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Josh Kendall

United States Department of Labor’s Unemployment Claims Report – Week Ending October 9, 2021

The Unemployment Insurance Weekly Claims report for the week ending October 9, 2021 has been released by the United States Department of Labor.

Week Ending 10/9 Prior Week
Seasonally adjusted initial claims: 293,000 326,000
4 week moving average: 344,250 344,000
Seasonally adjusted insured unemployment rate: 1.90% 2.00%
Seasonally adjusted insured unemployment number: 2,593,000 2,714,000
4-week moving average: 2,737,750 2,765,000
Number of unadjusted claims: 277,632 258,909
Unadjusted insured unemployment rate: 1.70% 1.70%
Unadjusted number claiming UI benefits: 2,252,670 2,391,433

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

Wisconsin Unemployment Tax Rates Hold Steady for 2022

The Wisconsin Department of Workforce Development announced that unemployment tax rates are unchanged for 2022.

Effective January 1, 2022, unemployment tax rates for experienced employers are to be determined with Schedule D, unchanged from 2021.  For experienced employers with a taxable payroll of less than $500,000 over the 12-month period ended June 30, 2021, rates are to range from zero to 12.00%.  For employers with taxable payroll of at least $500,000, rates are to range from 0.05% to 12.00%.  These rates include a solvency surtax.

For 2022, the standard tax rate for new employers with taxable payroll of less than $500,000 is to be 3.05%, and the rate for those with taxable payroll of at least $500,000 is to be 3.25%, unchanged from 2021.

For new construction employers with taxable payroll of less than $500,000, the unemployment tax rate is to be 2.50% for 2022, down from 2.90% in 2021.  For those with taxable payroll of at least $500,000, the tax rate is to be 2.70%, down from 3.10%.

Wisconsin’s unemployment-taxable wage base is to be $14,000 in 2022, unchanged from 2021.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions, please do not hesitate to contact us or visit our website for the latest news and updates.

Social Security Wage Base Rises to $147,000 for 2022

The Social Security (Old-Age, Survivors, and Disability Insurance) taxable wage base is to increase to $147,000 for 2022, up from $142,800 for 2021, the Social Security Administration announced October 11, 2021.

The maximum 2022 Social Security component of the Federal Insurance Contributions Act tax payable by each employee is $9,114, which is 6.20% of the taxable wage base, up from $8,853.60 for 2021.  Employers match the employee amount with an equal contribution.

The Medicare (Hospital Insurance) tax rate remains 1.45% and is applicable to all wages paid during the year.  An additional Medicare tax of 0.90% applies to individuals with annual earned income of more than $200,000, and $250,000 for married couples filing jointly.  While employers are required to pay a matching 1.45% portion of the standard Medicare tax, employers are not required to pay a matching 0.90% portion of the additional Medicare tax.

For 2022, an employee who earns exactly $147,000 is subject to a total FICA tax (Social Security tax plus Medicare tax) of $11,245.50 ($9,114 + $2,131.50), up from $10,924.20 for 2021.

Employees are to earn one credit for each $1,510 of earnings paid in 2022, up from $1,470 in 2021.  Employees may earn a maximum of four credits in a year.  Those who receive the maximum wages taxable under Social Security in any year also receive four coverage credits.  Employees must be credited with a certain amount of work earned under Social Security to qualify for benefits.

The Social Security earnings limit for workers who reach full retirement age increases to $51,960 in 2022, up from $50.520 in 2021.  The earnings limit applies only to workers who retire in the year they reach retirement age.  After earnings reach this limit, $1 in benefits is withheld for every $3 in earnings exceeding the limit only in those months preceding the month full retirement age is reached.  There is no limit on earnings from the full retirement-age month and later.

The earnings limit for workers who retire before reaching full retirement age increases to $19,560 in 2022, compared with $18,960 in 2021. One dollar in benefits is to be withheld for every $2 in earnings that exceed this limit.

