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COVID-19

COVID-19 and UI Benefits

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.

The End of Federal Pandemic Benefits

Summer is winding down and with the end of summer comes the end of the Pandemic Emergency Unemployment Assistance (PEUC) for many unemployed Americans. The CARES Act provided a lifeline for unemployed Americans by providing 13 weeks of federally funded PEUC benefits to those who had already exhausted their benefits at the state level, plus an additional 13-20 weeks of federally funded Extended Benefits in states that continued to have high levels on unemployment.  These programs, combined with the regular state unemployment benefits, can provide up to 53 weeks of benefits.

On September 6, 2021, the Federal PEUC benefits (additional $300/week) and the PUA benefits that covered individuals who were not eligible for or had exhausted their regular benefits will expire in the states that have not opted out of the program early.

What Does This Mean for Me as an Employer?

Once the program ends, the burden to continue benefits is on the employee.  As employers, the only actions that you need to take are to report those individuals who refuse an offer of work and some states are asking employers to report individuals who fail to show up for scheduled interviews.   Taking these steps will aid the state unemployment agencies in making sure that only those that are eligible still receive benefits.

One area to watch is fraudulent claims. There is concern that once the Pandemic Unemployment Assistance program ends, we may see another spike in fraud claims as cybercriminals shift their focus from the benefits paid to gig workers (PUA) to the traditional unemployment programs.  According to a recent report by Bloomberg Law “Fraud rings look for easy targets that produce revenue with minimal risk,” said Douglas Holmes, president of UWC – Strategic Services on Unemployment & Workers’ Compensation, an advocacy organization for businesses. “When PUA is no longer on the board, they’ll look to other places to exploit. They’ll look to regular UI.”

Employers should pay close attention to benefit claim notices, report those that are suspicious, and alert workers that they might be victims of identity theft.  Thomas & Company should be alerted to any potential fraud claims so that we can audit the unemployment benefit charge statements to protest any questionable claims. As always, we post the most up to date information on our UI Fraud Support page https://support.thomas-and-company.com/hc/en-us/categories/1500000053821-CLAIMS-FRAUD

How will my employees that are still unemployed be impacted?

You may want to be prepared to answer any questions that come from your employees who are still unemployed.  We have outlined the changes that have taken place, or will be coming, below.

What benefits will end:

  • The Pandemic Unemployment Assistance (PUA) program for those who traditionally did not qualify for regular state benefits, such as self-employed and independent contractors, or exhausted all other benefits
  • Pandemic Emergency Unemployment Compensation Program (PEUC) that extended regular state benefits
  • Federal Pandemic Unemployment Compensation Program (FPUC), which provided an additional $300 weekly benefit payment.

PUA benefits were available for those claimants who:

  • Lost their jobs or self-employment because of the COVID-19 pandemic
  • Did not earn enough wages in the 18 months before they applied for benefits to qualify for a regular unemployment benefits claim
  • Exhausted their regular unemployment, Pandemic Emergency Unemployment Compensation (PEUC) and State Extended Benefits (EB) or did not qualify for these claims

If your employees were receiving PUA and FPUC federal benefits, once the program expires in the state, they will not receive any further pandemic program benefit payments after the expiration date, even if they had a balance remaining on their claim.

If your employee had been receiving PUA benefits, they will still be required to provide proof of employment, self-employment, or prospective employment or self-employment, even though the pandemic claims program has ended. Requests for proof of employment must be provided by the deadline indicated on the notice. This requirement remains in effect even after the PUA program ended. If they fail to provide proof, they may have to repay all PUA benefits they received from December 27, 2020, or from their initial PUA claim date.

States will also begin enforcing the work search requirements to continue benefits.  This provision was waived during the pandemic to limit the spread of COVID-19. Pre-pandemic, the requirements for unemployment were being able and available for work and actively seeking work.  States will require those still receiving benefits to prove that they are actively seeking work by logging or reporting their work search activities, registering with the state’s re-employment services, or taking advantage of other re-employment options available in the state. Failure to report adequate re-employment activities can lead to benefits being denied.

