February 25, 2021
Maryland law reaffirms COVID-19 UI benefits are not factored into employer SUI tax rates; 2021 SUI tax rates will nonetheless increase substantially
Recently enacted SB 496/CH39, the Recovery for the Economy, Livelihoods, Industries, Entrepreneurs, and Families (RELIEF) Act, codifies and extends Maryland Governor Larry Hogan's Executive Order 20-12-10-01 requiring that the 2021 state unemployment insurance (SUI) tax rates not be based on individual employer experience for fiscal year (FY) 2020. Although employer individual SUI tax rates will not take into account COVID-19 unemployment insurance (UI) benefits, the overall historic impact on the state's UI trust fund has caused a significant increase in 2021 employer SUI tax rates.
Maryland 2021 SUI tax rates range from 2.2% to 13.5% on Table F (the highest rate schedule), up from 0.3% to 7.5% on Table A (the lowest rate schedule). Table A had been effective for five consecutive years prior to 2021.(Maryland Department of Labor website.)
The SUI taxable wage base remains at $8,500 for 2021. The new employer rate for 2021 continues at 2.6%, except for a new foreign contractor account, where the rate is 7.0% for 2021, up from 4.5%.
2021 SUI rate computation
An employer's UI benefit ratio, the percentage that is applied to the rate schedule for the calendar year, is computed by dividing the UI benefit charged against the employer's account for the previous three fiscal years by the taxable wages for the same time period. Without the governor's executive order and SB 496, employers' SUI tax rates for 2021 would have been based on employer experience for fiscal years 2018–2020 (July 1, 2017 through June 30, 2020), reflecting the regular COVID-19 UI benefits that were paid through June 30, 2020.
Instead, 2021 SUI tax rates will be based on employer experience for fiscal years 2017–2019 (July 1, 2016 through June 30, 2019), to arrive at the same individual employer benefit ratio as was used for the 2020 SUI tax rates. Fiscal year 2020 UI benefit charges and taxable payroll will not be used in the computation. However, the employer's benefit ratio is applied to Table F for 2021, not Table A.
Prior to the pandemic, Maryland's UI trust fund balance had grown over the previous five years to nearly $1.3 billion by June 30, 2019. The state's UI trust fund balance as of June 30, 2020 fell to $718,974,536.
According to the governor's website, the combination of the executive order and the RELIEF Act provides $326 million in cost relief to businesses.
Note that under the RELIEF Act, an employing unit or third-party agent that has established a pattern of failing to respond timely and/or adequately to requests for information regarding a UI claim for benefits may instead receive a 2021 SUI tax rate based on its UI experience through June 30, 2020.
2021 rate notices to be issued by end of February
SUI tax rate notices are typically mailed to employers in January of the rate year. However, as is the case for several states, the issuance of the 2021 tax rate notices was delayed. Department representatives expect that the 2021 rate notices will be issued by the end of February 2021. Tax rate notices will also be available on the Department's electronic reporting website. (Email response to inquiry.)
RELIEF Act allows small employers to defer 2021 SUI tax payments to 2022
The UI provisions of the RELIEF Act allows businesses, governmental agencies and nonprofit organizations with fewer than 50 employees to defer 2021 quarterly SUI tax payments to January 31, 2022. (Governor's website.)
Payment plan is available
As was the case in 2020, employers struggling to pay their 2021 quarterly SUI taxes may apply for a payment plan through the Department's electronic reporting system. Employers with questions should call the Department's Employer Call Center at +1 410 949 0033 or use the UI Inquiry Form on the Department's website.
Ernst & Young LLP insights
According to the federal Treasury Direct website, as of February 19, 2021, Maryland requested the option to receive federal UI Title XII advances (UI loans), but currently has a zero loan balance.
For more on Maryland SUI taxes, see the Maryland Department of Labor website.
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