities. Due to the significant reduction to the solvency rate, it is likely that employers will have a credit.
Tax contributions for Q1 and Q2 2021 are due on or before 3:00 pm EST, August 31, 2021.(1)
Employers will want to take extra care to ensure that correct 2021 SUI tax rates are being utilized when paying tax contributions. Many tax rate notices were issued late or even reissued. If an incorrect rate has been used, a reconciliation should be performed, remitting additional tax or applying credits to future liabilities, as may be applicable. Short paying SUI tax contributions can result in the assignment of penalty tax rates.
Solvency of the SUI System
There are two primary solvency measures used by the U.S. Department of Labor, the Average High Cost Multiple (AHCM) and the Minimum Adequate Level of Financing (MALF).
Average High Cost Multiple
The AHCM is a standard measure of the solvency of the SUI system using a single factor, a state’s trust fund balance at a point in time. A multiple of 1.00 indicates a state trust fund is deemed sufficiently solvent and able to pay one year of benefits associated with an average recessionary period. As of January 1, 2021, 40 states were not considered adequately funded under this measure.(2)
Average High Cost Multiples
Minimum Adequate Level of Financing
The MALF is a measure of solvency using multiple factors, a state’s average SUI tax rate and trust fund balance at a point in time. In an attempt to measure the adequacy of a state’s level of taxation it is necessary to arrive at a standard level of taxation which can be used for comparison. A comparison can be made between a state’s average tax rate for the year against the MALF. The MALF is calculated as the tax rate equal to the amount needed to cover a state’s total benefit payments (average level of last six years) plus a solvency amount. The solvency amount is the difference between a state’s net current trust fund level and the recommended minimum adequate level (a trust fund level equivalent to a 1.0 AHCM divided by five). The percentage difference between a state’s average tax rate and the Minimum Adequate Financing Rate shows how a state’s current level of financing compares to the determined adequate level. A large negative number corresponds to a level of financing that is well below adequate. This measure can be combined with the AHCM to suggest that a state may have an inadequate level of taxation if they have a large negative difference from the adequate financing rate and a low level of solvency.(3)
The average SUI tax rate in 30 states was below a calculated Minimum Adequate Financing Rate Target as of January 1, 2021.
Percentage Difference Between State Average Tax Rate and a Minimum Adequate Financing Rate
State Trust Fund Balances
State trust fund balances are the primary driver of SUI tax rates. As such, particular attention should be paid to these balances as an indicator of where rates will be headed in 2022 and beyond.
The following graphic compares quarterly net trust fund balances (trust fund balance net of Title XII advances, discussed further below) from January 1, 2020 to June 30, 2021, by state.4 Overall, net trust fund balances declined significantly during this period.
Quarterly State Trust Fund Balances by State (descending order by state as of June 30, 2021)
As depicted in the following graphic, net trust fund balances were negative $39.46 billion at the end of Q1 2011, as a result of the Great Recession, compared to negative $27.12 billion at the end of Q1 2021, as a result of COVID-19 (i.e., $12.34 billion more solvent). At the end of Q2 2021, trust fund balances rebounded slightly as a result of Q1 2021 tax contributions.(5)
Net trust fund balances were substantially higher pre-COVID than they were pre-Great Recession. Because of this, net trust fund balances to date have not reached the negative levels experienced during the Great Recession.
Federal Title XII Advances
The governor of any state may request a loan under Title XII of the Social Security Act. This is typically done when a state’s reserves are inadequate to pay anticipated future unemployment benefits. As of September 7, 2021, the following states received Title XII advances.(4)
Title XII Advance Activities Schedule (updated)
* Federal Title XII advance existed prior to COVID-19 crisis and continues to be subject to FUTA credit reductions.
**NEW** On August 18, 2021, 11 states had outstanding advances totaling approximately $53.92 billion. As of September 7, 2021, 16 states had outstanding advances totaling approximately $44.76 billion. This is a $9.16 billion reduction in just three weeks. Post-COVID advances are now below those taken during the height of the Great Recession.
During the Great Recession, a number of states issued bonds, using the proceeds to repay Title XII advances. In addition, states may earmark allocated funds from the American Rescue Plan Act of 2021 to repay federal advances (see explanation below).
