ETS Tax intelligence: 2018 Joint Account Strategies

October 26, 2017 Rori Carney

Joint accounts

Situation

The 2018 state unemployment insurance (“SUI”) tax rate season is underway. In addition to utilizing tax rate forecasting to prevent unexpected outcomes (see August 2017 ETS Tax Intelligence), several states allow statutory elections, such as joint accounts, that can be implemented to reduce an employer’s overall SUI tax burden.

Solution

The formation of a joint account permits two or more legal entities to combine their state unemployment experience rating factors to obtain a single or common SUI rate applicable to all members electing to participate in the joint account. The goal is to achieve a lower combined unemployment tax cost for the members as a whole.

The combination is strictly for SUI rating purposes and does not require changes to organizational or legal entity structure. Joint account members will continue to file their quarterly contribution reports utilizing their respective SUI account numbers. Factors used to determine if a joint account is beneficial include:

  • Planned changes in organizational structure due to mergers, acquisitions, reorganizations or divestitures that may impact the underlying experience of the members or change the make-up of the members eligible to participate in the joint account
  • Anticipated changes in employee headcount for any of the electing members. A fluctuation in SUI taxable payroll may impact anticipated tax savings
  • All possible legal entity combinations, including unaffiliated legal entities in certain jurisdictions
  • Concurrent use of voluntary contributions to maximize savings
  • Compliance requirements, including application deadlines, minimum duration (“lock-in” period), dissolution provisions, and ownership restrictions.
    Long-term SUI tax rate impacts

Due to the complexity of the calculations, and the short turnaround time between when tax rate notices are mailed and the election/application deadline, it is recommended that employers implement a strategy for performing joint account analyses prior to the date SUI tax rate notices are issued. In addition, employers should identify the authorized representative or officer available to review and approve the application to ensure it is timely submitted. After implementation of a joint account, employers must be diligent in their follow up with the state workforce agencies to ensure the proper joint or common rate is assigned.

Please note: Effective January 1, 2018, the Connecticut Department of Labor will no longer be able to administer JAs due to permanent reductions in staff. All existing JAs will be dissolved effective December 31, 2017.

Value

Taking advantage of joint account strategies provides employers with an on-going opportunity to reduce SUI tax burden. To verify that joint account analyses are included in your current Equifax solutions offerings, along with other available statutory elections, please contact Pete Krieshok at (314) 214-7325 or via e-mail at pete.krieshok@equifax.com. You can also visit our corporate blog at for information on other employment tax matters that might impact your organization.

Download a PDF version of this bulletin.

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