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May 25, 2021
2021-1059

Michigan will resume charging employer UI accounts with COVID-19 UI benefits; 2021 SUI tax rate computation remains unchanged from 2020; 2021 taxable wage base increases

According to a Michigan.gov COVID-19 news release, the charging of COVID-19 unemployment insurance (UI) benefits to the nonchargeable benefits component (NBC) account ended as of March 31, 2021. Accordingly, effective April 1, 2021, the state will resume charging COVID-19 UI benefits to employers' UI accounts, which could result in a rise in some employers' UI tax rates.

The news release also states that the relaxation of its workshare program requirements for the COVID-19 emergency has also ended effective March 31, 2021.

As previously reported, Michigan legislation (SB 886, Public Act 229 of 2020) provided that, through December 31, 2020, the Michigan Unemployment Insurance Agency (UIA) was prohibited from charging to an employer's UI tax account any UI benefits paid to a claimant who was laid off or placed on a leave of absence because of COVID-19. Instead, the UI benefits were charged to the Nonchargeable Benefits Component (NBC) account. The NBC account is only one of three components of an employer's Michigan UI tax rate that is not reflected in an employer's experience for future tax rate purposes. (Michigan Unemployment Insurance (UIA) website; EY Tax Alerts 2020-0636, 3-20-2020; 2020-2927, 12-23-2020.)

Under SB 604/Chapter 258 the provision for not charging an employer's UI tax account for COVID-19 UI benefits was extended to March 31, 2021.

2021 SUI tax rate computation unchanged from 2020

The Michigan 2021 state unemployment insurance (SUI) tax rates continue to range from 0.06% to 10.3%. New employers, except for certain employers in the construction industry, pay at 2.7%. (Form UIA 1771,Tax Rate Determination for Calendar Year 2021; Michigan UIA website.)

2021 SUI wage base increases

All employers will pay SUI taxes on wages up to the $9,500 taxable wage base for 2021, rather than the previous taxable wage base of $9,000 for nondelinquent employers. Michigan's UI law requires that the SUI taxable wage base increase to $9,500 for any calendar year that the state's UI trust fund balance was less than $2.5 billion on the previous June 30.(EY tax alert 2021-0465, 3-1-2021; Michigan UIA website.)

State ends EB and PUA UI benefits

On March 8, 2021, the Department announced that because Michigan is no longer in a high unemployment period (HUP), claimants receiving Extended Benefits (EB) and Pandemic Unemployment Assistance (PUA) will no longer receive additional weeks of EB or PUA that were previously added.

Affected claimants have been notified about the change in their benefit allowance.

The high unemployment period is triggered based on the unemployment rate in Michigan. Under federal law, when a state is in a HUP there are seven additional weeks added to PUA and additional weeks added to EB. When the state is no longer in a HUP, the additional weeks cannot be paid, and claimants must be notified.

According to unemployment data published by the federal government, Michigan's unemployment rate is below the threshold for the state's high unemployment period to remain active, and individuals no longer qualify for additional weeks of benefits provided during HUP.

For individuals receiving EB:

  • EB remains active and is payable up to 13 weeks, a reduction from 20.
  • If claimants have already been paid their maximum weeks of EB, their EB claim is considered exhausted and there are no more weeks of EB available.
  • Once all EB weeks are used, claimants should apply for the PEUC extension should they still be unemployed.

For individuals receiving PUA:

  • The maximum number of weeks available to PUA claimants has been reduced from 57 to 50 weeks.

Ernst & Young LLP insights

The Michigan Department of Labor and Economic Opportunity announced it is highly unlikely the state will need to borrow from the federal government to cover UI benefits claims in 2021. In addition, recently enacted legislation (HB 4047; 2021 PA 2) requires the deposit of $150 million into the state UI trust fund for use in offsetting state fraud and improper payments of UI benefits during the COVID-19 emergency.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

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