**NEW** The temporary waiver of interest on Title XII loans provided in the Families First Coronavirus Response Act ended on September 6, 2021. As such, states with outstanding advances will begin to accrue interest daily, which is payable on September 30th of each year (a condition of meeting federal conformity and compliance requirements).
FUTA Credit Reductions
If a state has an outstanding loan balance on January 1 of two consecutive years and has not repaid the balance by November 10 of that second year, employers in the state are at risk of losing a portion of their FUTA tax credit for that year. The FUTA tax credit starts at 5.40% and is reduced by 0.30% (known as the FUTA credit reduction) for each year the loan remains outstanding beyond the second year. The FUTA tax rate is a net 0.60% because of the FUTA tax credit [6.00% (gross FUTA tax rate) - 5.40% (FUTA tax credit) = 0.60%)].6
In the first year of the FUTA tax credit loss, the net FUTA tax rate increases from 0.60% to 0.90%. The net FUTA tax rate can increase further, in increments of 0.30% per year, if the loan remains outstanding in subsequent years.
Employers in states that accept federal advances during calendar year 2020 will not be subject to FUTA (Federal Unemployment Tax Act) credit reductions until 2022. The first January 1 occurred on January 1, 2021. The second January 1 will occur on January 1, 2022. Should a state’s Title XII advances remain outstanding on November 10, 2022, employers in the state will be subject to a 0.30% increase in the FUTA tax rate, from 0.60% to 0.90%, for the entire 2022 calendar year.
Annual Taxable Wage Bases
The depletion of state trust funds can have negative implications not only to future SUI tax rates but also the amount of wages subject to those tax rates. Employers pay SUI tax on wages earned and paid to each employee within a calendar year up to a specified amount, known as the annual taxable wage base. Some states correlate annual taxable wage base adjustments to state trust fund balances.7 Over the past 15 years, taxable wage bases have increased by an average of 2.4% annually. During the height of the Great Recession (from 2008 to 2010), the average annual increase was 4.8%. From 2020 to 2021, taxable wage bases increased by an average of 2.9%.
Average Annual Taxable Wage Bases
The following table identifies states that have already determined their 2022 annual taxable wage bases:
Annual Taxable Wage Bases (2021 and 2022) (updated)
Insights Gained from the Great Recession
The logical leading indicator of potential increases in SUI tax rates is the unemployment (jobless) rate. As the unemployment rate increases, net trust fund balances typically decrease. The correlation is almost immediate. This is because when more unemployment claims are filed, more benefits are paid to claimants, which are charged to the state trust funds. This can be demonstrated by looking back at the Great Recession, which lasted from December 2007 to June 2009.8
Correlation of Historical Unemployment (Jobless) Rates to Net Trust Fund Balances(9)
The Great Recession caused a slow increase in initial unemployment claims. In contrast, there was a sharp spike in claims due to the COVID-19 pandemic, which continues to put stress on the unemployment system.
As state trust funds are depleted during a period of increasing or higher levels of unemployment, SUI tax rates have historically increased. However, the correlation is not immediate. There is typically a lag between when economic downturns impact SUI tax rates. This is because rating calculations typically take into consideration more than just a single year of experience and look back to historical experience in the development of rates. And since rates are issued annually, a full year can pass before rates are next adjusted.
As illustrated in the below graphic, as net trust fund balances began to decline in 2009 as a result of the Great Recession, the average SUI tax rate in the U.S. did not hit its peak until 2012. After that peak, average rates declined for eight consecutive years through 2020. The average 2021 SUI tax rate in the U.S. is not currently available from the Department of Labor, but it is expected to increase over that of 2020 (based on historical trends and preliminary Equifax data).
Correlation of Historical Average SUI Tax Rates to Net Trust Fund Balances(10)
Legislative Actions Impacting 2022 SUI Tax Rates
Extension of Non-Charging of Benefits into 2021
As mentioned above, the most meaningful action taken by most states to mitigate the financial risks associated with the COVID-19 pandemic was the non-charging of COVID-related regular unemployment benefits. In some states, the non-charging provisions have expired. In other states, the non-charging provisions continue or have been extended into 2021.
