Contribution Rates Explained

Contribution Rates Explained

Beginning in 1992, an employer’s contribution rate is based on the multi-schedule contribution rate system shown below in Table 2.  The contribution rate schedule to be used depends on the ratio of the current reserve fund to the adequate reserve fund.

Employers are advised of their individual contribution rate in March of each year. Contribution rates are based upon the ratio of the employer’s reserve balance to your average annual payroll. You can find your contribution rate by finding the tax rate associated with your reserve ratio in the multi-schedule contribution rate system shown on the tables below. All rates are in percentages.

Under the experience rating plan, an employer may be eligible for a reduced rate if certain conditions are met after the account has been chargeable with benefits for the 12-month period prior to the rate computations date (December 31). In March a Contribution Rate Notice is mailed to each employer. The notice for the calendar year will show the tabulation for the average annual taxable payroll, beginning contribution reserve balance, contributions paid, benefits charged to the employer during the previous year and the ending contribution reserve balance. The notice will also show the tabulation for the employer’s reserve ratio. The reserve ratio is obtained by dividing the reserve balance at the end of the year by the average annual taxable payroll for the past three years. By applying the Reserve Ratio to the Effective Contribution Rate Schedule, the employer’s contribution rate is determined.

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New Employer Contribution Rate

The contribution rate for new or newly covered employers will be the same as the contribution rate assigned to employers with .0000 reserve ratio. See Table 1 for the current new employer rate.

Tax Base

The taxable portion of an employee’s annual wages is limited to the “tax base” for that calendar year. An individual employee’s wages in excess of the “tax base” are not taxable. The “tax base” is equal to the State’s average annual wages of employers contributing to the unemployment trust fund and is computed at the beginning of each calendar year. See Table 1 for the current tax base.

Employment & Training (E&T) Assessment

Prior to 2011, each employer, with a contribution rate greater than zero and less than 5.4% is liable for an employment and training assessment on taxable wages. For 2011, 2012, and 2013, all employers will be assessed the employment and training assessment rate including 5.4% rated employers.  For 2014, 2015, and 2016 an employer, with a contribution rate greater than 0% and less than the maximum rate of the applicable schedule, is liable for an employment and training assessment on taxable wages. See Table 1 for the current rates.

To determine the E&T amount due, the total taxable wages are multiplied by the assessment rate. No portion of the State E&T assessment will be credited to the employer’s reserve account. The E&T assessment amount cannot be taken as a credit against the Federal unemployment tax (FUTA).

Example for 2016:

Reserve Balance Payroll
Reserve 12/31/14 $9756.40 2013 $84,754.11
Contributions Paid 2015 +449.73 2014 $85,287.90
Benefits Charged 2015 0.00 2015 $74,956.12
Reserve 12/31/2015 10,206.13 Total Payroll 3 Yrs. $244,998.13
Average Annual Payroll
$244,998.13 / 3 Yrs. = $81,666.04
Reserve Ratio
Reserve 12/31/2015/ Average Annual Payroll = Reserve Ratio
$10,206.13/$81,666.04 =  0.1250

Contribution Rate:  Locate the computed Reserve Ratio on the effective Contribution Rate Schedule.  For 2016, use Schedule C. Since the Reserve Ratio of 0.1250 falls between 0.1200 to 0.1299 on Table 2, the employer’s contribution rate is 0.4%.

Table 1
Calendar Year Contribution Rate Schedule Tax Base New Employer Rate Employment & Training Assessment Rate
2006 C $34,000 2.4% .01%
2007 B $35,300 1.9% .01%
2008 A $13,000 1.7% .01%
2009 A $13,000 1.7% .01%
2010 D $34,900 3.0% .01%
2011 F $34,200 4.0% .02%
2012 F $38,800 4.0% .00%
2013 G $39,600 4.6% .01%
2014 E $40,400 3.4% .01%
2015 D $40,900 3.0% .01%
2016 C $42,200 2.4% .01%

Table 2: Rate Schedule Effective 1/1/2013