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

By June 17, 2021January 17th, 2022COVID-19, Tax Implications

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.

Josh Kendall

Author Josh Kendall

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