Even if the non-charging provisions expired in 2020, they can still have a positive impact on 2022 rates since most states' rating calculation periods begin July 1, 2020 and end on June 30, 2021. For those states that have extended non-charging provisions beyond June 30, 2021, 2023 SUI tax rates could be positively impacted. This is not to suggest that SUI tax rates for 2022 and 2023 will be lower than those of 2021, but it could mean that they will increase less than they otherwise would without such non-charging provisions.
The COVID-19 regular unemployment benefits not charged to specific employers will be “socialized” and come out of state trust funds. This in turn can trigger surcharges, the “great equalizer.” It is important for employers to continue auditing benefit charge statements to help ensure that benefits that should not be charged, are not charged. Equifax has prepared a State Claims Resource Guide summarizing certain COVID-19 related claims information, including states with “non-charging of benefit” provisions.
American Rescue Plan Act of 2021
On May 11, 2021, the Department of Treasury issued an Interim Final Rule to implement the Coronavirus State and Local Fiscal Recovery Funds established under the American Rescue Plan Act of 2021 (ARPA).Recipients of funds may make deposits into unemployment trust funds up to the level needed to restore the pre-pandemic balances of such account as of January 27, 2020 or to pay back advances received under Title XII for the payment of benefits between January 27, 2020 and date the Interim Final Rule becomes effective.
Since the level of state trust funds is a primary driver in determining SUI tax rates, the use of funds to replenish depleted trust funds has positive implications for employers. This of course is dependent on how the states decide to use the funds available to them. Should a state decide to improve the solvency of its trust fund, this could mitigate anticipated future increases in SUI tax rates. In addition, if a state uses the funds to repay Title XII advances prior to January 1, 2022, this could help avoid FUTA credit reductions in calendar year 2022. Also, as the current waiver of interest on Title XII advances ends on September 6, 2021, the elimination of some or all of the Title XII advances could help avoid the payment of interest, which is often passed on to employers.
State and Local Fiscal Recovery Funds are to remain available until December 31, 2024 and total $195.3 billion, allocated as follows:
Allocation of ARPA Funds(11)
State Actions Potentially Impacting 2022 SUI Tax Rates
The following contains examples of actions taken by states impacting 2022 SUI tax rates:
Alaska New Option to Reduce Unemployment Tax Rate
The Alaska Department of Workforce Development has announced a new option for employers to reduce their unemployment tax rate. This new option is designed to help employers minimize the COVID-19 pandemic's effect on unemployment tax rates by using the Emergency Option Form. Examples of COVID-19 unexpected payroll changes are: (1) an increase in wages due to providing essential services; (2) decreases from layoffs or a reduction in hours worked; or (3) unpaid leave for mandatory, self-imposed quarantine, etc.
Arkansas HB 1049
The new law stops any further increase in the unemployment taxable wage base in 2022. The wage base fluctuates with the balance in the state's unemployment trust fund. If the balance is lower, the wage base increases. The maximum amount the wage base can be is $12,000. For 2021, the wage base was $10,000. It was $7,000 in 2020. House Bill 1049 states that the wage base may not increase to more than $10,000 in 2022. It also notes that the wage base may not decrease below $7,000.
Colorado SB 20-207
The legislation incrementally increases Colorado's unemployment taxable wage base to $30,600 by calendar year 2026. The wage base will remain at $13,600 through 2021. It will then increase to $17,000 in 2022, $20,400 in 2023, $23,800 in 2024, $27,200 in 2025, and $30,600 in 2026. Each year thereafter, the wage base will be adjusted by the change in average weekly earnings.
As a counterbalance to increases in wage bases, the legislation requires that employers not be assessed a solvency surcharge for calendar years 2021 and 2022, even if the unemployment trust fund balance falls low enough to warrant an increase in the unemployment tax rates. Also, the bill allows the state to use funds received by the U.S. Department of Labor under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to bolster the trust fund. This move can help to lower the overall future-assigned unemployment tax rates.
