As part of preparation for 2017, employers should recognize whether the taxable wage bases for the unemployment insurance programs in the states where they operate are to change.
Employers should know the four general methods states use to determine what their unemployment-taxable wage base will be for the next year.
One of the methods is for a state to have a wage base that does not change from year to year, unless new legislation or a new regulation requires a change. Connecticut, for example, has a taxable wage base of $15,000 that has been in effect since 1999, under Section 31-222 (Chapter 567) of the General Statutes of Connecticut.
Of the three methods that involve adjusting the wage base from year to year, one determines wage base adjustments according to predetermined amounts established by law, one determines wage base adjustments according to changes in the applicable state average annual wage and the other requires the wage base to be changed whenever the balance of a state’s unemployment trust fund is at certain solvency levels on certain dates.
New York is perhaps the most prominent example of a state that determines its taxable wage base for the next year with automatic increases by fixed amounts designated by law, as the 2013-2014 budget established predetermined amounts of annual increases to the state’s taxable wage base from 2014 to 2026. There are predetermined increases of $200 for some years and $300 for others. The state’s wage base for 2016 was $10,700, and there is to be an increase to $10,900 for 2017.
Starting with 2027, New York is to determine its taxable wage base by setting it equal to a percentage of the applicable state average annual wage, a method that many states currently use. New Mexico, for example, calculates its unemployment-taxable wage base for a year to be 60 percent of the applicable state average annual wage, rounded up to the nearest multiple of $100.
For New Mexico, the applicable state average annual wage is the total amount of wages reported by employers taxed under the state’s unemployment law for the second-most recent year before the year the wage base takes effect, divided by the number of employees whose wages were reported by those employers for that year. This state’s calculation, mandated by Section 51-1-42 of the New Mexico Statutes Annotated, means that the state’s taxable wage base for 2017, $ 24,300, is 60 percent of the applicable state average annual wage for 2015.
Delaware is a quintessential example of a state that uses the fourth method of wage base determination, which involves a wage base going into effect based on the state’s unemployment trust fund balance as of a certain date. Each of five predetermined potential wage bases is associated with a range of unemployment trust fund balances, as defined by Section 3302 (Title 19, Chapter 33) of the Delaware Code Annotated.
The wage base associated with the trust fund balance range that contains the state’s unemployment trust fund balance as of Sept. 30 is in effect for the next year. The state’s 2017 wage base of $18,500 is in effect because the state’s unemployment trust fund balance as of Sept. 30, 2016, was up to $125 million and that range is associated with the wage base of $18,500.
For a list of unemployment-taxable wage bases that have been released for 2017, subscribers of Payroll Library can visit the chart, “Unemployment Insurance: Taxable Wage Bases and Tax Rates.”
Take a free trial of Bloomberg BNA’s Payroll Decision Support Network, your one-stop resource for reliable, up-to-date guidance and analysis in every area of payroll administration and compliance.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)