By the end of March, most state agencies and territories will have issued their 2014 tax rates.  Most of the rate schedules either remained the same or decreased to the next lowest rate schedules reflecting the recovery of the unemployment trust fund balances across the nation.The taxable wage bases increased in some states through legislative changes or through indexing the wages by the ratio of individuals working to claimants.  Employers should see their tax rates begin to stabilize as the worst years of the recession roll off the computation or are paid back through higher rates during those years.

The rates for New York employers will pay at an increased schedule and taxable payroll for 2014.   Mississippi employers will see a slight decrease.   Massachusetts employers will use a schedule that has been frozen for the past five years.   Massachusetts will delay the filing of the first quarter return until May 30, 2014 allowing the state to issue the 2014 unemployment tax rates.

We have included a state by state update for 2014 at the end of this newsletter.  Listed below are a comparison of the 2013 and the 2014 unemployment wage base limits.
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Rate Arrays

The following list shows the range of rates as assigned by each agency for the 2014 rate year.  Please keep in mind that New Hampshire, New Jersey, Tennessee and Vermont are effective July 1, 2013 – June 30, 2014.

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2014 FUTA TAX INCREASE                                     

The Title XII loans rose to higher levels than in any past recession.  At one point, the Title XII loans surpassed forty billion and were expected to reach eighty billion before the Great Recession ended.   Due to the quick response of many states to sell bonds or find other methods of financing their trust fund, the debt has slowly decreased.  The state with the highest loan balance and who has no relief in sight is the State of California.  Legislative matters will need to take place as California will enter their fifth year of owing money and additional penalties will apply.   Listed below are the current FUTA credit reduction states.   New Jersey and Pennsylvania have once again begun to borrow but expects to repay the loans this year.  New York also plans to repay their loan during 2014.

The list below does not include the Benefit Cost Ratio (BCR) that may apply to nineteen states.  We will release additional rate information on the BCR with additional Newsletters.

The BCR add-on becomes applicable after three years and continues to be applied until the Title XII loan is satisfied.    To avoid the add-on, a state must submit application to the Secretary of Labor prior to July 1, 2014.   The state must be able to pay the credit reduction amount that would have been paid by employers prior to November 10, 2014.   All loans during a one year period ending November 9th must be repaid.   The state must prove that they can increase solvency through improved legislation.  The final criterion is that additional loans are not made by the state prior to January 31, 2015.  The regulation supporting the waiver can be found at:  http://www.gpo.gov/fdsys/pkg/CFR-2012-title20-vol3/pdf/CFR-2012-title20-vol3-sec606-25.pdf

All the states on the list below have until November 10, 2014 to repay their loans and recoup the total FUTA tax credit for their employer’s.  The BCR rates have not been assigned or estimated as of this date.

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What happened in your state?

Listed below is a brief description of what took place in regards to the rate schedule for each state.

Alabama continues to rate employers on Tax Rate Table D.  The Shared Cost has decreased from 0.5% to 0.3% for 2014.  Employers will need to add the Tax Rate shown in Box 6 to the ESA shown in Box 7 to obtain their final rate. 

The rate schedule remained the same for Alaska as it did for 2013.  Rates will range from 1.62% – 6.02%.   The average rate assigned to employers in Alaska for 2014 is 1.97%.   As an employer’s wages reported decline, typically the rate increases.  Alaska has an Employee Portion of the rate which is 0.62% and should be deducted from the employee’s paycheck and submitted with the contributions owed to Alaska.   This email transmission reflects the employer and employee tax rate added together.  The breakdown of the two rates is shown on the Contribution Rate Notice.

Arizona The rate schedule has increased slightly over the rate schedule used in 2013.  Rates will range from 0.03% to 7.17% for 2014.   The JTT Rate is not paid on the 0.03%, 0.20%, 2.0% or any rate 3.78% or higher.  

Arkansas rates will range from 1.2% – 7.1% for 2014.  This range includes the 0.8% stabilization tax, the 0.1% extended benefit tax and the 0.2% advance interest tax.   New employers will remain at 4.0%.    Employers with the 6.0% (or 7.1% total rate) may see an additional 2.0%-6.0% added to their rate depended on the years the reserve account balance has been in negative status (begins as of year two with a negative account balance).

