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July 31, 2020
2020-1958

New Jersey won't charge employer UI accounts for COVID-19 benefits; FY 2021 SUI tax rates not affected by COVID-19

The New Jersey Department of Labor and Workforce Development has updated its employer unemployment insurance (UI) website to reflect that the Department plans to relieve employers of the adverse impact of COVID-19 UI benefits on their accounts before the fiscal year (FY) 2022 UI tax rates are calculated.

According to the Department's website:

Q: Will my unemployment insurance tax rate increase due to this emergency?

A: Employers have valid concerns about their insurance ratings. We will be taking

steps to ease the charging of employers directly impacted by the COVID-19

emergency. Those numbers are calculated at the end of March every year and we

will address that process in 2021.

Several bills were introduced in the state legislature (S 2504/A 4375; A 3930; A 4135) that would have required employer accounts not be charged for COVID-19 UI benefits. None of those bills made it past committee assignment during the 2020 legislative session.

FY 2021 UI tax rates continue to be computed based on Rate Schedule B

New Jersey employer UI tax rates continue to be assigned on Rate Schedule B for fiscal year 2021 (July 1, 2020 through June 30, 2021), ranging from 0.4% to 5.4%. The new employer rate continues to be 2.8% for fiscal year 2021. These rates include the 0.1% Workforce Development Fund rate and the 0.0175% Supplemental Workforce Fund rate. (New Jersey Department of Labor & Workforce Development website.)??

Ernst & Young LLP insights

New Jersey is one of four states (New Hampshire, New Jersey, Tennessee, and Vermont) that assign state unemployment insurance (SUI) tax rates on a fiscal-year basis, rather than a calendar-year basis; however, the taxable wage base for these states is assigned on a calendar-year basis.

Because the fiscal year 2021 SUI tax rates for these four states are based on state and employer experience through December 31, 2019, the FY 2021 rates do not reflect the effect of COVID-19 on SUI trust funds and employer experience.?

New Hampshire is an exception to this in that the balance of the SUI trust fund is reflected each quarter in the employer's SUI tax rate through a fund balance reduction factor and/or surcharges.

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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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