The SSA also said a cost-of-living increase of 5.90% is to take effect for 2022, compared with 1.30% in 2021, affecting several thresholds for benefits and coverage.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending October 2, 2021

The Unemployment Insurance Weekly Claims report for the week ending October 2, 2021 has been released by the United States Department of Labor.

Week Ending 10/2 Prior Week
Seasonally adjusted initial claims: 326,000 362,000
4 week moving average: 344,000 340,000
Seasonally adjusted insured unemployment rate: 2.00% 2.00%
Seasonally adjusted insured unemployment number: 2,714,000 2,802,000
4-week moving average: 2,765,000 2,797,250
Number of unadjusted claims: 258,909 298,255
Unadjusted insured unemployment rate: 1.70% 1.80%
Unadjusted number claiming UI benefits: 2,391,433 2,460,965

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

United States Department of Labor’s Unemployment Claims Report – Week Ending September 25, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 25, 2021 has been released by the United States Department of Labor.

Week Ending 9/25 Prior Week
Seasonally adjusted initial claims: 362,000 351,000
4 week moving average: 340,000 335,750
Seasonally adjusted insured unemployment rate: 2.00% 2.10%
Seasonally adjusted insured unemployment number: 2,802,000 2,845,000
4-week moving average: 2,797,250 2,804,000
Number of unadjusted claims: 298,255 306,209
Unadjusted insured unemployment rate: 1.80% 1.80%
Unadjusted number claiming UI benefits: 2,460,965 2,534,759

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

United States Department of Labor’s Unemployment Claims Report – Week Ending September 18, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 18, 2021 has been released by the United States Department of Labor.

Week Ending 9/18 Prior Week
Seasonally adjusted initial claims: 351,000 332,000
4 week moving average: 335,750 335,750
Seasonally adjusted insured unemployment rate: 2.10% 1.90%
Seasonally adjusted insured unemployment number: 2,845,000 2,665,000
4-week moving average: 2,804,000 2,807,500
Number of unadjusted claims: 306,209 262,619
Unadjusted insured unemployment rate: 1.80% 1.70%
Unadjusted number claiming UI benefits: 2,534,759 2,328,822

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending September 11, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 11, 2021 has been released by the United States Department of Labor.

Week Ending 9/11 Prior Week
Seasonally adjusted initial claims: 332,000 310,000
4 week moving average: 335,750 339,500
Seasonally adjusted insured unemployment rate: 1.90% 2.00%
Seasonally adjusted insured unemployment number: 2,665,000 2,783,000
4-week moving average: 2,807,500 2,840,250
Number of unadjusted claims: 262,619 284,287
Unadjusted insured unemployment rate: 1.70% 1.90%
Unadjusted number claiming UI benefits: 2,328,822 2,600,083

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending September 4, 2021

The Unemployment Insurance Weekly Claims report for the week ending September 4, 2021 has been released by the United States Department of Labor.

Week Ending 9/4 Prior Week
Seasonally adjusted initial claims: 310,000 340,000
4 week moving average: 339,500 355,000
Seasonally adjusted insured unemployment rate: 2.00% 2.00%
Seasonally adjusted insured unemployment number: 2,783,000 2,748,000
4-week moving average: 2,840,250 2,855,000
Number of unadjusted claims: 284,287 287,751
Unadjusted insured unemployment rate: 1.90% 1.90%
Unadjusted number claiming UI benefits: 2,600,083 2,617,062

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

United States Department of Labor’s Unemployment Claims Report – Week Ending August 28, 2021

The Unemployment Insurance Weekly Claims report for the week ending August 28, 2021 has been released by the United States Department of Labor.

Week Ending 8/28 Prior Week
Seasonally adjusted initial claims: 340,000 353,000
4 week moving average: 355,000 366,500
Seasonally adjusted insured unemployment rate: 2.00% 2.10%
Seasonally adjusted insured unemployment number: 2,748,000 2,862,000
4-week moving average: 2,855,000 2,901,500
Number of unadjusted claims: 287,751 297,765
Unadjusted insured unemployment rate: 1.90% 2.00%
Unadjusted number claiming UI benefits: 2,617,062 2,763,176

The full news release report can be downloaded here.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

 

COVID-19 Impact on 2022 Tax Rates and Beyond

Episode One – 9/7/2021

Kicking off our September series regarding the impact of COVID-19 on state unemployment tax rates for 2022, we want to take this opportunity to set the table for what you should expect from this series.