Arkansas has amended their definition of Newly Hired Employee to mean an individual who never worked for the employer or an individual who is separated from the employer for at least 60 days before returning to work.

California has based their rates on the maximum rate schedule allowable.  The rates will continue to range from 1.5% to 6.2%.   Employers with a maximum rate will not pay the 0.1% Training Tax.   All other employers will have an additional 0.1% Employment Training Tax that is due at the time of filing.  The Employment Training Tax is not assessed against an employer with a rate of 6.2%.

Colorado will increase their taxable wage base form $11,300 for 2013 to $11,700 effective January 1, 2014.  The Bond principal repayment will increase from 19.39% to 22.19% for 2014.  Details of the range of rates will be released in November.

Connecticut is a benefit ratio state that uses the ratio as a portion of the assigned rate.   A Fund Tax Rate of 1.4% is added to the assigned rate to obtain the final rate used when submitting contributions. The 1.4% has not changed since 2009.

Delaware will increase their wage base for 2014 to $18,500 which is a large increase from the 2013 taxable wage base of $10,500.  After 2014, the taxable wage base will be indexed according to the wages paid within the state.  The wage base will span from $10,500 to $18,500 depending on the wages reported to the state and the level of the trust fund balance.

H.B. 168 allows the Delaware Department of Labor to borrow money to pay a portion of the entire Title XII loan still outstanding.  If the federal loan is not repaid by November 10, 2014, employers will pay at a rate of 1.2% on the first $7,000 earned for the entire year of 2014.

Delaware has also amended its definition of Newly Hired Employee to read an individual who never worked for the employer or an individual who was separated from the employer for at least 60 days before returning to work.

The State Experience Factor changed from 53 in 2013 to 49 for 2014 representing a slight decrease for most Delaware employers in 2014.

The rate schedule remained the same as it was in 2013 for District of Columbia employers  An administration assessment of 0.2% was continued from past years and was added to the final rate.  

Florida has announced that their taxable wage base will remain at $8,000 per employee.  The Multiplier in Box 1 has decreased from 0.8634 to 0.7540 for 2014.  The Variable Adjustment Factor has decreased from 0.0222 to 0.0176 for 2014.

The rate table for 2014 remained the same as it was in 2013 for Georgia employers.   The Statewide Reserve and the Base Rate Solvency Factor have remained at zero.   The Base Rate adjustment factor is 0.50% as it was with 2013 unemployment tax rates.   An administration assessment has remained at 0.08% and is included in all rates except 0.04% and 8.10%.

Hawaii will access all contributory employers, with the exception of the minimum rated employer of 0% and the maximum employer rated at 5.4%, an employment and training fund assessment of 0.01% based on the 2014 taxable wage base which has not been announced.

The Idaho Tax Array for 2014 ranges from 0.545% to 5.400%, as compared to 2013 range of 0.786 to 6.800. The Administrative Reserve Rate and Workforce Development Training Fund combined to make up a 3 percent surcharge of the overall tax rate.

The Indiana rate schedule remains unchanged since the 2013 calculation. The interest surcharge has decreased from 7% to 3%. A penalty rate is added to employers who have missed filing a quarterly contribution return and not satisfied the state’s request for a response. New employers are exempt from the interest surcharge, but can incur a penalty rate.

The 2014 rate schedule for Iowa employers will be based on Table 6. This Table reflects a decrease from Table 5 used in the 2013 computation. Rates will range from 0% – 8.0%.

The Benefit Conversion Factor for Illinois remained at 138.4%.  The Fund Building Rate remained at 0.550% for 2014. The State Experience Factor decreased from 132% in 2013 to 125% for 2014. Most employers should see a decrease in the unemployment tax rates as the benefit charges begin to improve during the post-recession period along with the decrease in the State Experience Factor.

HB 2676 was passed in March of 2010 freezing the Kansas rate schedule through 2014.  The rates will range from 0.11% – 9.40% as they have since 2010. Only positive balanced employers qualify for the voluntary contribution option and the Shared Work Program.