On Thursday, August 19th, Labor and Treasury Department officials announced that states can pay benefits past the September 6th expiration date by using leftover funds allocated to them through the American Rescue Plan. “Now, in states where a more gradual wind down of income support for unemployed workers makes sense based on local economic conditions, American Rescue Plan funds can be activated to cover the cost of providing assistance to unemployed workers beyond Sept. 6,” Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh wrote to Senate Finance Committee Chair Ron Wyden, D-Ore., and House Ways and Means Committee Chair Richard Neal, D-Mass.

Twenty-six states opted out of federal unemployment programs early, in June and July, to try pushing jobless workers back into the labor market. Four states — Alaska, Arizona, Florida, and Ohio — only ended the extra $300 a week and kept other federal benefits intact. And state judges in Indiana, Maryland and Arkansas reversed officials’ withdrawal, reinstating the benefits.

States do not have to meet specific economic conditions to offer unemployment assistance from the leftover funds.  We will continue to monitor the situation as the deadline draws near.  If any additional actions are needed as an employer, we will 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.

MANDATORY VACCINATION POLICIES AND ELIGIBILITY FOR UNEMPLOYMENT BENEFITS

Due to the recent nationwide spike in cases associated with the Delta Coronavirus variant, many employers are encouraging their employees to be vaccinated and an increasing number of workplaces are requiring vaccinations to remain employed.  As a result, Thomas & Company has received numerous inquiries regarding how State Workforce Agencies might rule on eligibility for unemployment benefits should an individual voluntarily resign due to this policy or is subject to discharge for refusal to comply with the policy.

In most states, unemployment benefits are paid to individuals who are out of work through no fault of their own.  In general, individuals who are discharged for misconduct, willfully violating company policies, or endangering the safety of the workplace would typically be determined ineligible for benefits.  Likewise, someone who voluntarily quit would need to prove they had “good cause connected to the work and that is attributable to the employer.”

Private employers are typically free to set conditions of employment as long as they do not violate existing state and federal laws.  There are currently 27 states that have legislation pending that would prohibit employers from mandating vaccinations or requiring proof of vaccination as a condition of employment.  If these bills are passed into law, this will have an impact on whether or not an individual is eligible for unemployment benefits if they resign or are discharged based on their vaccination status. For more information on the employer-mandated vaccine legislation, please refer to https://www.huschblackwell.com/newsandinsights/50-state-update-on-pending-legislation-pertaining-to-employer-mandated-vaccinations.

That said, State Workforce Agencies can update eligibility requirements such that, depending on the circumstances, may allow unemployment benefits in either case.  Most state agencies review each unemployment claim on a case-by-case basis and make its determination on eligibility dependent on the individual facts.

This remains an extremely fluid issue and, as always, Thomas & Company 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.

Virginia Unemployment Tax Rate Calculations to Exclude Pandemic Related Benefit Charges

The Virginia Employment Commission announced that unemployment tax rate calculations for 2022 are to exclude unemployment benefits related to the COVID-19 pandemic in a measure signed by Governor Ralph Northam on August 10, 2021.

Under the measure (H.B. 7001), unemployment benefits paid from April 1, 2020 through June 30, 2021 will not be charged to employers’ accounts for the purposes of computing the 2022 state unemployment tax rate.  Additionally, the bill states that 2022 unemployment tax rates may not exceed the 2021 rate assigned to a given employer.

H.B. 7001 also outlines plans for federal distributions received from the American Rescue Plan Act of 2021.  $73.6M in funds will be allocated to information technology modernization, call center improvements, security, and claims adjudication to better serve claimants and employers.  Another $862M is to be deposited to the Virginia Unemployment Trust Fund that is used to pay unemployment benefits.  This is especially pertinent Unemployment Trust Fund levels often dictate unemployment tax rate tables and additional surcharges.

No action is required by employers at this time.  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.

