19 January 2018 California 2018 unemployment, disability and Employment Training Tax rates and limits, FUTA credit reduction could be avoided in 2018 According to the California Employment Development Department (EDD) website, following are the 2018 state unemployment insurance (SUI), state disability insurance (SDI) and Employment Training Tax (ETT) rates and limits. The 2018 California employer SUI tax rates will continue to range from 1.5% to 6.2% on Schedule F+. The new employer SUI tax rate remains at 3.4% for 2018. The state's unemployment trust fund deficit was $3.9 billion at the end of 2016. The trust fund is projected to have a deficit of $1.2 billion at the end of 2017. The unemployment trust fund is projected to have a positive balance of $1.8 billion by the end of 2018, the first time since 2008 this is anticipated. The Department forecasts that the trust fund will increase to $2.3 billion by the end of 2019, however, the current financing structure leaves the UI Fund unable to self-correct and achieve a fund balance sufficient to withstand an economic downturn, if changes are not made to the financing structure (e.g., increasing the $7,000 taxable wage base). (October 2017 UI fund forecast.) The October 2017 UI forecast shows that employers will remain on Contribution Rate Schedule F+ through at least calendar year 2019. As a result of the ratio of the California Unemployment Insurance Trust Fund and the total wages paid by all employers continuing to fall below 0.6%, the 2018 SUI tax rates will continue to include a 15% surcharge. The SUI, ETT, and SDI tax rates are combined on a single rate notice, Notice of Contribution Rates and Statement of UI Reserve Account (DE 2088). The Department typically mails the SUI rate notices to employers in December, with a mailing date of December 31, 2017. Tax rates are also available on the Department's e-Services for Business website. Employers will have 60 days from the mailing date to protest any item on the rate notice except SDI and ETT, which are specifically set by law. Because Schedule F+ is in effect, by law voluntary contributions to reduce the SUI tax rates will not be allowed for 2018. The 2018 employee SDI withholding rate, which includes disability insurance and paid family leave, will increase to 1.0%, up from 0.9%. The maximum SDI to withhold from employees' paychecks for 2018 is $1,149.67, up from $998.12 for 2017. The Department predicts that its federal unemployment insurance (UI) loan will be repaid in mid-2018. The US Department of Labor's FY 2018 Unemployment Insurance Outlook Midsession Review (published in May 2017) also indicates that the states (California and the Virgin Islands) that are currently borrowing from the federal government are expected to repay their loan balances by the end of fiscal year 2018 (this does not take into account those states that have repaid their federal loans through the issuance of bonds and other repayment mechanisms). If California meets its projected pay off date, the federal unemployment insurance (FUTA) tax rate will return to normal (a net 0.6%) for calendar year 2018 for California employers. Beginning on January 26, 2009, California began borrowing from the federal government to pay UI benefits. As of December 8, 2017, California has an outstanding federal UI loan balance of $870,349,347. Because the state did not repay all its federal UI loans by November 10, 2017, employers will see a 2.1% FUTA credit reduction for calendar year 2017 (for a total FUTA rate of 2.7%), to be paid in full with employers' fourth quarter 2017 FUTA tax deposit, due January 31, 2018. The Department again requested, and received, a waiver of the additional Benefit Cost Rate (BCR) factor for calendar year 2017. Interest on the federal loan began accruing on January 1, 2011, and the resulting seven interest payments of $303.5 million, $308.2 million, $259 million, $217.4 million, $171.1 million, $111.3 million and an estimated $50 million were made to the US Department of Labor on September 30 in 2011 through 2017, respectively. The interest for 2013-2017 was paid from the state's general fund. The Department estimates that the cost of the FUTA credit reduction increases California employers' FUTA taxes as follows: 2011: $290 million These additional FUTA tax payments are applied to California's federal unemployment insurance loan balance. Document ID: 2018-0133 |