Due to the passage of HB 495 signed in 2012, Kentucky employers will be assessed a surcharge of 0.22% that is not included in the tax rate. The 0.22% will appear as an additional line item on the quarterly contributions report (Form UI 3) beginning with the first quarter of 2014. Kentucky financed their 2013 interest payment due on outstanding Title XII loan through a private vendor. The surcharge will be paid on the first $9,600 each employee earns for the 2014 rate year. Each year a new surcharge will be assessed until the Title XII loan is satisfied. The surcharge will not be credited to an employer’s reserve balance.

Kentucky is using the Rate Schedule E, the highest schedule available, for the sixth year in a row. Kentucky increased their taxable wage base from 2011 – 2012 from $8,000 – $9,000.  Kentucky will increase their taxable wage base by $300 each year until they reach a wage base of $12,000. A Rating Factor is assigned to each employer and is shown on the Notice of Contribution Rate. If you disagree with the Rating Factor, please contact us upon receipt so we may resolve the issue with the state.

The Louisiana Rate Schedule remained the same for 2014 as in 2013.  The rates range from 0.08% to 5.40% (this reflects the reduced rate factor).   The Total Social Charge is made up of three factors, the non-charge Social Charge, the Incumbent Worker Training Program and the Integrity Social Charge.   Each component of the Total Social Charge decreased from 2013 causing a decrease in the total rate for 2014.

Table A will be in effect for the 2014 rate year for Maryland with rates ranging from 0.3% to 7.5%.   Maryland’s rates were based on Table C was in effect with rates ranging from 1.0% to 10.5%.   Maryland was at the highest table from 2010-2012 (Table F).   Maryland’s rates have decreased for two years in a row and have one of the highest trust fund balances across the nation at $934,896,062.

The rate schedule for Maine employers has decreased slightly reflecting a savings for most employers.

Massachusetts will be using rate Schedule E once again for 2014 as opposed to the much higher rates Schedule G the highest rate schedule available.  Massachusetts has held the schedule at Schedule E for four consecutive years with this year being the fifth year if the legislation is extended into 2014.  The Massachusetts Senate and House of Representatives disagree about how to incorporate the 2014 freeze into a broader set of reforms to the state’s Unemployment Insurance system.  This has delayed the issuance of the 2014 unemployment tax rates until April.  The deadline for employers to file their first quarter, 2014 quarterly contribution return has been extended to May 30, 2014.

Michigan’s fully rated employers were able to receive 50% credit for their FUTA credit reduction paid for the years 2009 -2011. Employers can still claim the credit for those years although the deadline has passed. Please view the Michigan UIA website for details if you have not filed for a credit during that time frame.  Michigan repaid their Title XII loan in 2012 allowing employers full FUTA credit beginning with the 2012 rate year.

The base rate for Minnesota dropped from 0.5% for 2013 to 0.2% for 2014.  The Additional Assessment and the Federal Loan Interest Assessment has been set to zero further reducing most employers’ rates.  Rates will range from 0.1% – 9.1% for 2014.  For the 2014 rate year, a 25% surcharge is added to the voluntary contribution if the option is chosen.

Mississippi rates have three components.  The first factor is the individual tax rate which is the employer’s benefit charges divided by their taxable payroll.  The General Experience Rate decreased from 0.23% to 0.20% for 2014.   The Training Contribution Rate decreased from 0.22% to 0.15%.   Most employers should see a slight decrease in their 2014 unemployment tax rates.

The Missouri rate schedule remained the same as it did in 2013 with rates ranging from 0.0% – 9.75%.  The 30% surcharge on rates also remained in place.

Montana will increase their taxable wage base from $27,900 – $29,000 effective January 1, 2014. Montana has recently issued rates.

The array of rates for Nebraska continues to range from 0% to 5.40%.   The assigned rates between the minimum and maximum rates have decreased for 2014 reflecting a decrease in contributions for most employers.

The ratios have changed within the Nevada array reflect a decrease for most employers although the range remained the same.  Contributory employers will pay a quarterly bond assessment representing the principal, interest and administrative payments on the bonds used to repay the Title XII loan balance.  The first payment will be due April 30, 2014.