With the unprecedented claims volumes over the past year, state unemployment trust funds have taken a big hit.  Both the federal government and states are doing everything they can to minimize the impact to employers and trying to defer any increases in taxes so employers can invest in recovery efforts.  But at some point, in time, the states will need to take actions to replenish the depleted trust funds in each state.

In most years, state unemployment taxes collected exceed the benefits paid, this obviously was not the case in 2020.  As a result, states will need to find ways to replenish the trust fund while minimizing the impact to employers.

When states encounter a short fall in their trust fund, they now have four options:

  • They can reduce unemployment benefits paid to claimants
  • They can borrow money from the Federal Unemployment Tax (FUTA) Reserves to boost their trust fund balances
  • They can use emergency funding from the American Recovery Plan Act to restore Trust Fund balances to pre-pandemic levels
  • They can increase taxes on employers

All of these options can have an impact on employers, and we suspect that states will be employing one or more of these tactics in the next few years to address the depletion of the state trust funds due to the COVID-19 pandemic.

This is Episode One of a four-part series during the month of September that will delve into each of these options, so you are prepared for 2022 unemployment tax rates.  Tune in next Tuesday (9/14) for Episode 2!

Episode Two – 9/14/2021

As we discussed in Episode 1 last week, state unemployment agencies have four options when they encounter a short fall in their state unemployment trust fund.  Three of those four options will be covered in this week’s Episode:

  • Reducing Unemployment Benefits Paid to Claimants
  • Title XII Loans from the Federal Unemployment Tax (FUTA) Reserves
  • Emergency Funds from the American Recovery Plan Act

Reducing Unemployment Benefits Paid to Claimants

When states are facing a short fall in their trust fund, they have the option to reduce the benefits that are paid to claimants to mitigate the impact of additional claims on the overall trust fund.  While a majority of states will pay out benefits for 26 weeks, some states set the duration of benefits for claimants based on the solvency of the Trust Fund or the state’s overall unemployment rate.    For example, Tennessee recently enacted legislation that will cap the number of weeks a claimant can collect benefits based on the state’s overall unemployment rate. Benefits collected could be as low as 12 weeks and up to 20 weeks if unemployment in the state balloons to over 9%.  Based on historic unemployment rates in TN, most claimants would see their benefits stopped after 13 or 14 weeks.  Lawmakers estimate that this move will save the state up to $24 million per year.

Title XII Loans from the Federal Unemployment Tax (FUTA) Reserves

The Federal Government has had a program in place for states to borrow funds when their trust funds reach certain levels. These Title XII loans are available to states in need and these loans have to be paid back in full or the FUTA taxes paid in that state are offset.  Currently a number of states have an outstanding balance that must be paid by November 10, 2022 in order to avoid a reduction in the employer FUTA credit.  This credit reduction would increase the FUTA taxes paid per employee for 2022 from $42 to $63. For every year this balance is outstanding, employers can pay an additional $21 per employee in FUTA tax. This is another situation that we are monitoring as it could have an impact on your taxes in 2022 and beyond.

Emergency Funds from the American Recovery Plan Act

The American Recovery Plan Act has provided another option for states with $350B in emergency funding provided to state, local, territorial, and tribal governments to directly address negative economic impacts of the COVID-19 public health emergency.  States can allocate their share of the money into 15 different categories, one of those being deposits to the state UI Trust Funds to restore their trust fund balances to pre-pandemic levels.

