June 1, 2021
Colorado issues revised 2021 SUI tax rate notices; 2021 SUI tax rates increased; regular COVID-19 UI benefits not charged to employer accounts
The Colorado Department of Labor & Employment announced that it has reissued 2021 employer state unemployment insurance (SUI) tax rate notices. The original 2021 SUI tax rate notices, issued in November 2020, did not reflect the removal of COVID-19 unemployment insurance (UI) benefit claims and contained formatting errors. For many employers, the 2021 revised rate notice will reflect a different UI tax rate than shown on the November 2020 rate notice. (Telephone conversation, Department representative, 5-2021; Employer email updates, 11-2020; 3-2021; and 4-2021.)
Employers were asked to not protest benefit charge statements and tax rate notices until after the Department got caught up with the process of removing COVID-19 UI benefits from employer accounts. Employers may protest their 2021 tax rates if the UI benefits used in the computation are still not accurate. Employers that have not received a revised rate notice, but feel they should have, are instructed to go to their electronic account on the My UI Employer system and follow the electronic protest procedure if they disagree with the posted tax rate.
The Department also announced that there will be a delay in issuing the first quarter 2021 UI benefit charge statements in order to correct some charging on employer accounts. The statements were expected to be mailed by May 25, 2021, and employers have 60 days from the mail date to make payment.
2021 SUI tax rates increased
Colorado 2021 SUI tax rates increased to a range from0.71% to 9.64%, up from0.58% to 7.4%for 2020. The 2021rates continue to consist solely of the base tax rates found in Colorado unemployment law (under the column heading "Reserve Ratio .000-.004").Due to recently enacted legislation (SB 20-207), there are no surcharges, fund building surtaxes or additional rates added to the SUI base rate for 2021.
The 2021new employer rate for non-construction employers continues at 1.7%. For general construction, the 2021 new employer rate is 2.07%; for heavy construction,7.74%; for trades, 2.91%; and for political subdivisions, 0.3%. (Colorado Department of Labor & Employment website.)
2021SUI taxable wage base remains unchanged from 2020, will increase incrementally over several years
Legislation held the SUI taxable wage baseat$13,600 for calendar year 2021. However, SB 20-207 provides that the SUI taxable wage base will increase incrementally to $30,600 by calendar year 2026.Under the legislation, the variable SUI taxable wage base will be set at:
Counterbalancing the increase in taxable wage base, the law requires that employers not be assessed a solvency surcharge for calendar years 2021–2022, even if the state UI trust fund balance falls low enough to warrant this increase in the SUI tax rates. (EY Tax Alert, 2020-1831, 7-17-2020.)
SUI tax increase to continue in future years
The effect COVID-19 UI benefits had on the state's UI trust fund caused the rate schedule for 2021 to move from the third lowest of seven columns to the second highest column. It is expected that in 2022, the rate schedule will move to the highest column. Although under SB 20-207 a fund-building surcharge is not added for 2021–2022, it is expected that a surcharge will be necessary for calendar year 2023. (Legislative council staff March 2021 forecast.)
The Department also recently stated the following regarding SUI rate increases in the future:
[T]he UI trust fund started the pandemic at a positive balance of $1.2 billion, and today we have depleted that balance and have reached just over $1 billion borrowed. At such a deficit, all employer premiums are statutorily mandated to increase significantly. See more: cdle.colorado.gov/businesses-employers.
For more information on SUI taxes in Colorado, see the Department's website.
COVID-19 UI benefits not charged to employers
Colorado Governor Jared Polis ordered in March 2020 that regular COVID-19 UI benefits not be charged against employers' UI tax accounts. (Executive Order 2020-012; extended by Executive Order 2021-097 on May 5, 2021.)
Ernst & Young LLP insights
Colorado's UI trust fund became insolvent in August 2020 and the state began to borrow from the federal government to continue to pay UI benefits. According to the federal Treasury Direct website, as of May 17, 2021, Colorado has a federal UI loan balance of $1,014,167,918.51. The state's failure to repay the loan balance in full by November 10, 2022, will result in a federal unemployment insurance tax (FUTA) credit reduction of 0.3% for calendar year 2022.
EY Payroll News Flash