Connecticut HB 5377
The new law removes COVID-19 pandemic layoffs from the calculation of unemployment tax rates. Specifically, the legislation disregards an employer's unemployment benefit charges and taxable wages between July 1, 2019, and June 30, 2021, when calculating the employer's unemployment tax experience rate for taxable years starting on or after January 1, 2022. This means that the unemployment benefits paid to an employer's former employees during that period will not affect the employer's experience rate. The bill's provisions apply to the extent allowed by federal law and as necessary to respond to the spread of COVID-19. The legislation similarly disregards the statewide benefits and taxable wages for calendar years 2020 and 2021 when calculating the unemployment tax rate that will apply to new employers for tax years starting on or after January 1, 2022. As such, the rate charged to employers who have not participated in the system long enough to have their own experience rates will not be affected by the benefits paid during those years. The legislation effective date is October 1, 2021.
Connecticut HB 6633
The new law increases the unemployment taxable wage base from $15,000 to $25,000, beginning January 1, 2024. Each year thereafter, the wage base will be indexed for inflation. The bill also expands the range of experienced unemployment tax rates from 0.1% to 10% (currently, 0.5% to 5.4%), beginning January 1, 2024. Other provisions that will take effect on January 1, 2024 include: not charging employers for unemployment benefits claimed through the state's shared work program during periods of high unemployment and capping the fund solvency tax at 1.0% (currently at 1.4%). During a period of economic recession, the maximum solvency tax rate will be reduced to 0.5%, according to the bill. Beginning January 1, 2022, the legislation will require the Connecticut Department of Labor to adjust the benefit ratio for each employer in an industry sector (based on the North American Industry Classification System) downward by 50% of the average increase in that sector if the average benefit ratio for all employers within that sector increases over the prior calendar year's average by 0.01 or greater. In addition, the legislation temporarily changes the lookback period for determining an employer's unemployment experience rating. Currently, the lookback period is the three consecutive years preceding the computation date. For 2026, the lookback period will be one year. For 2027, the lookback period will be two years.
**NEW** Connecticut Announcement Relating to the Federal Title XII Interest Assessments
The Connecticut Department of Labor has announced that there will be no special assessment on employers for the state's outstanding federal unemployment loan interest. Connecticut's unemployment trust fund was depleted in August 2020. As a result, the state borrowed funds from the federal government to continue to pay benefits. Typically, there is interest on federal unemployment loans, which is due by September 30. The Families First Coronavirus Response Act waived this interest until September 6, 2021. The calculated interest on Connecticut's loans from September 7, 2021 through September 30, 2021 is expected to be approximately $1 million. The state usually imposes a special assessment on employers to pay for this interest. However, the state will pay the interest due on September 30.
The Department added that the state is expected to become a FUTA tax credit reduction state for the 2022 tax year. This is because the federal unemployment loans will have been outstanding for two consecutive years. As a result, the 5.40% FUTA credit reduction on the 6.0% FUTA tax rate will be reduced by 0.30% for the 2022 tax year. This means employers will pay as much as $21 in additional FUTA taxes per employee next year.
Florida SB 50
**NEW** The legislation changes how Florida’s UI tax rate is computed for rates effective 2022 through 2025.
Tax rates effective January 1, 2022, will exclude charges from the second, third and fourth quarters of 2020 and all benefit charges paid as a direct result of a government order to close or reduce capacity of a business due to COVID-19, as determined by the Department of Economic Opportunity. The tax rate calculation will also exclude the application of the positive adjustment factor (trust fund trigger). Lastly, benefit charges from the first and second quarters of 2021 may be decreased if the Office of Economic and Demographic Research (EDR) estimates total tax collection for rate year 2022 will exceed $475.5 million. Since EDR has until January 1, 2022, to advise the Department whether to decrease benefit charges, the Department has until March 1, 2022, to post rates for the 2022 calendar year.
Tax rates effective January 1, 2023 through December 31, 2025, will exclude charges from the second, third and fourth quarters of 2020 and all benefit charges paid as a direct result of a government order to close or reduce capacity of a business due to COVID-19, as determined by the Department of Economic Opportunity. The tax rate calculation will also exclude the application of the positive adjustment factor (trust fund trigger). Lastly, benefit charges from the first and second quarters of 2021 may be decreased if EDR estimates total tax collection for rate year 2022 will exceed $475.5 million. These changes to the tax rate calculation are repealed if the trust fund reaches $4,071,519,600 on June 1.
