CONNECTICUT – TAXABLE WAGE BASE INCREASE, TAX RATES ANNOUNCED
The Connecticut Department of Labor announced a series of unemployment tax related updates, effective January 1, 2025.
The 2025 taxable wage base in Connecticut will increase to $26,100, up from $25,000 in 2024. As a reminder, to help offset a portion of the short-term employer impact of the wage base increase, the state has put into place a charged rate reduction factor as part of the employer’s tax rate calculation over the next four years. For 2025, this charged rate reduction will be 1.269%.
Final contribution rates will range from 1.1% through 8.9%, while the new employer rate will now be 2.2%.
FEDERAL – FEDERAL UNEMPLOYMENT TAX ACT (FUTA) CREDIT REDUCTIONS
Federal Unemployment Taxes (FUTA) are paid by employers to fund the administration of the unemployment system at the State Unemployment Workforce agencies, fund a portion of extended benefits during periods of high unemployment, and to provide loans (Title XII Advances) to state agencies whose State Unemployment Trust Funds have become insolvent and are unable to continue paying benefits to unemployed individuals.
Going into 2024, California, New York and the Virgin Islands had outstanding Title XII balances for at least two consecutive years. As such, these jurisdictions were potentially subject to a reduction in their FUTA Credit for 2024, potentially increasing the FUTA rate from the standard net rate of 0.60% to 1.50% for California and New York, and to 4.80% for the Virgin Islands. The FUTA tax is paid on the first $7,000 each employee earns for the year.
While Connecticut had a federal loan balance going into the deadline, it was once again able to avoid credit reductions by paying off the balance of the loan prior to November 10. However, California, New York, and the Virgin Islands were unable to do so, resulting in further credit reductions.
Due to these credit reductions, employers in California and New York will be obligated to pay approximately $105 per employee (instead of the normal $42 per employee) and employers in the Virgin Islands will see FUTA tax continuing to increase to the historic high of approximately $336 per employee.
The final FUTA payment for 2024 that applies the FUTA rate (changed due to the reduction in the offset) is due by January 31, 2025.
