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Recently enacted Massachusetts legislation (HB 90, 2021 Chapter 9) freezes the state unemployment insurance (SUI) tax rate schedule for 2021—2022 at the same rate schedule as was used for 2020 (Schedule E), with SUI taxes ranging from 0.94% to 14.3%. HB 90 also imposes a federal interest assessment on employers, which ranges from 0.1% to 0.76% based on the employer's SUI reserve ratio.

Chapter 9 is the result of a proposal filed by Massachusetts Governor Charlie Baker in late 2020 (HB 5206) and reintroduced in 2021 to limit the effect COVID-19 would have on employer SUI tax rates. Had HB 90 not passed, the Massachusetts Department of Unemployment Assistance (DUA) predicted in its January 2021 trust fund report that Rate Schedule G would be in effect for calendar years 2021—2024, with rates ranging from 1.21% to 18.55%.

New non-construction employers continue to pay at 2.42% for 2021, with new construction employers paying at 6.89%, down from 7.37% for 2020. The additional Workforce Training Fund (WTF) rate continues at 0.056% for 2021.

Governor Baker previously stated that freezing the SUI rate schedule for the two-year period of 2021—2022 will save employers from a nearly 60% SUI tax increase. Remaining on Schedule E for 2021 and 2022 could save employers an estimated combined average of $327 per employee. (Governor's press release.)

2021 tax rates issued; experience-rated employers may make a voluntary contribution by May 7, 2021 to lower their assigned tax rate

Because of pending legislation, the DUA delayed issuance of the 2021 SUI tax rate notices. On April 6, 2021, the DUA issued paper notices and posted rate information on its UI Online system. (DUA website; telephone conversation/email response to inquiry, DUA rate setting unit, 4-5-2021.)

Experience-rated employers may make a voluntary contribution to reduce their assigned 2021 SUI tax rate by May 7, 2021. The payment must be made electronically via the UI Online system by ACH Debit. (Email response to inquiry, DUA rate setting unit, 4-9-2021; DUA website.)

Employer interest surcharges will further increase SUI costs in 2021—2022

Massachusetts started borrowing from the federal government in June 2020 when the state's UI trust fund became insolvent. As of April 23, 2021, the US Department of Treasury shows that Massachusetts has an outstanding federal UI loan balance of $2,268,015,459.63.

Failure to repay the full loan amount by November 10, 2022 will result in a reduced federal unemployment insurance tax (FUTA) tax credit for calendar year 2022. Further, under the American Rescue Plan Act, interest on federal UI loans will begin to accrue as of September 7, 2021. (See the US Department of Labor's Program Letter No. 14-21.)

In anticipation of the impending federal interest charges, and the potential of a FUTA credit reduction starting in 2022, HB 90 includes the following provisions.

• The state may assess surcharges on employers to pay the interest due on the state's UI trust fund loans. The first interest payment will be due from the state in the fall of 2021. Because federal law does not allow the state to pay the interest from the SUI trust fund, employers will have to pay the surcharge unless other financing is secured.
• The state may issue special obligation bonds for the purpose of repaying federal UI loans taken in years 2020 through 2025. Repayment of the federal UI loan through the issuance of bonds avoids an increase in FUTA beginning calendar year 2022 due to the FUTA credit reduction. Without the issuance of bonds, employers could start to see FUTA credit reductions for calendar year 2022 because the state does not anticipate that the federal loan would be repaid by November 10, 2022. Employers would repay the bonds through a state unemployment obligation assessment.

Massachusetts COVID-19 UI benefits are not charged to employer accounts

Legislation enacted in 2020 (SB 2618-A, 2020 Chapter 81) prevents contributory employers from being charged for COVID-19 UI benefits, instead charging these benefits to the solvency account if not paid by federal funds. This provision was effective as of March 10, 2020, and sunsets one year from the effective date of the law, or 180 days after the termination of the governor's declaration of a state of emergency, whichever is later. (EY Tax News alert 2020-1026, 4-17-2020; DUA COVID-19 website.)

Deferral available for a portion of SUI tax payments due

Employers may be eligible to request a deferral of a percentage of their SUI tax payments for the first and second quarters of 2021. Election for the deferral is available online until April 30, 2021. Eligible employers must timely file and make payments (less deferred amount). Deferrals are not available for the WTF or the Employer Medical Assistance Contribution (EMAC).

For more information, go here.

EMAC rates remain the same

The EMAC rate for employers in their sixth and greater year of subjectivity continues at 0.34% for 2021. Employers in their fourth year of being subject to EMAC pay at a rate of 0.12%. Employers in their fifth year of being subject to EMAC pay at 0.24%. New employers in their first through third years are exempt from the EMAC. The taxable wage base remains at $15,000. (Department website; email response to inquiry.)

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