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Josh Kendall

United States Department of Labor’s Unemployment Claims Report – Week Ending April 10, 2021

The Unemployment Insurance Weekly Claims report for the week ending April 10, 2021 has been released by the United States Department of Labor:

Week Ending 4/10 Prior Week
Seasonally adjusted initial claims: 576,000 719,000
4 week moving average: 683,000 719,000
Seasonally adjusted insured unemployment rate: 2.70% 2.70%
Seasonally adjusted insured unemployment number: 3,731,000 3,794,000
4-week moving average: 3,763,000 3,978,500
Number of unadjusted claims: 612,919 714,433
Unadjusted insured unemployment rate: 2.80% 2.90%
Unadjusted number claiming UI benefits: 3,936,696 4,142,940

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 at www.thomas-and-company.com.

 

Kentucky Passes Legislation Retroactively Lowering 2021 Unemployment Tax Rates

The Kentucky House of Representatives has passed House Bill 413, retroactively lowering 2021 unemployment tax rates for all employers in the state.

House Bill 413 was introduced on February 9, 2021 and the bill received full support from the Economic Development & Workforce Investment Committee as well as employers within the state who have seen a drastic increase in their state unemployment tax rates from 2020 to 2021.

HB 413 freezes the UI tax rate schedule at Schedule A for 2021; a decrease from the originally assigned Schedule E.  This allows rates to return to 2020 levels providing relief to all experience-rated employers.  Due to this change, tax rates will range from 0.30% to 9.00%.  The new-employer tax rate will remain at 2.70% for 2021.

Additionally, HB 413 will decrease the 2021 unemployment taxable wage base from $11,100 to $10,800.

One issue remains: Will the Kentucky Division of Unemployment Insurance be able to generate and issue revised 2021 tax rate notices for all employer prior to the first quarter 2021 filing and payment deadline of April 30, 2021?  In speaking with representatives at the Division, the expectation is to send out these revisions “in the next couple of weeks”.  In the absence of a revised tax rate notice reflecting the employer’s newly lowered rate for 2021, the Division has provided guidance indicating that employers should pay at their originally assigned rate under Schedule E.  That will generate an overpayment on the employer’s account and at that point, the employer can either use that overpayment toward future tax liabilities or a refund can be requested via the agency website.

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 at www.thomas-and-company.com.

North Carolina Passes Legislation Retroactively Lowering 2021 Unemployment Tax Rates

The North Carolina Senate has passed Senate Bill 114, retroactively lowering 2021 unemployment tax rates for all employers in the state.

Senate Bill 114 was introduced in the February 17, 2021 General Assembly Session by the North Carolina Unemployment Oversight Committee.  This bill received full support from the North Carolina Division of Employment Security as well as employers within the state who have seen a drastic increase in their state unemployment tax rates from 2020 to 2021.  All this even though the NC DES excluded COVID-related benefit charges from the 2021 tax rate calculation.

SB 114 reduces the base contribution rate from 2.40% to 1.90% thus causing rates to fall back to 2020, pre-pandemic levels.  This may result in an unemployment insurance tax rate reduction of up to 0.50% for each active, experience-rated employer.  The North Carolina Department of Employment Security has begun recalculating tax rate based on this change and the target date of issuance is April 12, 2021.  Important items to note are as follows:

  • Employers who are affected by this change will receive a revised 2021 Tax Rate Notice by mail. For our clients, those revisions will be mailed to our office and we will send them out to you upon review and verification.
  • Employers whose tax rate for 2021 is already at the minimum rate allowed by law (0.06%) will not be affected by this change and will not receive a revised notice.
  • Employers whose tax rate for 2021 is already at the maximum rate allowed by law (5.76%) may or may not receive a rate reduction, depending on individual recalculation results.
  • Employers who have the new-employer rate (1.00%) will not be affected by this change and will not receive a revised notice.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

New York Unemployment Tax Rates Set to Rise in 2021

The New York Department of Labor announced that employers should expect unemployment tax rates to be higher in 2021 than in 2020.

Effective January 1, 2021, unemployment tax rates will range from 2.10% to 9.90% for experience-rated employers. Rates includes basic tax rates ranging from 1.50% to 8.90%, a subsidiary tax with rates ranging from 0.525% to 0.925%, and a reemployment service fund contribution rate of 0.075%. In comparison, tax rates in 2020 ranged from 0.60% to 7.90% for experience-rated employers.

The total tax rate for new employers is 4.10% for 2021, up from 3.20% in 2020.

Tax rates are determined with the schedule in effect when the size-of-fund index is less than zero.

New York’s unemployment taxable wage base is $11,800 for 2021, up from $11,600 in 2020.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Budgeting for FUTA (Federal Unemployment Tax) for 2021 and Beyond

The federal unemployment tax rate for employers has become a moving target, making budgeting for this expense more difficult. Your FUTA tax payments for 2021 are not a good predictor of your 2022 liability, which will be higher for most multi-state companies.