Massachusetts Revises 2021 Unemployment Tax Rates

The Massachusetts Department of Unemployment Assistance (“DUA”) has released revised 2021 unemployment tax rates for all employers.  In a letter to employers, the DUA announced that these revisions would be available on their website as of today and will reflect a decrease in the solvency assessment, which was a major factor in the original tax rate increases felt by employers in 2021.

Unemployment tax rates have been adjusted due to a decrease in the solvency assessment from 9.23% to 1.12% for 2021.  However, employers will now be assessed a new Covid-19 Recovery Assessment rate, which equals 10.50% of an employer’s unemployment tax rate and ranges from 0.099% to 1.509%.

The adjusted tax rates and recovery assessment rates are retroactive to January 1, 2021.

Unemployment tax payments for the first and second quarters of 2021 have been extended and are due by 3 p.m. Eastern time August 31, 2021.

The letter to employers included tax rate calculation examples and a set of frequently asked questions about adjusted tax rates and the recovery assessment.

This is exciting news for most Massachusetts employers, despite the late notice of these tax rate revisions and the addition of the COVID-19 Recovery Assessment Rate.  Nevertheless, for those employers who receive a lower tax rate for 2021 because of these revisions, they will see an overall tax decrease for calendar year 2021 as opposed to what was budgeted under the originally assigned rate.

Because the DUA is not mailing these revised notices to employers of their third-party agents, we are in the process of retrieving these from the DUA website and verifying the calculations.  We will send them out to our clients once that process is complete.

If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.

Indiana To Waive Unemployment Benefit Charges for 2022 Tax Rates

The Indiana Department of Workforce Development has confirmed that it will not include unemployment benefits charged from March 13, 2020 to June 30, 2021 when calculating employer’s unemployment tax rates for 2022.

However, this does not necessarily equate into lower tax rates in 2022 and beyond.  The frequently asked questions posted to the IN DWD website indicate that unemployment benefits charges waived from individual employer accounts in 2020 may be recovered through a mutualized unemployment tax for 2022.  Similarly, charges waived in 2021 may be recovered through a mutualized unemployment tax for 2023.

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.

 

Tennessee Unemployment Tax Rate Calculations to Exclude All Benefit Charges

The Tennessee Department of Labor & Workforce Development announced that unemployment tax rate calculations for the one-year period July 1, 2021 through June 30, 2022 are to exclude all unemployment benefits claimed during the COVID-19 pandemic in a measure signed by Governor Bill Lee.

Under the measure (SB 2520), unemployment benefits paid from March 14, 2021 through July 3, 2021 will not be charged to employers’ accounts for the purposes of computing the 2021-2022 state unemployment tax rate.  This is an extension of previous laws and executive orders which in total now exclude charges beginning March 15, 2020 running through July 3, 2021.

The purpose of SB 2520 is to curb a sharp increase in tax rates for the one-year period July 1, 2021 through June 30, 2022 and future years, thus allowing Tennessee employers an opportunity to reinvest in their businesses after the COVID-19 pandemic.

No action is required by employers at this time.  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.

Texas Unemployment Tax Rates Hold Steady for 2021

The Texas Workforce Commission announced that unemployment tax rates for 2021 will remain at pre-pandemic levels in accordance with legislative authority enacted.

As you may recall, the TWC announced in March 2021 that 2021 unemployment tax rates would be delayed while they coordinate with the Texas Legislature and the Governor’s Office to explore opportunities to keep tax rates as low as possible following the historic unemployment claims volume seen in 2020.  Our prior post relating to the March announcement can be found here.

Based on this week’s announcement from the TWC, Texas employers can expect to see lower tax rates than expected when the 2021 rates are finally released later this month.  They confirmed that the three adjustment factors included in the overall rate will remain unchanged for 2021:

  • UI Replenishment Rate = 0.18%
  • Deficit Tax Rate = 0.00%
  • Obligation Assessment = 0.03%

The purpose of holding the tax rate low is to curb a sharp increase in tax rates for 2021 and future years, thus allowing Texas employers an opportunity to reinvest in their businesses after the COVID-19 pandemic.