The new legislation also requires the state to make three deposits during 2021 to the UI trust fund. The funding comes from online sales tax collected from out-of-state e-commerce companies. In addition, beginning July 2022, and on or before the 25th day of each of the following months, the Florida Department of Revenue will distribute $90 million monthly to the state's UI trust fund. The Department is required to end monthly distributions when the Department of Revenue receives certification from EDR that the ending balance of the UI trust fund exceeds $4,071,519,600 or on December 31,2025, whichever is earlier.
Hawaii HB 1278
The legislation, retroactively effective January 1, 2021, calls for unemployment tax rate schedule D (0.2% to 5.8%) to apply for 2021 and 2022. Further, the legislation requires the Director of Labor and Industrial Relations to omit benefits charged for experience ratings for employers due to COVID-19 in calendar years 2021 and 2022. Relief is provided to reimbursable employers for unemployment claims beginning March 15, 2020 through March 20, 2021 that are not a direct result of the COVID-19 pandemic. Reimbursable employers will receive a 50% credit against amounts owed for any base period the employer is making reimbursements rather than contributions.
Indiana HB 1111
The new law creates a new tax rate Schedule C (former Schedule E) which is to remain in effect through 2025. The rates range from 0.50% to 7.40%.
Indiana HB 6633
The new law provides that employers will not be charged for unemployment benefits paid from March 13, 2020 through June 30, 2021. However, the waived charges may be recovered through a mutualized unemployment tax in the subsequent year.
**NEW** Iowa Announcement Relating to 2022 Unemployment Tax Rates Unemployment insurance tax rates for Iowa employers will remain unchanged for 2022 and will range from 0.0% to 7.5% (Tax Table 7). For the fifth consecutive year, the tax rates used to fund unemployment benefits will be the second lowest allowed by law.
Iowa Announcement Relating to 2022 Wage Base
The taxable wage base increased from $32,400 for 2021 to $34,800 for 2022 due to an increase in the average annual wage for 2020 of $52,130.71 up from $48,455.86 in 2019.
Kansas HB 2196
Under the new legislation, Kansas unemployment tax rates will be determined using a standard rate schedule with six new solvency rate schedules and six new credit rate schedules providing for solvency and credit rating adjustments to be made according to the experience rating of employers, effective with tax year 2022. Tax rates for the standard schedule range from 0.2% to 5.4% for positive-rated employers and from 5.6% to 7.6% for negative-rated employers. The solvency rate schedules increase the tax rates relative to the standard schedule, ranging from 0.23% to 6.82% for positive-rated employers and from 6.34% to 9.6% for negative-rated employers. Credit rate schedules lower the tax rates relative to the standard schedule ranging from 0.15% to 4.69% for positive-rated employers and from 4.13% to 6.6% for negative-rated employers. Kansas has sent an email communication directly to you with the details.
Kentucky HB 413
The legislation locks the taxable unemployment wage base at the level of 2020 for tax years 2021 and 2022 (revised from $11,100 to $10,800 for 2021), and sets the employer contribution rate table to Schedule A of Table A for those two years as well. Additionally, the new law bars the charging of benefits paid due to a state of emergency or disaster declaration from the reserve account of the employer of the beneficiary and eliminates surcharge assessments for calendar years 2021 and 2022.
Louisiana SB 89
The new legislation provides for unemployment insurance “Procedure 2” to be applied by the secretary of the Louisiana Workforce Commission for calendar year 2022. Procedure 2, among other provisions, stipulates that the taxable wage base will be $7,700 for 2022.
Louisiana SB 5
The law suspends the provisions of R.S. 23:1536(E)(1) relative to the unemployment insurance solvency tax on employers.
Maryland SB 811
The new legislation sets the unemployment tax rates for 2022 and 2023 to be determined under Table C, rather than Table F, as they are for tax year 2021. Tax rates under Table C range from 1.0% to 10.5%, whereas tax rates under Table F range from 2.2% to 13.5%. The bill addresses the shortfall in the unemployment trust fund by allocating qualified federal funds to the state unemployment trust fund to buttress the solvency level.
Massachusetts SB 90
The new bill freezes a statute-mandated increase in the unemployment tax schedule through calendar year 2022. However, the bill also adds a surcharge to 2021 and 2022 rates to cover anticipated interest payments on federal advances issued to Massachusetts to cover unemployment obligation shortfalls. The legislation also excludes all COVID-19-related benefits paid between March 10, 2020 and August 1, 2021 from the UI solvency rate calculation.