The problem is that federal loans to the state UI trust funds can cause the net FUTA tax rate to increase for employers in the borrowing states.  The increases are in annual increments of 0.30% (on a $7,000 taxable wage base). Such an increase is referred to as a “credit reduction” because the 5.40% credit for state UI taxes paid is reduced.

The “normal” net FUTA tax rate of 0.60% (0.80% prior to July 1, 2011) is arrived at by subtracting the 5.40% credit for state UI taxes paid from the gross FUTA tax rate of 6.00%.  Given enough time, the credit reductions could theoretically cause an employer’s net FUTA tax rate to increase from 0.60% all the way to 6.00% as the credit is gradually reduced to zero.  The tax revenue generated by the credit reductions is credited to the state’s UI trust fund and reduces the state’s loan balance.

A credit reduction can be removed for a given calendar year if a state repays its outstanding long-term loan by November 10 of that calendar year.  A credit reduction can also be avoided for a calendar year (as in South Carolina in 2011) if a state takes certain actions to restore the solvency of its UI trust fund.  Further, a credit reduction can be capped (at no less than 0.60%) if certain conditions are met.

As of March 5, 2021, nineteen state unemployment insurance trust funds (plus the Virgin Islands) had outstanding federal loans that remain unpaid under Title XII of the Social Security Act. The total amount outstanding is $51.22 billion. See the link to the US Treasury website at Government – Title XII Advance Activities Schedule (treasurydirect.gov).

Employers in the following states and jurisdictions are at risk of increasing FUTA taxes as early as 2022:

California Illinois Minnesota Ohio
Colorado Kentucky Nevada Pennsylvania
Connecticut Louisiana New Jersey Texas
Georgia Maryland New Mexico Virgin Islands*
Hawaii Massachusetts New York West Virginia

*The Virgin Islands have been subject to FUTA credit reductions for several years now

Because these states had an outstanding balance as of January 1, 2021 employers with employment in the states may be subject to an increase in Federal Unemployment Tax for 2022 if a loan amount remains outstanding as of January 1, 2022 and is not repaid in full by November 10, 2022.

Interest on Title XII loans was waived through December of 2020 under temporary law pursuant to the Families First Coronavirus Response Act of 2020 and the waiver was extended through March 14, 2021 by the Consolidated Appropriations Act of 2021.  Unless there is further federal legislation extending the waiver, states will be obligated to pay the interest from sources other than regular employer UI contributions.  States should budget for payment of this interest from other sources.

The budgeting problem is exacerbated by the fact that state UI agencies have until November 10 to repay their long-term loan and avoid a credit reduction for the calendar year in which the loan balance is repaid.  No official notification of credit reductions is provided until after November 10.  By that time employers have already submitted three quarterly FUTA deposits. Any shortfall must be paid with the final deposit for the calendar year (due January 31 of the succeeding year).

As we progress through 2021, the best budgeting tool available is located at https://oui.doleta.gov/unemploy/futa_credit.asp.  The chart available is updated regularly but you should bear in mind that one or more of the nineteen at-risk states (plus the Virgin Islands) may repay their loan or qualify for a credit reduction avoidance.

We will continuously monitor this situation throughout the year and provide regular updates as they become available.  As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

 

Hawaii Revises 2021 Unemployment Tax Rates

In December 2020, we reported that employer tax rates were set to increase in Hawaii for 2021.  However, due to a bill signed on Mach 2, 2021 by Governor David Ige, Hawaii’s employers will not see as steep an increase as originally reported.

Under the measure (H.B. 1278), unemployment tax rates are to be determined with Schedule D and are to range from 0.20% to 5.80%.  The provision is retroactively effective to January 1, 2021.

Schedule D also is to be in effect for 2022, regardless of the solvency of the state unemployment trust fund.

Tax costs will still be higher in 2021 than in 2020 because rates for 2020 were determined with Schedule C, which generally has lower rates than Schedule D.  However, tax rates for 2021 initially were to be determined with Schedule H, the state’s highest unemployment tax rate schedule, for which rates range from 2.40% to 6.60%.

Additionally, for 2021 and 2022, unemployment benefit claims related to COVID-19 are to be excluded from the calculation of employers’ unemployment tax rates, which will also contribute to lower rates overall.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Texas Delays 2021 Unemployment Tax Rate Calculations

As the Texas Workforce Commission, Texas Legislature, and Governor of Texas explore opportunities to keep 2021 unemployment tax rates as low as possible for Texas employers, the issuance of the 2021 unemployment tax rate notices has been delayed to July.

Tax obligations are not to be suspended and employers will be notified of unemployment tax payment options in effect until rates for 2021 are finalized in the next few weeks. Below is the reporting and payment schedule set for 2021:

 

 

 

One other important change for 2021 is that voluntary contributions will not be in effect for 2021. Governor Abbott has suspended Section 204.048 of the Texas Labor Code, which set deadlines for a small subset of employers who make voluntary contributions into the UI tax system. The Commissioners in turn aligned TWC Policy with that decision.