This is potentially good news for employers.  If the states elect to use some of the allocated funds to replenish their trust funds or pay back the advances on the Title XII loans, the impact on tax rates can either be minimized or eliminated altogether.  Twelve states have enacted legislation to distribute a portion of their ARPA allocation to replenishing the Trust Funds/Title XII Advancements.  The exact level of impact will vary from state to state as some are able to allocate sufficient funds to bring their trust fund back to pre-pandemic levels while others can only make a dent in the deficit.

That’s all for this episode.  Looking forward to next week, we will discuss in detail the fourth option for states to replenish the trust fund and arguably the most important option for employers: Increasing Taxes on Employers.  Tune in next Tuesday (9/21) for Episode 3!

Episode Three – 9/21/2021

In Episode 2 last week, we discussed three of the four options that state agencies have to replenish depleted state unemployment trust funds.  In this Episode, we will cover the fourth option and the most significant one affecting employers: Increasing Taxes on Employers.

The most common method for building up the state’s trust fund is to adjust the amount of taxes paid by employers.  States will accomplish this by:

  • Raising the state’s taxable wage base
  • Increase the factors used to set the tax rates (rate tables)
  • Add surcharges and other assessments to build up the trust funds

Taxable Wage Bases – are they where they should be?

The state trust funds are financed through employer payroll taxes and the taxable wage base is the portion of each worker’s wages that are subject to UI taxes.  States are required to have a wage base that is at least as high as the federal taxable wage base of $7,000, which has not significantly increased in nearly a century. There is talk in Congress that a federal policy that raises the minimum unemployment insurance wage base to at least half of the Social Security wage base (currently $142,800) would improve the solvency of the UI system and allow states to have a greater role in financing adequate benefits in the next economic downturn, according to Andrew Stettner, Senior Fellow at The Century Foundation.

In simple terms, UI benefits are based on a rate that currently averages a payout of nearly 50 percent of a worker’s wages, but taxes can only be charged on 25 percent of a worker’s wages. It is not surprising that the U.S. Department of Labor found that most states in 2020 were charging below the minimum financing rate needed to recover benefits and build a trust fund.

States that are more likely to have solvent trust funds or recover quicker are the ones that index their taxable wage bases to the average wages in the state.  States like WA, ID and NJ are among the 19 states that use this type of indexing and are among the states with the highest taxable wage bases in the US.  We expect that if a federal mandated taxable wage base increase does not occur, states will increase their taxable wage bases for the next few years to bring more money into the trust funds.  AZ, CO, CT, and NY have already announced taxable wage base hikes for 2023 and beyond.

State 2021 Taxable Wage Base 2022 Taxable Wage Base Percentage Increase
CO $13,600 $17,000 25%
IA $32,400 $34,800 7%
NV $33,400 $36,600 9.5%
NY $11,800 $12,000 1%
WA $56,500 $62,500 10%

Increasing Tax Rate Tables

In a period of depleting trust funds, it is common for states to increase their tax rates to generate more revenue and thus, replenish their trust funds.  This is obviously not a popular method for employers as it increases their state unemployment expenses via higher taxes.  With the COVID-19 pandemic accelerating the exhaustion of these trust funds, we expect to see states resort to this moving forward.

To date, we have confirmed that at least 2 states whose tax rates are effective on a fiscal year basis (July 1 thru June 30) will be increasing their tax rate tables (New Jersey & Vermont).  We fully expect this trend to continue into the fall and winter as the remaining states are calculating tax rates and issuing notices.

One interesting point to mention is that most states have indexed their tax rate schedules to correlate with the current level of the state trust fund.  This is similar to the indexing of taxable wages to the average wage we mentioned when discussing taxable wage limitations.  By having the tax rate schedule indexed to the trust fund level, it creates an economic trigger that drive these factors up or down rather than arbitrarily increasing and decreasing them via political or public opinion.

Special Assessments

Some states are trying to build back their Trust Fund balances by assessing a special COVID assessment or other assessments that are triggered when certain conditions are met in the state’s Trust Fund. For example:

  • Massachusetts created a COVID-19 Recovery account and moved all COVID related charges to that account. The state will charge all experience rated employers an assessment equal to 10.5% of their corresponding UI rate beginning January 1, 2021. This assessment ranges from $14.85 (0.099%) to $226.35 (1.509%) additional per employee.
  • Minnesota applies a 4% assessment to the amount that is due for a Federal Loan Interest Assessment to pay the interest on the Title XII loans that MN took to replenish their trust fund balance when it reached a certain level.

