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November 8, 2019
2019-2001

California 2020 unemployment, disability and employment training tax rates and limits

Following are the 2020 state unemployment insurance (SUI), state disability insurance (SDI) and Employment Training Tax (ETT) rates and limits, as provided by a California Employment Development Department (EDD or Department) representative. (Email response to inquiry, October 30, 2019.)

2020 SUI tax rates and taxable wage base

The SUI taxable wage base for 2020 remains at $7,000 per employee.

The 2020 California employer SUI tax rates continue to range from 1.5% to 6.2% on Schedule F+. The new employer SUI tax rate remains at 3.4% for 2020.

In 2018, the trust fund regained a positive balance, after nine years of insolvency. The EDD forecasts that the trust fund will increase to $2.8 billion by the end of 2019 and $3.2 billion by the end of 2020. However, if changes are not made to the current financing structure (e.g., increasing the taxable wage base to higher than the current $7,000), the UI trust fund is unable to self-correct and achieve a fund balance sufficient to withstand an economic downturn. (May 2019 UI fund forecast.)

Beginning on January 26, 2009, California began borrowing from the federal government to pay UI benefits. The EDD repaid its federal UI loan balance in 2018 prior to the November 10, 2018 deadline to avoid the FUTA credit reduction for 2018. As a result, the FUTA minimum net rate of 0.6% returned for calendar years 20182019 (employers saw FUTA credit reductions for calendar years 20112017).

Unemployment Insurance Trust Fund Surcharge

As a result of the ratio of the California UI Trust Fund and the total wages paid by all employers continuing to fall below 0.6%, the 2020 SUI tax rates will continue to include a 15% surcharge.

Mailing of 2020 rate notices and protest deadline

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 mailed the 2020 SUI rate notices to employers in late October 2019. Tax rate notices are also available on the Department's e-Services for Business website.

The EDD announced that the 2020 state unemployment insurance (SUI) tax rate notices were issued earlier than usual this year although they show a December 31, 2019 mailing date. (News release, October 29, 2019.)

Employers 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.

Unemployment insurance voluntary contributions

Because Schedule F+ is in effect, by law voluntary contributions to reduce the SUI tax rates are not allowed for 2020.

2020 SDI rates and taxable wage base

Per a Department representative, the 2020 employee SDI withholding rate, which includes disability insurance and paid family leave, remains at 1.0%.

The 2020 SDI taxable wage base is $122,909, up from $118,371 for 2019.

The maximum SDI to withhold from employees' paychecks for 2020 is $1,229.09, up from $1,183.71 for 2019. (Email response to inquiry, October 30, 2019.)

According to the May 2019 DI fund forecast, the DI Fund balance was $3.1 billion at the end of 2017 and $3.3 billion at the end of 2018. The DI Fund balance is projected to be $3.1 billion at the end of 2019, and $3.6 billion at the end of 2020. A DI Fund balance ranging from 25% to 50% of the prior 12 months of disbursements is generally considered adequate to maintain solvency through typical fluctuations in contributions and disbursements. The DI Fund adequacy rate was 49% for 2017 and 46% for 2018. The DI adequacy rate is projected to be 39% for 2019 and 43% for 2020.

Employment Training Tax (ETT)

The ETT rate for 2020 remains at 0.1%.

The ETT taxable wage base for 2020 remains at $7,000 per employee.

For more information on California payroll taxes, see the EDD website.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)

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