Potential FUTA Credit Reductions Issued for 2016

The Bloomberg BNA Payroll Library gives you reliable, up-to-date guidance and analysis in every area of payroll administration and compliance, and includes hundreds of interactive forms and links to related federal, state, and local sites.

By Howard Perlman

Employers in four jurisdictions are at risk of being assessed Federal Unemployment Tax Act credit reductions for 2016, the Labor Department said Feb. 3.

The jurisdictions are California, Connecticut, Ohio and the U.S. Virgin Islands, the department said in a document regarding potential credit reductions in 2016. Each was a credit-reduction jurisdiction for 2015.

If the jurisdictions have a federal unemployment loan balance by Nov. 10, 2016, employers in the jurisdictions would be assessed a general FUTA credit reduction of 1.8 percent that would increase their federal unemployment tax costs by up to $126 for each employee.

Benefit-Cost Rate Add-On

The jurisdictions have had a federal unemployment loan balance for at least five years, so employers in the jurisdictions also could be assessed an additional credit reduction, the benefit-cost rate (BCR) add-on, for 2016. The percentage of the BCR add-on applicable for a jurisdiction varies based on the jurisdiction's efforts to achieve solvency of its unemployment trust fund.

For 2016, employers in California could be assessed a BCR add-on of 0.4 percent, with an additional cost of up to $28 for each employee; Connecticut, 0.1 percent, up to $7 for each employee; Ohio, 0.3 percent, up to $21 for each employee; and the U.S. Virgin Islands, 1.1 percent, up to $77 for each employee.

Connecticut is to repay its federal unemployment loan by Sept. 30, 2016, which would cause employers in the state to avoid a general FUTA credit reduction and a BCR add-on for this year, the state Labor Department said July 2, 2015, in an e-mail to Bloomberg BNA.

California, Ohio and the U.S. Virgin Islands likely are to again apply for a BCR waiver, also known as a fifth-year waiver, to prevent employers there from being assessed a BCR add-on for 2016. Employers in these jurisdictions were not assessed a BCR add-on for 2015 because the Labor Department accepted their applications for relief.

To contact the reporter responsible for this story: Howard Perlman at hperlman@bna.com

To contact the editor responsible for this story: Michael Trimarchi at mtrimarchi@bna.com