FUTA Credit Reduction Percentages Issued; Connecticut to Receive Record-High Tax Rate

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By Howard Perlman

Employers in four jurisdictions are to pay higher payroll costs for 2015 because of Federal Unemployment Tax Act credit reductions, down from eight jurisdictions for 2014, the Labor Department said Nov. 10 in its final credit-reduction assessment list for the year.

Higher federal unemployment tax costs for employers in California, Connecticut, Ohio and the U.S. Virgin Islands are to apply for 2015 because the jurisdictions had loan balances from the federal unemployment account Nov. 10 and were assessed FUTA credit reductions for 2014.

The 2015 total is down from the historic high of 21 jurisdictions in 2011.

Credit Reduction of 1.5% for 4 Jurisdictions

For 2015, employers in the four jurisdictions are to be assessed a general FUTA credit reduction of 1.5 percent on wages paid to employees for work attributed to these jurisdictions, which is to cause the employers to pay additional federal unemployment tax costs of up to $105 for each employee beyond the standard FUTA cost of up to $42 for each employee that would apply under the standard full-credit FUTA rate of 0.6 percent.

In addition to a general credit reduction of 1.5 percent and the standard FUTA rate of 0.6 percent, Connecticut employers are to be assessed a benefit cost-rate (BCR) add-on credit reduction of 0.6 percent on wages paid to employees for work attributable to Connecticut. Connecticut employers are to be assessed a BCR add-on for 2015 because the state had a federal unemployment loan balance on Jan. 1 of at least five consecutive years and the state did not apply for relief from the BCR add-on. California, Ohio and the U.S. Virgin Islands also had a federal unemployment loan balance on Jan. 1 of at least five consecutive years but employers in these jurisdictions are to not be assessed a BCR add-on for 2015 because the Labor Department approved the jurisdictions' applications for relief from a BCR add-on for 2015.

The total 2015 FUTA rate for Connecticut employers, 2.7 percent, which is the sum of the standard rate and the rates of the state's general credit reduction and BCR add-on, is the highest FUTA rate ever assessed. For 2015, Connecticut employers are to pay up to $189 in federal unemployment tax costs for each employee.

Loan Repayments to Lower FUTA Costs

Four states with credit reductions that were applicable for 2014 are not credit-reduction states for 2015 because the states did not have a federal unemployment loan balance Nov. 10. The states are Indiana, Kentucky, New York and North Carolina.

South Carolina, which would have been a credit-reduction state for 2014 if it had not received credit-reduction relief, is not a credit-reduction state for 2015 because it also did not have a loan balance from the federal unemployment account Nov. 10.

The Internal Revenue Service is to reaffirm the 2015 credit-reduction percentages on 2015 Form 940 Schedule A, Multi-State Employer and Credit Reduction Information.

Additional amounts due because of 2015 credit reductions are to be paid by Feb. 1, 2016, which also is the standard due date for the 2015 Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.

Changes in UI Wage Bases

Increases to unemployment-taxable wage bases for 2016 were acknowledged by 17 states: Colorado, Iowa, Kansas, Kentucky, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Vermont, Washington and Wyoming.

Wage base increases for 2016 also are to occur for Alaska, Hawaii, Idaho, North Dakota, Rhode Island and Utah, but the states as of Nov. 16 have not finalized the bases.

Washington's 2016 wage base, $44,000, is to be the highest unemployment-taxable wage base ever enforced.

No jurisdictions are to experience decreases to their taxable wage bases for 2016. For 2015, Florida and Oklahoma's wage bases were lower than they had been for 2014.

In the accompanying wage base comparison chart, increased wage bases for 2016 are bold.

STATE 2015 2016
Alabama $ 8,000 $ 8,000
Alaska 38,700 *
Arizona 7,000 7,000
Arkansas 12,000 12,000
California 7,000 7,000
Colorado 11,800 12,200
Connecticut 15,000 15,000
Delaware 18,500 18,500
District of Columbia 9,000 9,000
Florida 7,000 7,000
Georgia 9,500 9,500
Hawaii 40,900 *
Idaho 36,000 *
Illinois 12,960 12,960
Indiana 9,500 9,500
Iowa 27,300 28,300
Kansas 12,000 14,000
Kentucky 9,900 10,200
Louisiana 7,700 7,700
Maine 12,000 12,000
Maryland 8,500 8,500
Massachusetts 15,000 15,000
Michigan 9,000; 9,5001 *
Minnesota 30,000 31,000
Mississippi 14,000 *
Missouri 13,000 13,000
Montana 29,500 30,500
Nebraska 9,000 9,000
Nevada 27,800 28,200
New Hampshire 14,000 14,000
New Jersey 32,000 32,600
New Mexico 23,400 24,100
New York 10,500 10,700
North Carolina 21,700 22,300
North Dakota 35,600 *
Ohio 9,000 9,000
Oklahoma 17,000 17,500
Oregon 35,700 36,900
Pennsylvania 9,000 9,500
Puerto Rico 7,000 *
Rhode Island 21,200; 22,7002 *
South Carolina 14,000 14,000
South Dakota 15,000 15,000
Tennessee 9,000 *
Texas 9,000 9,000
Utah 31,300 *
Vermont 16,400 16,800
Virginia 8,000 8,000
Washington 42,100 44,000
West Virginia 12,000 12,000
Wisconsin 14,000 14,000
Wyoming 24,700 25,500

* Wage base to be announced.

1For quarters when Michigan's unemployment trust fund balance is sufficiently high, Michigan employers that are not delinquent in paying unemployment-related amounts may be assigned a reduced taxable wage base.

2Experienced Rhode Island employers that are assessed the maximum unemployment tax rate are assigned a higher wage base.

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