Child-putting-money-in-pi-002It just does not seem possible but the 2018 rate season has begun with Vermont and New Jersey issuing their fiscal year rates.  New Hampshire and Tennessee will issue by early September.    As in the past three years, we expect most of the rate charts, multipliers and surcharges to decrease or remain the same as unemployment springs back from the worst recession since The Great Depression.   More than half the nation closed the 2018 rate computation as of June 30, 2017, which means the rates are already set for most employers although they will not be issued immediately.  About thirty states will issue by December 31st with the remaining states issuing in January – March.

Once the rate notice is issued, it is not too late to save tax dollars.  Many tax savings still exist for employers.  The most popular money-saving opportunity is the voluntary contribution (VC) option.   Twenty-six states allow the voluntary contribution option.  The concept behind the VC is to pay monies in advance to obtain a lower rate.  An employer needs to use their current or projected taxable payroll to multiply by the rate reduction and then subtract the amount it took to buy down the rate.   The result is the savings for the year or cost for the year.   A savings would mean the VC is profitable.

Sound simple?  Well, it is; however, there are factors that need consideration when determining the taxable payroll to use to determine whether the VC is profitable.   The first would be, is your company decreasing employee or increasing employees?    A decrease in employment would obviously reduce the taxable payroll making the VC less profitable or negate it completely.  An increase in the taxable payroll could make a VC that was not profitable a great option.

Transfers of business is another evaluation process of the taxable payroll.    If you divest a portion of a state account number, the profitability decreases.   If you acquire or merger another business into an existing business, one of two actions may be taken by the state agencies.   Depending on the effective date of the transaction, the unemployment rates may be combined changing the entire computation or the agency may wait until the next rate year which would mean the taxable payroll would increase.

The key to determining whether a VC is profitable is being able to estimate what is going to happen with your taxable payroll for the next year.  Generally speaking, most of the savings are realized within the first quarter of the year.    Corporate Cost Control provides all their employers with our recommendations of whether the voluntary contribution is profitable or not profitable.

If you have any questions, please contact your CCC Tax Analyst.


Contact CCC to see how we can save your organization time and money.
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