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July 7, 2020
2020-1729

New Mexico will not charge employers accounts for COVID-19 UI benefits

Under Senate Bill 13, which was introduced but not passed in the New Mexico 2020 special session, New Mexico employers would have been relieved of the impact of COVID-19 unemployment insurance (UI) benefits on their 2021–2023 UI tax rates. A provision in the bill directed the New Mexico Secretary of Labor to omit UI benefit data for the period January 1, 2020 through December 31, 2021 from calculations of an employer's experience history, excess claims premiums and excess claims rates.

The bill would also have required the Secretary to use the FY 2019 computation date reserve factor portion of the employer UI tax rates for the calendar year 2021–2023 UI tax rate calculations. The reserve factor is computed each year based on the determination of whether the balance of the state's UI trust fund as of the end of the fiscal year is adequate to pay between 18 to 24 months of UI benefits at an average of the five highest years of UI benefits paid in the last 25 years. The reserve factor used to compute the 2019 tax rates was 1.5955 and 1.6528 for 2020. For 2019 and 2020, the range of UI tax rates was 0.33%-6.4%.

If the bill had been enacted, it would have shielded New Mexico employers from higher UI tax rates resulting from the significant increase in UI benefit claims due directly and indirectly to COVID-19.

When issuing Executive Order 2020-004, Governor Michelle Lujan Grisham did not specify if employer accounts should be charged for COVID-19 benefits and the New Mexico Department of Workforce Solutions' (DWS) website does not address the issue.

Note, however, that DWS stated in its analysis of Senate Bill 13 that: "Per guidance from the federal government, DWS is currently not charging employers for separations related to COVID-19 as of March 16, 2020," adding that "this experience history will not be included in the calculation for the 2021 tax rates. The only impacting factor for the 2021 tax calculations would be the reserve factor based upon trust fund solvency."

The DWS recommended against Senate Bill 13 because the artificial reduction in UI taxes could have resulted in even higher UI tax rates after the freeze in the reserve factor computation expired.

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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)
   • Peter Berard (peter.berard@ey.com)

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