Mississippi SB 3051
An act to provide that the general experience rate for 2021 shall be 0%; to provide that charges attributed to each employer's individual experience rate for the period March 8, 2020, through June 30, 2020, will not impact the employer's individual experience rate calculations for purposes of calculating the total unemployment insurance rate for 2021 and the two subsequent tax rate years; to provide that charges attributed to each employer's individual experience rate for the period July 1, 2020, through December 31, 2020, will not impact the employer's individual experience rate calculations for purposes of calculating the total unemployment insurance rate for 2022 and the two subsequent tax rate years.
New Jersey (fiscal year jurisdiction)
New Jersey 2021/2022 SUI tax rates were issued on August 19, 2021. Table C is in effect (rates range from 0.5% to 5.8%) for fiscal year 2022 (from July 1, 2021 through June 30, 2022). The 2022 taxable wage base has been determined and has increased to $39,800.
New Jersey (fiscal year jurisdiction) Bill A-4853/S-301
The bill aims to assist employers affected by the COVID-19. Specifically, the bill will assign the following unemployment tax rate tables through fiscal year 2024:
Table C (rates range from 0.5% to 5.8%) for fiscal year 2022 (from July 1, 2021 through June 30, 2022);
Table D (rates range from 0.6% to 6.4%) for fiscal year 2023 (from July 1, 2022 through June 30, 2023), unless calculations call for a lesser table to be in effect; and
Table E (rates range from 1.2% to 7.0%) for fiscal year 2024 (July 1, 2023 through June 30, 2024), unless calculations call for a lesser table to be in effect.
New York SB 1197
Under the legislation, employers will not be charged for any unemployment benefit claims tied to the coronavirus (COVID-19) pandemic. The waiver is applicable from March 12, 2020 to Dec. 31, 2021 (the end of the rating calculation period for 2022).
**NEW** North Carolina Executive Order 231 Executive Order (EO) 231 reinstates certain requirements for unemployment claimants previously imposed by EO 118. EO 231 rescinds section 3(b), among other sections, which directed the Department of Commerce to not charge COVID-19 related unemployment benefits to employers' accounts.
Oregon HB 3389
The new legislation modifies requirements regarding the calculation and payment of unemployment insurance taxes to provide employers immediate and long-term relief. The legislation:
Provides that the experience rating used to determine an employer’s 2020 tax rate will also be used in 2022, 2023, and 2024;
Allows employers to defer payment until June 30, 2022, of up to one-third of tax owed in 2021 if their tax rate increased by at least 0.5% percentage point between 2020 and 2021 without incurring interest or penalties;
Forgives a percentage of deferred 2021 taxes depending on the amount an employer’s tax rate increased in 2021 and if the employer is in good standing;
Reduces fund adequacy percentages used to determine tax rate schedules; and
Extends from 10 years to 20 years the look-back period used to determine Unemployment Compensation Trust Fund solvency level and provides that 2020 and 2021 are not included in the 20-year look-back period.
Note: Participation in the deferral portion of this relief plan could negatively impact employers’ FUTA tax credit. Some employers may be unable to utilize the full credit for state unemployment tax paid on their Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) if they pay state unemployment taxes after the Form 940 due date.
**NEW** Pennsylvania Announcement Relating to 2022 Unemployment Tax Rates Unemployment tax rates for experienced employers will continue to range from 1.2905% to 9.9333% in the 2022 tax year. These rates include a 5.40% surcharge and 0.50% additional contribution tax. The interest factor will not be in effect for 2022 (1.10% in 2021). Delinquent employers pay a basic rate that is 3.0% higher. The taxable wage base will continue to be $10,000 in 2022. Employees must also make unemployment tax contributions. The employee unemployment tax withholding rate will remain at 0.06% in 2022. This withholding is deducted from all of the employee's taxable wages, not just up to the taxable wage base limit.
The 5.40% surcharge is factored into the contribution rate and appears as the Surcharge Adjustment on the rate notice (Basic Contribution Rate + 3% Increase for UC delinquency, if applicable, x 5.4 percent = Surcharge Adjustment). This applies to all employers and is not subject to appeal.
