Some 2013 FUTA Credit Reduction States to Repay Loans in 2014

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 By Howard Perlman

Three of the 13 states that had 2013 Federal Unemployment Tax Act credit reductions are to repay their federal unemployment account loans by Nov 9, relieving employers in Georgia, Missouri and Wisconsin of 2014 credit reduction assessments of at least 1.2 percent, speakers said May 14 at the American Payroll Association's 2014 Congress in Minneapolis.  

Each 0.3 percent of a FUTA credit reduction represents an additional cost to employers of up to $21 for each employee, said Matthew White, region director of employment tax services for Equifax Workforce Solutions.  

Employers in states that do not repay their loans from the federal unemployment account by Nov. 9 may be assessed not only a 2014 basic credit reduction of 1.2 percent but also an additional benefit cost rate (BCR) add-on,  said Brent Gow, CPP, director of global payroll for Starbucks Coffee Co. 

Nine states with 2013 FUTA credit reductions also may have a 2014 BCR add-on: Arkansas, California, Connecticut, Indiana, Kentucky, New York, North Carolina, Ohio and Rhode Island, said Gow, who is chairman of Bloomberg BNA's Payroll Library Advisory Board.  

The 2014 basic credit reduction is to be 1.2 percent in eight of the nine states. In Indiana, the basic credit reduction is to be 1.5 percent, he said.

Employers in states with a federal unemployment account loan balance on Jan. 1 for at least five consecutive years may be assessed a BCR add-on.  

The additional percentage assessed because of a BCR add-on varies based on how a state's unemployment tax and benefit provisions affect unemployment trust-fund solvency.

New Jersey repaid its loan balance from the federal unemployment account before Nov. 9, 2013, so it was not a 2013 FUTA credit-reduction state, Gow said. However, it borrowed again from the federal unemployment account and on Jan. 1, 2014, had a loan balance, he said.

By May 12, New Jersey had again repaid its loan balance. If on Nov. 10, the state still has no loan balance, it will not face a basic credit reduction of 1.2 percent and a BCR add-on for 2014, Gow said.

Employers in Delaware, which was a FUTA credit-reduction state for 2013, may have a 0.9 percent basic credit reduction and an additional 2.7 percent add-on for 2014, Gow said. 

A 2.7 percent add-on may apply for employers in jurisdictions with federal unemployment account balances on Jan. 1 for three consecutive years.

In 2012 and 2013, only the U.S. Virgin Islands had the 2.7 percent add-on applied. In 2014, it could have a basic credit reduction of 1.2 percent and a BCR add-on.

South Carolina employers could be assessed a 1.5 percent basic credit reduction and BCR add-on for 2014 if the state's federal unemployment account loan is not repaid by Nov. 9 and if its application for credit reduction avoidance is denied by the federal Labor Department. The state's 2011, 2012 and 2013 applications were approved.

To apply for credit-reduction avoidance in 2014, a state must repay additional federal unemployment accounts loans acquired from Nov. 10, 2013, to Nov. 9, 2014, among other requirements.

As of May 12, California's federal unemployment account loan balance was $7.5 billion, which is about $6 billion more than that of Ohio, which has the second-highest loan balance, White said.

California plans to fully repay its loan balance by November 2017, White said.