Many states took actions to keep rates low in 2021 to aid in the recovery efforts but the Trust Fund Balances will need to be replenished.  We expect to see more states use Special Assessments going forward to evenly distribute the replenishment of the Trust Fund balances.

That’s the end of the third episode!  As we wrap up our September series next week, we will summarize this information and answer the lingering question: What can I do as an employer?  Tune in next Tuesday (9/28) for the series finale!

Episode Four – 9/28/21

Welcome to the finale of our September series regarding the impact of COVID-19 on state unemployment tax rates for 2022.  I hope you have enjoyed the first three episodes and our goal this week is to provide a summary of this topic and answer the age-old question: What can I do as an employer?

As we discussed in Episodes 1-3, state unemployment agencies have four options when they encounter a short fall in their state unemployment trust fund.  With respect to these options, here are the main points for each you need to know:

  • Reducing Unemployment Benefits Paid to Claimants
    • Most states will pay out benefits for 26 weeks, but some states set the duration of benefits for claimants based on the solvency of the Trust Fund or the state’s overall unemployment rate. For example, Tennessee recently enacted legislation that will cap the number of weeks a claimant can collect benefits based on the state’s overall unemployment rate. Benefits collected could be as low as 12 weeks and up to 20 weeks if unemployment in the state balloons to over 9%. 
  • Title XII Loans from the Federal Unemployment Tax (FUTA) Reserves
    • Currently a number of states have an outstanding balance that must be paid by November 10, 2022 in order to avoid a reduction in the employer FUTA credit. This credit reduction would increase the FUTA taxes paid per employee for 2022 from $42 to $63. For every year this balance is outstanding, employers can pay an additional $21 per employee in FUTA tax.
  • Emergency Funds from the American Recovery Plan Act
    • The American Recovery Plan Act has provided $350B in emergency funding provided to state, local, territorial, and tribal governments to directly address negative economic impacts of the COVID-19 public health emergency. States can allocate their share of the money into 15 different categories, one of those being deposits to the state UI Trust Funds to restore their trust fund balances to pre-pandemic levels.  If the states elect to use some of the allocated funds to replenish their trust funds or pay back the advances on the Title XII loans, the impact on tax rates can either be minimized or eliminated altogether.  Twelve states have enacted legislation to distribute a portion of their ARPA allocation to replenishing the Trust Funds/Title XII Advancements.
  • Increasing Taxes on Employers
    • The most common method for building up the state’s trust fund is to adjust the amount of taxes paid by employers. States can accomplish this by raising the state’s taxable wage base, increasing the factors used to set the tax rates (rate tables), and/or adding surcharges and other assessments to build up the trust funds.  This option is the one that affects employers the most by directly increasing their unemployment tax expenses.  However, it is important to note that states that are more likely to have solvent trust funds or recover quicker during economic downturns are the ones that index their taxable wage bases to the average wages in the state and/or index their tax rate schedules to the level of the state trust fund.  By doing so, there are economic triggers that drive these factors up and down rather than arbitrarily increasing and decreasing them via political or public opinion. 

What can I do as an employer to minimize our tax expense? 

Despite having little control over the actions taken at the state level, there are ways that you can mitigate your tax costs.  Now, more than ever, partnering with Thomas & Company and providing timely and detailed responses to the initial claims can help you control your unemployment costs.  Taking advantage of Joint Accounts and Voluntary Contributions to reduce your tax rates is another way to reduce your tax liability.  For more information on how you can improve your program or take advantage of tax savings, contact me at jkendall@thomas-and-company.com.

As always, we will continue to monitor this situation and provide updates as they become available.  If there are any questions, please do not hesitate to contact us or visit our website for the latest news and updates.