In a majority of states, employer-specific factors (benefit charges, taxable payroll, tax contributions, and reserve account balances) used in calculating 2018 state unemployment insurance (“SUI”) tax rates will be fixed as of June 30, 2017. However, there are still unknown legislative and economic factors that could have an impact on 2018 and future SUI tax rates. Evaluating trends in economic conditions provides insight into where future rates are potentially headed.
Total Unemployment or Jobless Rate. The U.S. “total unemployment rate” (TUR) was 10.0% in October of 2009, during the height of the Great Recession. The higher a state’s TUR, the higher a state’s SUI tax rate is likely to be. The U.S. TUR was 4.3% in May of 2017. The economic/ employment recovery has caused SUI tax rates to decline in most states.
Initial Unemployment Claims. Because the TUR has improved, among other factors, “initial unemployment claims” have steadily declined since its peak in 2009, a trend that suggests SUI tax rates will also continue to decline, at least until the next recession.
State Trust Fund Solvency. The solvencies of SUI trust funds are assessed based on an index known as the Average High Cost Multiple (“AHCM”). A multiple of 1.00 indicates a trust fund is deemed sufficiently solvent. While the economic/employment recovery has improved the number of states deemed to be sufficiently solvent, as of January 1, 2017, 32 taxing jurisdictions were still deemed to be underfunded.
Average SUI Tax Rate. SUI tax rates have moderated in the last few years and this trend is expected to continue in the near-term, at least until the next recession. Average tax rates are approaching pre-Great Recession levels.
Equifax assists employers in understanding employer-specific and economic factors impacting their SUI tax rates. This allows employers to more accurately forecast and budget for future SUI tax costs. For more information, please contact Pete Krieshok at (314) 214-7325 or via e-mail at email@example.com. You can also visit our corporate blog for information on other employment tax matters that might impact your organization.
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