Here are a few quotes from TWC leadership as to why this decision was made:

“Texas employers continue to overcome the challenges of the past year and contribute to a strengthening economy.  Today’s action on UI taxes enables businesses to better focus resources on innovating and expanding jobs available to Texas workers.” – TWC Chairman Bryan Daniel

“Texas workers are eager to get back to work and help move our economy forward.  This decision to keep taxes low will encourage hiring and expand opportunities for working Texans.” – TWC Commissioner Representing Labor Julian Alvarez

“This decision gives stability and predictability to our UI tax structure.  Texas employers and Business leaders look forward to that stability especially after a year of rampant uncertainty.  This gives them the capacity they need to hire, expand and get Texas’ economy back on track.” – TWC Commissioner Representing Employers Aaron Demerson

No action is required by employers at this time.  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.

 

Washington Unemployment Taxable Wage Base to Rise in 2022

The Washington Employment Security Department announced today that the unemployment taxable wage base is set to rise to $62,500 in 2022, up from $56,500 in 2021.

This will be the highest taxable wage base ever implemented by any state and the first to exceed $60,000.

The ESD has historically tied the taxable wage base to the state’s average annual wage.  This causes automatic increases or decreases each year.  The average annual wage rose to $76,741 in 2020, a 10.1% increase from 2019.

In a news release, the Department said “The higher than normal increase in reported average wages can be attributed to the fact that thousands of lower-paid workers lost their jobs during the COVID-19 pandemic and higher-paid workers remained employed.  While it is common for the average wage to rise during recessions, since lower wage workers are more likely to be laid off than higher paid ones, the shift during the pandemic recession was much more dramatic than during the Great Recession.”

The average annual wage is also used to calculate weekly unemployment benefit amounts in Washington.  As of July 4, 2021, unemployment benefits will range from $295 to $929 per week.

No action is required by employers at this time.  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.

 

New Jersey Unemployment Tax Rate Calculations to Exclude COVID-19 Related Benefit Charges

The New Jersey Department of Labor & Workforce Development announced that unemployment tax rate calculations for the one-year period July 1, 2021 through June 30, 2022 are to exclude unemployment benefits related to the COVID-19 pandemic in a measure signed by Governor Phil Murphy.

Under the measure (AB 4853), unemployment benefits paid from March 9, 2020 through December 31, 2020 will not be charged to employers’ accounts for the purposes of computing the 2021-2022 state unemployment tax rate if the reason for separation was “virus-related”.

The law also limits the move over the next three fiscal years to higher rate schedules, which are expected to trigger due to the effect of COVID-19 UI benefits on the state’s UI trust fund balance.  It is estimated that the highest rate schedule, Schedule E+, would have been in effect for the 2021-2022 rate year, with rates ranging from 1.30% to 7.70%.

  • For the one-year period from July 1, 2021 to June 30, 2022 the assignment of SUI tax rates will move from the current Rate Schedule B, with rates ranging from 0.40% to 5.40%, to Rate Schedule C, with rates ranging from 0.50% to 5.80%.
  • For the one-year period from July 1, 2022 to June 30, 2023 the assignment of SUI tax rates will move from Rate Schedule C to Rate Schedule D, with rates ranging from 0.60% to 6.40%.
  • For the one-year period from July 1, 2023 to June 30, 2024 the assignment of SUI tax rates will move from Rate Schedule D to Rate Schedule E, with rates ranging from 1.20% to 7.00%.

The law provides that if calculation of the actual fund reserve ratio would result in the selection of a rate schedule with lower contribution rates for any of these periods, the lower rate schedule will apply.

The New Jersey Office of Legislative Services estimates that by setting lower rate schedules than dictated by the fund’s actual reserve ratio, the law will reduce revenues to the state’s UI trust fund by at least $660 million in the first year, $450 million in the second year, and $230 million in the third year relative to the contribution amounts payable under the tax schedule that would otherwise have taken effect.

No action is required by employers at this time.  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.