February 26, 2021
Oregon 2021 SUI tax rates increase; employers affected by COVID-19 may request interest and penalty free SUI payment plan arrangements
The Oregon 2021 state unemployment insurance (SUI) tax rates range from 1.2% to 5.4% on Rate Schedule IV, up from 0.7% to 5.4% on Rate Schedule II for 2020 and 0.9% to 5.4% on Rate Schedule III for 2019. Tax rate notices were issued to employers on November 13, 2020.
A table on the Department's website shows the breakdown of changes in employers' SUI tax rates from 2020 to 2021 for approximately 145,000 employers that pay Oregon SUI taxes.
The 2021 SUI taxable wage base increased to $43,800, up from $42,100 for 2020. The new employer rate increased to 2.6% for 2021, up from 2.1% for 2020.
In addition to the base SUI rates, employers pay a "special payroll tax offset" surcharge each quarter. For the first quarter 2021, the special surcharge is 0.12%. For the remaining quarters of 2021, the special surcharge is 0.09%.
The special surcharge is included in an employer's total SUI rate; however, it is used to fund various state programs, is not deposited in the state's unemployment insurance (UI) trust fund and cannot be considered when determining the "contributions paid to the state" when preparing federal FUTA Form 940.
2021 SUI tax payment plan for employers affected by COVID-19
The Oregon Employment Department announced the availability of a new payment plan for SUI contributions that give employers more time to make their remittances without interest and penalty. The new payment plan is available to employers that were affected by COVID-19 and had their assigned 2021 SUI rates increased by 0.5% or more over 2020. Eligible employers must have been in good payment standing prior to the start of the COVID-19 emergency and must continue to timely file their quarterly SUI tax returns.
Employers unable to fully pay their Oregon SUI taxes for the calendar year 2021 because of COVID-19-related factors, may apply for the payment plan if both of the following conditions are met:
Interest will continue accruing at 1.5% on the unpaid balance until payment is made in full and will be abated along with penalties upon completion of the payment plan. A minimum monthly payment of $100 is required and may be paid via reoccurring automatic payments, online through the Oregon Department of Revenue website or by mailing a check to the Department.
The payment plan applies solely to Oregon SUI taxes and not to income tax withholding or workers' compensation insurance premiums.
Employers were given abatement of interest and penalty for late payment of first quarter 2020 SUI tax
Employers affected by COVID-19 that were late in paying their 2020 first quarter SUI contributions (due April 30, 2020) were given abatement of penalties and interest, provided the payments were made within 30 days of the date that Governor Kate Brown's March 8, 2020, Executive Order was no longer in effect, or later if a payment arrangement was reached with the Department. The COVID-19 emergency period has been extended multiple times and is still in effect. (EY Tax Alert 2020-1281, 5-13-2020.)
Employers were required to apply for the interest and penalty abatement by filing the Application for Interest and Penalty Relief. The Department required that employers' first-quarter 2020 SUI returns be timely filed.
Employers charged for regular COVID-19 UI benefits; Oregon does not anticipate borrowing from the federal government
Department representatives confirmed that, except for workshare benefits for which the state is being reimbursed in 2020, Oregon is one of the few states that is charging individual employer accounts with regular state COVID-19 UI benefits. As a result, employers will see a direct impact of the UI benefits paid during 2020 on their SUI tax rates for the next several years, because Oregon SUI tax rates are computed by directly comparing the previous three fiscal years of UI benefits against the same period of taxable wages. (Telephone conversations, Oregon Employment Department Employer Services representatives.)
The Department announced that it projects the state will not need to borrow from the federal government to continue to pay UI benefits to unemployed workers. (Email to subscribers, 11-4-2020.)
Oregon law provides for eight SUI rate schedules, with the lowest being Rate Schedule I and the highest Rate Schedule VIII. Oregon's rate schedules are designed to provide adequate reserves to cover 18 months of a recession. (ORS Section 657.462; Oregon Employment Department website.)
Ernst & Young LLP insights
According to the Department, Oregon's UI trust fund is healthy even now because of the system used to fund it. The state's UI tax structure is self-balancing due to the passage of major reforms in 1975. As a result, Oregon did not have to borrow from the federal government during the Great Recession of 2008–2009 and does not anticipate the need to borrow now. The federal Treasury Direct website shows that despite having the highest Ui benefit claims in Oregon's history, Oregon's UI trust fund balance was $3,781,391,672 as of January 31, 2021.
See the Department's FAQs and fact sheet for more information on the 2021 rate schedule projection and go here for general information on how Oregon SUI tax rates are computed. Go here for information on how the Department is handling COVID-19.
EY Payroll News Flash