The US Department of Labor (DOL) has released its preliminary projections of the states and territories that have the potential for a federal unemployment insurance (FUTA) credit reduction for calendar year 2016. The Department's projections include the standard credit reduction and estimated Benefit Cost Ratio (BCR) percentages for 2016.

As it was on December 31, 2015, the DOL projects that employers of California, Connecticut, Ohio and the Virgin Islands will again be subject to the FUTA credit reduction in 2016, resulting in higher FUTA taxes this year than last for most jurisdictions. Two states, Connecticut and Ohio anticipate they will repay their federal unemployment insurance (UI) loan balances before November 10, 2016, and if they do, there will be no 2016 FUTA credit reduction in those states.

It is anticipated that these early rate projections could change over the next several months. (Potential 2016 Federal Unemployment Tax Act (FUTA) Credit Reductions, US Department of Labor, Employment and Training Administration, February 4, 2016.)

Higher FUTA taxes due to Benefit Cost Ratio add on

States that carried a federal UI loan balance since 2008-2009 are faced with both the standard FUTA credit reduction and the BCR add on. Jurisdictions can request a waiver of the BCR no later than July 1, 2016. Last year, all jurisdictions except for Connecticut requested and received a waiver of the BCR add on.

The US Department of Labor projections of the standard FUTA credit reduction and BCR add-on rate for each of the states is shown in the chart on the following page.

For more information about the FUTA credit reduction see our special report.

For the FUTA credit reduction states in 2015, see our a href="hhttp://www.ey.com/Publication/vwLUAssets/ey-employment-tax-rates-limits-for-2015/$FILE/ey-employment-tax-rates-limits-for-2015.pdf">rates and limits facts.

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