In addition:įrom 2020 to 2021, the average SUI tax rate increased from 1.72% to 1.89% (a 9.9% increase).įrom 2021 to 2022, the average SUI tax rate decreased from 1.89% to 1.74% (a 7.9% decrease).įrom 2022 to 2023, the average SUI tax rate increased from 1.74% to 1.81 (a 4.0% increase). The 2023 average SUI tax rate is estimated/preliminary per U.S. After that peak, average rates declined for eight consecutive years through 2020. And since rates are issued annually, a full year can pass before rates are next adjusted.Īs illustrated in the below graph, as net trust fund balances began to decline in 2009 as a result of the Great Recession, the average SUI tax rate in the U.S. This is because rating calculations typically take into consideration more than just a single year of experience and look back to historical experience in the development of rates. There is typically a lag between when an economic downturn impacts SUI tax rates. However, the correlation is not immediate. The following graph illustrates net trust fund balances by state as of December 31, 2023.⁴Ĭorrelation of State Trust Fund Balances to SUI Tax RatesĪs state trust funds are depleted during a period of high or increased levels of unemployment, SUI tax rates have historically increased as well. Because of this and other factors, net trust fund balances did not reach the negative levels experienced during the Great Recession. Net trust fund balances were substantially higher pre-COVID than they were pre-Great Recession. ⁴ There is still a long way to go before trust funds are at levels experienced just prior to the COVID-19 pandemic. By the end of Q4 2023, net trust fund balances were positive $38.24 billion. By the end of Q1 2022, net trust fund balances rebounded and were positive for the first time since the COVID-19 pandemic. As of January 1, 2023, 37 states were not considered adequately funded under this measure.³Ī logical starting point for addressing the outlook for 2024 SUI tax rates is state unemployment trust fund balances, a primary factor in developing SUI tax rates.Īs depicted in the following graph, net trust fund balances (trust fund balance net of federal Title XII advances) were negative $39.46 billion at the end of Q1 2011, as a result of the Great Recession, compared to negative $27.12 billion at the end of Q1 2021, as a result of the COVID-19 pandemic (i.e., $12.34 billion more solvent). An AHCM multiple of 1.00 indicates a state trust fund is deemed sufficiently solvent and able to pay one year of benefits associated with an average recessionary period. State trust funds are used to pay unemployment benefits. The Average High Cost Multiple (AHCM) is a standard measure of the solvency of the SUI financing system using a primary factor, a state’s trust fund balance at a point in time. Virgin Islands.¹įor 2024, the following jurisdictions had outstanding Title XII advances on January 1, 2024, which could increase the net FUTA tax rate by an additional 0.30% in these jurisdictions for 2024: The net FUTA tax rate for 2023 will increase from 0.90% in 2022 to 1.20% in 2023 for California and New York and from 4.2% in 2022 to 4.5% in 2023 for the U.S. As such, these jurisdictions will be subject to a FUTA credit reduction for 2023. Department of Labor, as of November 10, 2023, announced that California, New York and the Virgin Islands had outstanding Title XII advances on January 1 for at least two consecutive years and on November 10, 2023. Virgin Islands had its FUTA tax credit reduced by 3.6% for an effective FUTA tax rate of 4.2%).¹įor 2023, the U.S. The net FUTA tax rate for 2022 increased by 50%, from 0.60% to 0.90% (the U.S. As such, these jurisdictions were subject to a FUTA credit reduction for 2022. Department of Labor, as of November 10, 2022, announced that California, Connecticut, Illinois, New York and the Virgin Islands had outstanding Title XII advances on January 1 for at least two consecutive years (20) and on November 10, 2022. 2023 FUTA Credit Reductionsīefore addressing the condition of the SUI financing system, 2023 tax rates under the Federal Unemployment Tax Act (FUTA) are top of mind for employers as well.įor 2022, the U.S. This regularly updated resource is intended to help provide employers insights into the condition of the SUI financing system and the potential impact to rates in 2024 and beyond. Last updated: Janu(changes since last update on Decemwill begin with **NEW**)Īs state workforce agencies emerge from the financial stress caused by the COVID-19 pandemic, it is prudent for employers to monitor how this stress might impact their state unemployment insurance (SUI) tax rates.
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