The 2016 New York state unemployment insurance (SUI) tax rates range from 1.625% to 9.425%, down 0.4% from 2015. The new employer rate remains at 4.025%.

As we previously reported, New York Governor Andrew M. Cuomo announced that the SUI tax rates decreased because, for the first time in six years, the state's UI trust fund was solvent at the end of 2015. Employers are anticipated to realize SUI tax savings in 2016 by as much as $42.80 per employee. (News release, February 9, 2016.)

All contributory employers continue to pay at an additional 0.075% Re-employment Services Fund surcharge. Information on the 2016 rates is available here.

2016 mailing of rate notices

The New York Department of Labor began mailing the 2016 SUI tax rates in batches to employers on February 16, 2016.

Employers will avoid the interest assessment surcharge for 2016

Because the state repaid its federal loan in May 2015 and did not need to borrow again, a Department official confirmed that there will be no interest assessment surcharge (IAS) for 2016. (Telephone conversation, representative, Employer Account Adjustment Section, New York Department of Labor, February 17, 2016.)

Taxable wage base to increase

The SUI taxable wage base will continue to increase over the next several years until it reaches $13,000 in 2026. For each year thereafter, the SUI taxable wage base will be computed as 16% of the state's average annual wage.

Below is the schedule of increases for years 2017 through 2026:

2017 $10,900
2018 $11,100
2019 $11,400
2020 $11,600
2021 $11,800
2022 $12,000
2023 $12,300
2024 $12,500
2025 $12,800
2026 $13,000

Act before March 31 to potentially reduce cost — voluntary contributions

Experience-rated employers may make a voluntary contribution to reduce their assigned SUI rate. The voluntary contribution must be accompanied by a cover letter stating that the payment is a voluntary one, without any conditions stated or implied (such as the desired tax rate). To state any conditions could result in rejection of the voluntary contribution. The employer registration number should be shown on the cover letter and remittance. To affect the 2016 tax rate, the voluntary contribution payment must be mailed (postmarked) on or before March 31, 2016. Special conditions apply to employers that have had a negative balance write-off (see below). Voluntary contributions are not subject to refund or credit. Voluntary contributions cannot be accepted if any liabilities are due or reports are missing. (New York Department of Labor website; Publication IA 318-12, New York Department of Labor, February 2016.)

Act before March 31 to potentially reduce cost — joint accounts

Certain New York employers may also be able to lower their SUI rates for 2016 by taking advantage of a statutory election to form a "joint account." The SUI rate change that is made as a result of the New York joint account election will be applied retroactively to January 1, 2016, if an application is filed by March 31, 2016. (New York Department of Labor website; Publication IA 318-12, New York Department of Labor, February 2016.)

What is a joint account? When there are multiple corporate entities, each with their own SUI accounts, an unintentional adverse effect on SUI taxes may occur. Some states, such as New York, give businesses the statutory option of minimizing this tax effect through the joint account election. By forming a joint account, the unemployment experience of two or more employers within the state is combined to obtain a single SUI rate based on the combined experience of all members. By mathematically combining the unemployment experience, the members of a joint account can share their unemployment insurance reserves, effectuating an overall reduction in state unemployment taxes. (In New York, any two or more qualified employers in the same or related kinds of business, or that have a common financial interest, may form a joint account.)

No corporate restructuring necessary. The joint account election offers an above-the-line tax benefit that does not require a change in the corporate structure. Each entity continues to file separate SUI returns after the joint account is established. By forming a joint account in 2016, the rating combination will remain in effect through 2018, and new members can be added after the first year. In some cases, a voluntary contribution (see above) can also be made, adding to the overall savings.

Businesses must act quickly. To achieve the retroactive benefit of the joint account election to January 1, 2016, the Form IA 95, An Application for Joint Account must be filed by March 31, 2016 with the New York Department of Labor, Liability and Determination Section. Whether or not the joint account option will reduce unemployment tax liability depends on the state unemployment experience of the companies within the joint account and the minimum number of years that the companies are "locked in" to the election. For this reason, a careful analysis of a company's specific unemployment facts is vitally necessary in determining whether or not to pursue the joint account election.

Negative balance write-off

The New York Department of Labor will automatically and involuntarily "write off" the amount of an employer's negative account balance as of the December 31 computation date that exceeds 21% of the employer's prior year taxable payroll and assign the employer the maximum SUI tax rate for the following three calendar years. To avoid the three-year maximum rate assignment, an employer may choose by March 31 of the rate year to pay to the state the amount that is being written off. Care should be taken in calculating whether such a payment would prove profitable, as New York will not refund a voluntary payment once accepted.

Status of New York's UI trust fund

New York repaid its federal UI loan in May 2015. As a result of the loan repayment, New York employers saw the net FUTA rate return to 0.6% for calendar year 2015.

New York began borrowing from the federal government in January 2009 to continue to pay unemployment benefits from the state's UI trust fund. As of the beginning of May 2015, New York had an outstanding UI loan balance of $518,363,164, down from approximately $1.5 billion at the same time the previous year and over $3.6 billion on May 1, 2013. New York Department of Labor officials credited the ability to repay the loan before 2018 to UI reform legislation passed in 2013 (2013-2014 budget bill AB 3007, Chapter 57, signed by the governor on March 29, 2013), which made changes in UI benefit eligibility and increased UI tax rates and the taxable wage base beginning in calendar year 2014.

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