The 0.50% Additional Contributions tax applies to all employers, except newly liable employers (unless the employer is also subject to an increase for delinquency) and is not subject to appeal. This is added to the tax contribution rate after the Surcharge Adjustment is calculated.
The Total Contribution Rate is the sum of the Basic Contribution Rate, the Increase for delinquency (if applicable), the Surcharge Adjustment and the Additional Contributions.
**NEW** Rhode Island Executive Order 21-92 Executive Order (EO) No. 21-92 provides that charges to employer accounts since January 27, 2020 for COVID-19 related claims are suspended. Such charges will be directed to the state's balancing account. The order supersedes Executive Order 20-19 and will remain in effect through October 1, 2021 unless renewed, modified, or terminated by a subsequent EO.
Tennessee (fiscal year jurisdiction) Announcement Relating to Second Half of 2021 Tax Rates
The Tennessee Department of Labor and Workforce Development (DLWD) has announced that unemployment tax rates for experienced employers will continue to be determined under Table 6 for the second half of 2021 (July 1, 2021 to December 31, 2021). Rates range from 0.01% to 10.0%. The taxable wage base for unemployment remains $7,000.
Vermont (fiscal year jurisdiction)
Vermont 2021/2022 SUI tax rates were issued on June 24, 2021. The rate schedule increased from Schedule I to Schedule III. The state did not include calendar year 2020 taxable payroll and benefits charged in the rate computation. The 2022 taxable wage base will not be determined until later this year.
Virginia HB 7001
The new bill determines how ARPA funds will be used, includes a provision that requires the Virginia Employment Commission, when calculating the SUI tax rates for 2022, to exclude pandemic related claims from April 1, 2020 through June 30, 2021. Further, the law orders that an employer's SUI tax rate may not exceed its 2021 tax rate. The bill also requires the “pool charge” for 2022 to be computed using the same methodology and may not exceed the 2021 rate. Finally, the bill appropriates $862,000,000 to the Unemployment Trust Fund and $73,600,000 towards information technology modernization and improvements.
Washington State SB 5061
The legislation has a number of provisions designed to provide unemployment tax relief to employers. The new legislation sets the maximum social tax as follows: (1) 0.50% for 2021; (2) 0.75% for 2022; (3) 0.80% for 2023; (4) 0.85% for 2024; and (5) 0.90% for 2025 and suspends the solvency surcharge for 2021 to 2025. From February 8, 2021 until May 31, 2026, the 10% Voluntary Contribution Program (VCP) surcharge is not charged and the VCP payment deadline is extended to March 31. The minimum amount of a voluntary contribution must result in a recomputed benefit ratio at least two rate classes lower than the original rate class; and only employers who have moved up at least eight rate classes may use the program.
Washington State SB 5478
New Legislation creates the Unemployment Insurance (UI) Relief Account. The UI Relief Account may only be used for reimbursing the unemployment compensation fund for forgiven benefits. The Washington Employment Security Department (ESD) is required to determine the forgiven benefits for approved employers to be reimbursed by the UI Relief account rather than charged against an employer's experience rating account. ESD must transfer from the UI Relief account to the unemployment compensation fund an amount equal to the forgiven benefits. The legislation identifies employers for four categories.
Category 1 employers are contributing employers who had 20 or fewer employees as of the 4th quarter of 2020 whose experience rating increased by three or more rate classes from 2021 to 2022, and belong to specified North American Industry Classification System (NAICS) codes.
Category 2 employers are contributing employers of any size whose experience rating increased by three or more rate classes from 2021 to 2022, and belong to specified North American Industry Classification System (NAICS) codes.
Category 3 employers are contributing employers who had 20 or fewer employees as of the 4th quarter of 2020, had an experience rating that has increased by four or more rate classes from rate year 2021 to rate year 2022; and do not meet the definitions of categories 1 or 2.
Category 4 employers are contributing employers who had more than 20 employees, but fewer than 5,000 as of the 4th quarter of 2020, had an experience rating that has increased by four or more rate classes from rate year 2021 to rate year 2022; and do not meet the definitions of categories 1, 2, or 3.