Texas generally calculates an employer’s unemployment tax rate in effect for a calendar year based on benefit claims and payroll data as of September 30th of the preceding year.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Legislation Introduced Retroactively Lowering North Carolina 2021 Unemployment Tax Rates

The North Carolina Unemployment Insurance Oversight Committee has introduced a bill to retroactively lower 2021 unemployment tax rates for all employers in the state.

Senate Bill DRS35052 was introduced in the February 17, 2021 General Assembly Session and is still in draft form at the moment.  However, this bill is getting full support from the North Carolina Division of Employment Security as well as employers within the state who have seen a drastic increase in their state unemployment tax rates from 2020 to 2021.  All this even though the NC DES excluded COVID-related benefit charges from the 2021 tax rate calculation.

If passed, SB DRS35052 will reduce the base contribution rate from 2.40% to 1.90% thus causing rates to fall back to 2020, pre-pandemic levels.  Although this bill is still in its infancy, the NC DES has reportedly begun internal testing in order to issue revised, retroactive tax rate calculations upon its passage.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Maryland Unemployment Tax Rate Calculations to Exclude COVID-19 Claims

The Maryland Department of Labor, Licensing & Regulation announced that unemployment tax rate calculations for 2021 are to exclude unemployment benefits claimed during the COVID-19 outbreak in a measure signed February 15, 2021 by Governor Larry Hogan.

Under the measure (SB 496), the computation date July 1, 2019, is to be used to determine an employer’s unemployment benefit ratio if using that date would result in a lower benefit ratio and a lower unemployment tax rate.  The provision takes effect starting with unemployment tax rate calculations for 2022 and expires June 30, 2025.

The adjustment would effectively exclude unemployment benefit claims data from fiscal years affected by the pandemic and prevent future tax rates from increasing because of those claims.  Tax rates for 2022 are to be determined using the same benefit ratios used to calculate tax rates for 2020.

The July 1, 2019 computation date also was used to determine tax rates for 2021 to exclude benefit data from fiscal 2020 and to allow employers to maintain the same benefit ratio for 2021 as in 2020, under an executive order signed December 10, 2020.

The measure also allows employers with fewer than 50 employees to defer sending unemployment tax and wage reports for the first, second, and third quarters of 2021, until the deadline for fourth-quarter reports, which is Jan. 31, 2022.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Bipartisan Bill Introduced to Make the Work Opportunity Tax Credit Program Permanent

On February 8, 2021, a bipartisan bill named the Work Opportunity Tax Credit & Jobs Act was introduced by U.S. Senators Rob Portman (R-OH), Ben Cardin (D-MD), Roy Blunt (R-MO), Sherrod Brown (D-OH), Bill Cassidy (R-LA), and Bob Menendez (D-NJ) which would strengthen federal efforts to connect long-term unemployed with jobs.

The current program legislation is set to expire on December 31, 2025, but this bill would make an employer tax credit a permanent solution for those who hire individuals who face barriers to employment.

“Because of the ongoing COVID-19 pandemic, now more than ever individuals who are in the shadows are struggling to find meaningful employment”, said Senator Portman.  “Encouraging employers to hire those who have the most trouble finding work is good policy, and wile securing a five-year extension last year was a positive step, it’s critical that we make the Work Opportunity Tax Credit permanent.”

“The Work Opportunity Tax Credit is one of our best tools to promote the employment of those who find it hardest to get a job. But to be effective employers need the certainty a permanent extension provides and tens of thousands of families in Maryland need to know we have their back from now on,” said Senator Cardin. “That’s why we need to invest in this effective program permanently, to ensure those who need the most help are getting it.”

The Work Opportunity Tax Credit Program provides an employer tax credit of between $1,200 and $9,600 per employee for hiring and retaining individuals that are part of certain targeted groups representing populations that have a difficult time finding work, or are often out of the labor force altogether. The credit amount is based on the qualified wages paid to those employees within the targeted groups including veterans, long-term unemployed, ex-felons, the disabled, summer youth employees, as well as Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program, and Supplemental Security Income recipients.

“The COVID pandemic has hammered our nation’s economy, leaving millions out of work and small businesses struggling to survive,” said Senator Bob Menendez. “As we begin to recover from this crisis and build back an economy that works for all Americans, making the Work Opportunity Tax Credit permanent will provide certainty for employers to hire the long-term unemployed, veterans, and others who’ve been locked out of the workforce. We have both an economic interest and moral obligation to ensure that every individual has a fair shot in our economy to work hard, support a family and contribute to our society. Making this tax credit permanent is the smart and right thing to do.”

Last week, the U.S. Bureau of Labor Statistics reported that employers added 196,000 jobs in March, and the unemployment rate remained unchanged at 3.8 percent. However, the number of long-term unemployed people (those who were without jobs for 27 weeks or more) was essentially unchanged at 1.3 million in March and accounted for 21.1 percent of the unemployed.

“It can be difficult for Americans to find a job when they’re out of the work force,” said Dr. Cassidy. “This Work Opportunity Tax Credit permanency bill ensures those struggling to find work are helped by continuing to incentivize businesses to hire them.”

The bill has been sent to the Senate Finance Committee for further review and we are hopeful this permanent solution is underway.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.