 The rate schedule for New Hampshire has remained the same as it has been for several years.  New Hampshire employers will see a reduction in their computation effective July 1, 2013. An emergency surcharge of 0.5% was added to all employers in 2009 and an additional surcharge of 0.5% was added in 2010. On October 1, 2012, the first 0.5% surcharge was removed. The second 0.5% surcharge was removed for the fourth quarter of 2013.  The commissioner of the agency can add or remove the surcharge when applicable.  Negative balanced employers have a 1.5% Inverse Rate added to their total rate.   The Inverse Rate will continue to be added to a negative balanced employer until that employer has a positive reserve balance. 

New Jersey has announced that they plan to repay their Title XII loan before the November 10, 2013 deadline.   New Jersey had repaid their loan in August but had to borrow $400 million in September. If New Jersey does not repay the loan from September, employers would pay a FUTA rate of 1.5% on the first $7000 in wages. If payment occurs as expected, New Jersey employers will pay at a rate of 0.6% on the first $7000 earned by each employer.

The New Mexico rate schedule remained the same as it was in 2013.

The rates for New York employers range from 2.025% to 9.825% for 2014.   In 2013, the rates ranged from 1.5% to 9.825.  The taxable wage base was increased from $8500 in 2013 to $10,300 for 2014.  The rate schedule will continue to increase each year until it reaches $13,000 in 2026.   The increase in the rate schedule and the taxable wage base is an effort of New York legislatures to repay the Title XII loan in 2014 and to prepare the unemployment trust fund to better handle a future downturn of the economy.

North Carolina no longer assigns rates by applying the reserve ratio to a rate schedule. Effective with the 2014 rate year, a procedure similar to a Benefit Ratio (i.e. Illinois or Minnesota) will be used.  North Carolina still reviews the employer’s reserve account balance and compares it to the taxable payroll. The ratio derived is called a Reserve Ratio. The first step is to multiply the Reserve Ratio by 0.68. The resulting percentage is called an Employer’s Reserve Ratio Percentage. The Employer’s Reserve Ratio Percentage is then subtracted from 2.9% (set for all experience rate employers) to obtain the resulting UI tax rate. The UI tax rate is then multiplied by a surcharge of 20% which is added to the UI tax rate to arrive at the final rate for 2014. Rates range from 0.072% – 6.912% which represents a slight increase from 2013.

The rate schedule for North Dakota employers has decreased.  Employer’s rates ranged from 1.39% to 9.78% for 2013.  For the 2014 rate year, employer’s rates will range from 0.16% to 9.76%.

Ohio ranks employers using a chart containing forty ratios designating the assigned rate.  Ohio has increased twenty-one of the forty rates related to the range of ratios by 0.1%. The Mutualized Contribution Rate is zero as it was in 2013.

Oklahoma has based their rate schedule on a State Factor of 41% which represents a decrease in rate for most employers. Last year the State Factor was 47%.   The rates will range from 0.2% to 7.3%.  The taxable wage base decreased from $20,100 to $18,700. Oklahoma indexes their rate schedule and their taxable wage base each year.  This allows Oklahoma’s trust fund to recover quickly during a downturned economy.

Oregon employers will be rated according to Rate Schedule 6 which is in place for 2014 with rates ranging from 1.8% to 5.4%. Most employers will see a reduction in their 2014 tax rate from 2013 when Rate Schedule 8 was in place.

Effective with the first quarter filing of 2014 (due April 30, 2014), Pennsylvania employers will be required to file electronically. Employers will be required to follow one of the following methods: Key online with fewer than 100 employees, file upload or FTP for more than 100 employees.

The rates for Puerto Rico employers remained at Rate Table G as it was in 2013.

The Rhode Island rate schedule has remained the same as it was since 2009.  Rhode Island employers do not receive credit for 20% of their contributions which is set aside in a separate fund.  The fund is used to pay unemployment claimants whose benefit charges cannot be placed against a specific employer.

The taxable wage base for South Carolina will remain at $12,000 for 2014. The taxable wage base for 2015 is slated to increase to $14,000.  The tax rates for 2014 will range from 0.089% to 7.805%, including the interest and contingency surcharges.   This is a decrease from 2013 when rates ranged from 0.095% – 7.855%.  The new employer rate for 2014 will be 1.996% down from 2.011%.