For Category 1 and 2 employers, approved benefits are benefits paid to employees during the fiscal year ending June 30, 2021, not to exceed an amount that would reduce the employer's rate class increase to no more than a two-rate class increase.
For Category 3 and 4 employers, approved benefits are the benefits paid to employees during the fiscal year ending June 30, 2021, not to exceed an amount that would reduce the employer's rate class increase to no more than a three-rate class increase. By September 1 of each year, the ESD will identify delinquent employers who have not entered into an ESD-approved deferred payment contract. The ESD must notify employers of the availability of deferred payment contracts and provide assistance in entering such contracts. Relief expires July 30, 2022.
Washington State Announcement Relating to 2022 Wage Base
The Washington Employment Security Department has announced that the taxable wage base for unemployment tax purposes will increase from $56,500 to $62,500 in 2022 due to a 10.1% increase in the average annual wage in 2020.
Wisconsin AB 406
This legislation locks unemployment tax rate Schedule D in effect through 2023. Basic contribution rates for Schedule D range from 0% to 10.7%. Schedule D is the lowest contribution rate schedule. Typically, the unemployment tax rate schedule depends on the level of the state's unemployment trust fund. This bill requires Schedule D be in effect regardless of the trust fund level as of June 30, 2021 and June 30, 2022. However, the bill provides that it applies only if the 2021-23 budget bill, as enacted, provides for transfers of $60,000,000 in each of fiscal years 2021-22 and 2022-23.
The COVID-19 pandemic has been severe and unprecedented. States are continuing to take actions to mitigate some of the financial hardship expected on employers in 2022 and beyond.
“Since the unemployment system is based on an insurance concept, employers will ultimately bear the financial burden associated with COVID-19.”
How states decide to address COVID-19 related benefits, rating calculations, surcharges, and taxable wage base limits, can have a direct impact on SUI tax rates in 2022 and beyond. With SUI tax costs anticipated to increase in the near-term, it is more important than ever for employers to take actions to help mitigate future increases, including:
Diligent adjudication of unemployment claims
Auditing of benefit charges and timely appealing those that appear improper
Reconciling SUI tax rates used to pay tax contributions with the most recently issued tax rate notices to ensure proper payment
Utilizing available state-specific rating strategies to lower SUI tax rates (e.g., voluntary contributions, joint account formation, negative write-off payments, payroll variation elections, etc.)
To keep up-to-date, please visit our COVID-19 Resources site which will be updated as new information becomes available. The site includes a 2022 Tax Guide intended to assist employers in identifying potential risks associated with increases in SUI tax costs from 2021 to 2022 (e.g., changes in minimum and maximum SUI tax rates, changes in wage bases, etc.).
Please reach out to your Equifax unemployment representative to help address potential SUI tax rate impacts from COVID-19. Not a current client? Please feel free to contact our Employment Tax Consulting Group with any questions.
Disclaimer: The information provided herein is subject to change. It is intended as general guidance and not intended to convey specific tax or legal advice. Equifax is not providing, and cannot provide, tax and legal advice. Before taking any actions, employers should consult with internal and/or external counsel.
Per correspondence from the Massachusetts Department of Unemployment Assistance to employers and third-party administrators dated July 15, 2021.
Per 2021 SUI Trust Fund Solvency Report issued by the U.S. Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services (April 2021).
Per SUI Tax Measures Report for 2020 issued by the U.S. Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services (April 2021).
Per data obtained from the TreasuryDirect site (a service offered by the U.S. Department of the Treasury Bureau of the Fiscal Service).
Per respective Unemployment Insurance Data Summary reports published by the U.S. Department of Labor.
Per IRC Section 3302 and related U.S. Treasury Regulations.
Per Comparison of State Unemployment Insurance Laws 2019 issued by the U.S. Department of Labor, Employment and Training Administration.
Recessionary period according to the Federal Reserve.
Total Unemployment Rate for December of each respective year per U.S. Department of Labor, Bureau of Labor Statistics. Net Trust Fund Balances per respective Unemployment Insurance Data Summary reports published by the U.S. Department of Labor.
Per Average Employer Contribution Rates by State issued by the U.S. Department of Labor. Net Trust Fund Balances per respective Unemployment Insurance Data Summary reports published by the U.S. Department of Labor.