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FUTA Credit Reduction Updates
Eight jurisdictions had FUTA credit reductions for 2014 with additional tax due in 2015; this was
the lowest number of jurisdictions since 2010, when credit-reductions were assessed on
employers in three jurisdictions.
The eight jurisdictions for 2014 included California, Connecticut, Indiana, Kentucky, New York,
North Carolina, Ohio and the Virgin Islands.
According to a credit-reduction projection document released by the Labor Department on
January 21, employers in up to nine jurisdictions are at risk for having credit reductions for 2015
with additional tax due in 2016. These include the eight jurisdictions for 2014 and South
Carolina, which despite its outstanding loan balance from the federal unemployment account on
January 1 of seven consecutive years, successfully applied with the Labor Department for a
credit-reduction avoidance each year from 2011 to 2014.
The office of Gov. Pat McCrory in a news release on November 12, 2014, said North Carolina is
to repay its federal unemployment loan balance before November 10, 2015. South Carolina also
is to repay its loan balance before November 10, 2015 the state Department of Employment and
Workforce said October 31, 2014 in a news release. If these repayments occur and these
states continue to not have a federal unemployment loan balance on November 10, 2015,
employers in these states would not be assessed credit reductions for 2015 that would increase
federal unemployment tax on wages for work attributable to these states.
Although Arizona on January 1, 2015 had a loan balance from the federal unemployment
account, it cannot be a credit-reduction jurisdiction for 2015 as it did not have a balance on
January 1, 2014.
Record High Additional costs --While North Carolina and South Carolina’s repayment would enable the number for creditreduction jurisdictions for 2015 to be lower than 2014, employers in the other seven jurisdictions
are to again be assessed record-high additional amounts of tax per employee because of the
reductions.
Connecticut in 2014 became the only state to have ever been assigned a benefit cost-rate
(BCR) add-on, which is an extra type of credit reduction that can be assessed on employers in a
jurisdiction when that jurisdiction has possessed a loan balanced from the federal
unemployment account on January 1 of at least five consecutive years. Employers in the other
credit-reductions jurisdictions for 2014 would have been assessed BCR add-ons had those
jurisdictions’ applications to prevent applicability of a BCR add-on not been approved by the
Labor Department.
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Credit-reduction jurisdictions that applied for relief from the BCR are likely to apply again for
relief in 2015. The Connecticut Department of Labor did not apply for relief from the BCR addon for 2014 because it wanted to use additional revenue raised by the BCR add-on to repay
about 37 percent of its federal unemployment loan balance so that its account would be closer
to solvency, the department said June 20 in an e-mail to Bloomberg BNA.
Credit-Reduction Percentages --Estimated 2015 Rates based upon current information
2014
Total Rate
2015 CR
Reduction
Rate
2015 BCR
Add-on Rate
(Estimated)
2015 Total
FUTA CR
Rate
(Estimated)
Maximum
Additional
Tax (FUTA /
EE)
California
1.2%
1.5%
1.4%
2.9%
$ 105 - $ 203
Connecticut
1.2%
1.5%
0.7%
2.2%
$ 154
Indiana
1.5%
1.8%
0.9%
2.7%
$ 126 - $ 189
Kentucky
1.2%
1.5%
0.7%
2.5%
$ 105 - $ 154
New York
1.2%
1.5%
0.00%
1.5%
$ 105
North Carolina
1.2%
1.5%
0.6%
2.1%
$ 105 - $ 147
Ohio
1.2%
1.5%
1.2%
2.7%
$ 105 - $ 189
South Carolina
0.0%
1.8%
0.6%
2.1%
$ 126 - $ 147
Virgin Islands
1.2%
1.5%
1.6%
3.1%
$ 105 - $ 217
State
Proliferation of SIDES --The National Association of State Workforce Agencies (NASWA) is working with numerous
state unemployment agencies to expand access in 2015 to the State Information Data
Exchange System (SIDES), an Internet-based system that enables employers and third-party
administrators to more efficiently respond to requests from states for unemployment eligibility
information.
SIDES is made up of three active exchanges. The separation information exchange, which
allows employers and third-party administrators to electronically receive and respond to
requests from state unemployment agencies for information about how individuals claiming
benefits ended work with an employer, is operational for 41 states, the District of Columbia,
Puerto Rico and the U.S. Virgin Islands. California, Florida, Indiana and Virginia are to
implement the separation exchange by the end of 2015 and Alaska and Connecticut are to
implement the exchange by the end of 2015, NASWA said January 13.
The earnings exchanged, which facilitates transmission of information regarding periods when
individuals claiming benefits were working and the wages they earned during those periods, is
operational in nine states, Puerto Rico and the U.S. Virgin Islands. The exchange is to be
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implemented by the end of 2015 by Alabama, the District of Columbia, Florida, Georgia,
Mississippi, Nebraska, New York, Oregon, Rhode Island and Virginia, and Delaware is to
implement the exchange by the end of 2016, said NASWA.
Missouri, New York, Tennessee and Wisconsin implemented the monetary and potentialcharges exchange, which aids transmission of notifications regarding how wages employers
paid to individuals claiming eligibility for unemployment benefits are being used in calculations
of benefits for those individuals and transmission of employers’ desired updates to that
information. The exchange is to be implemented by the end of 2016 by Delaware, Indiana, New
Jersey, Oregon, Puerto Rico and the U.S. Virgin Islands.
The fourth SIDES exchange, the determinations and decisions exchange, currently is not active
for any jurisdiction, but Kansas is to implement the exchange by the end of 2015 NSWA said.
The determinations and decisions exchange would enable the Kansas Department of Labor to
send notifications of whether individuals were determined to be eligible for benefits and
notifications of the outcomes of appeals of the those decisions.
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