South Carolina is in its fifth year of owing for advances taken under the Title XII loan provision.  For 2013, an additional tax would be added called the Benefit Cost Reduction.   Employers could have paid an at a FUTA rate of 3.2% had South Carolina not requested an extension to repay the loan.   A requirement to meet approval, forced South Carolina to make two voluntary payments.    South Carolina expects to receive approval and employers should plan to pay at a rate of 0.6% on the first $7,000 for each employer.

The rate schedule for 2014 has remained the same as it was the past three years. South Dakota employers will receive the full FUTA tax credit reduction of 5.4%.  Based on a $7,000 wage base, each employer will pay approximately $42.00 per employee for the year ending December 31, 2013.

Tennessee employers have seen a drop in their overall tax rate. Rate Premium Table 5 will be in place as of July 1, 2013. Rates will range from 1.0% to 10.6%. The 0.6% surcharge that has been in effect since 2009 will not be in effect for the last two quarters of 2013. An announcement will be made after December 31, 2013 as to whether the 0.6% surcharge will be removed for the first two quarters of 2014.

Texas has issued their Tax Rate Notice.  Rates will range from 0.54% – 7.35%.  The Replenishment Ratio decreased from 1.35 in 2013 to 1.34 for 2014.  The Bond Obligation Assessment Rate has increased from 0.135 to 0.15 for 2014.  The Deficit Ratio is not in place for 2014.  Most employers will see a decrease in their 2014 tax rate.

In  Utah the Reserve Factor used in the computation was reduced from 1.2 to 1.05.  The Social Costs have decreased from 0.0050 to 0.0040.  Most employers will see a decrease in their rate for 2014 if their figures remained constant.  Rates range from 0.40% to 7.4% for 21014.

Vermont Effective July 1, 2013 through June 30, 2014, Tax Rate Schedule V will be in effect for all tax paying employers. Experience rates range between 1.3% and 8.4% under Schedule V.

Also as of July 1, 2013, Vermont paid off its Federal Title XII loan. As a result of the loan payoff, the net FUTA tax rate for Vermont employers will revert back to 0.60% for 2013, assuming that the state does not borrow any additional federal UI funds for the remainder of the year. (Without the loan payoff, the FUTA rate for Vermont employers would have increased from 0.90% for 2012 to 1.20% for 2013.)

Washington has a provision within their laws to allow an employer to make a voluntary contribution; however, the rules surrounding the voluntary contribution make it difficult to be profitable for most employers.  The rate must have increased by twelve classes over the prior year (2013) tax assignment.  The voluntary contribution is applied to the two most recent years of benefit charges and a surcharge of 10% is added to the voluntary contribution.  Washington will mail a transmittal to the companies who are allowed to make a voluntary contribution payment in mid-January.  It is required that the exact amount be paid in order to obtain a lower rate. The 10% surcharge is an administration fee and is not applied to an employer’s account.  Please forward any approval regarding a voluntary contribution to us so we may evaluate its profitability.

Washington assigns an employer’s rate by evaluating their benefit ratio to a rate table with forty classes which is comparable to a range of rates.   The Rate Class Table has remained the same as it was in 2013. Rates will range from 0.17% – 5.84%.

The West Virginia Rate Schedule has remained the same as it was for 2103 with rates ranging from 1.5% to 10.0% for 2014. 

Wyoming is a benefit ratio state that compares the benefit charges to the taxable payroll to determine the base rate.  The Noncharge Ineffective Charge Adjustment Factor decreased from 0.0024 to 0.00198 for 2014.  The Employment Support Fund Factor decreased from 0.0016 to 0.00132.    The fourth factor of the rate is the Fund Balance Adjustment Factor which decreased from 0.0115 to 0.0083 for employers with less than three years of experience.   Employers with three years of experience will enjoy a decrease from 0.0024 to 0.0015.  All four factors are added together to obtain the assigned tax rate which is shown as a decimal on the rate notice.  

Wisconsin rates were issued in late October for 2014. The rates were based on Rate Schedule A and range from 0.27% to 9.8% for employers with less than $500,000 in payroll. The rates for the larger size employers range from form 0.7% – 9.8%. The taxable payroll remained at $14,000.

If you have any questions, please contact our Director of Tax, Norma Green at (800) 207-6926, Ext. 418 or ngreen@corporatecostcontrol.com

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