The Texas Workforce Commission (TWC) announced that the impact of regular COVID-19 state unemployment insurance (UI) benefits on the state's UI trust fund balance will have less of an impact on employer 2021 SUI tax rates than would have otherwise been the case because it has modified the rate computation.

2021 SUI tax rates

As a result of the TWC's modifications, employer total SUI tax rates range from 0.31% to 6.31% for 2021, the same as for 2020.

For 2021, employer SUI tax rates will not include a deficit tax rate, even though the state has an outstanding federal UI loan balance. A factor of the rate computation, the flat UI replenishment tax rate, will be held at 0.18%. However, an unemployment obligation assessment rate of 0.03% will be added to the rate computation, with the proceeds to be used for the payment of federal interest due on the state's federal UI loan balance as of September 30, 2021.

The TWC has not yet decided to issue bonds for the repayment of the federal UI trust fund loan balance that began to accrue in 2020 when the state's UI trust fund became insolvent. Accordingly, there is not yet a bond interest fee added to the SUI tax rate.

The 2021 Texas total SUI tax rate shown on the rate notice will equal the general tax rate + the replenishment tax rate + the unemployment obligation assessment + the employment and training investment assessment, resulting in a minimum computed SUI tax rate of 0.31% and a maximum computed SUI tax rate of 6.31%, the same range as was in effect for 2020.

The TWC has not yet updated its website to reflect more detailed information on the 2021 SUI tax rates.

Once updated, the information will be posted here.

Further information are Texas SUI taxes is posted here.

2021 mailing of rate notice

According to a TWC tax representative, the employer 2021 SUI tax rate notices were to be mailed to employers by July 2, 2021.(Email response to inquiry.)

Once released, 2021 SUI tax rates will also be available online using the employers' Unemployment Tax Services (UTS) system. Once logged in to the UTS online account, click on the "Account Info" tab at the top of the page, and then select the "Tax Rate Summary" link in the Quick Links box on the left to view your SUI tax rate information for the last several years.

2021 SUI wage base

According to a TWC tax representative, the SUI taxable wage base will remain at $9,000 for 2021 and the new employer rate will remain at 2.7%. (Email response to inquiry.)

Voluntary contributions suspended for 2021

Governor Abbott suspended for 2021 the ability of experience-rated employers to make voluntary contributions to potentially reduce their SUI tax rates. (EY Tax Alert2021-0911; 5-05- 2021; TWC COVID-19 website.)

2021 SUI tax rate computation

The 2021 Texas SUI experience tax rates consist of four components, as follows:

• General tax rate. The general tax rate is calculated by dividing the benefit charges for three fiscal years ending the third quarter of 2020 by the same three years of taxable payroll and multiplying by a replenishment ratio of 1.36 for 2021 (up from 1.32 for 2020).This is the same replenishment ratio as was in effect for 2019.
  
  Recently enacted legislation (HB 7) excludes from the calculation of the replenishment ratio benefits paid and not effectively charged to an employer's account as a result of an order or proclamation by the governor declaring at least 50% of the state's counties to be in a state of disaster or emergency.
• Replenishment tax rate. This is a flat tax paid by all employers to replenish the state's UI trust fund for one half of the UI benefits paid to claimants that were not charged to a specific employer's account. The replenishment tax rate for 2021 is 0.18% (down from 0.21% for 2020).
• Unemployment obligation assessment (OA). The third component of the 2021 tax rate is the OA, which for 2021 is 0.03%. The purpose of OA is to collect the amounts needed to pay any federal interest due on the state's federal UI loan balance as of September 30, 2021. This tax will not be certified by Texas to the federal government as unemployment contributions and should not be used in calculating the federal unemployment tax credit on Form 940. Because the state has not yet issued bonds for the repayment of its federal UI loan balance, the unemployment obligation assessment does not yet include a percentage for bond interest.
• Employment and training investment assessment (ETA). This is a flat tax of 0.10% paid by employers to fund the Skills Development Fund. This tax is not certified by Texas to the federal government as unemployment contributions and should not be used in calculating the federal unemployment tax credit on the Form 940. The employment and training assessment is listed as a separate line item on the Texas Employer's Quarterly Tax Report.

Although the state's UI trust fund has fallen below its statutory minimum required balance, the TWCwill not charge employers any deficit tax in 2021.

Charging of employer SUI accounts for regular COVID-19 benefits

Under H.B 7, the Texas Workforce Commission (TWC) will not include in the computation of the replenishment ratio used to determine an employer's unemployment compensation contribution tax rate any benefits paid and not effectively charged to an employer's account as a result of an order or proclamation by the governor declaring at least 50% of the counties in this state to be in a state of disaster or emergency. The legislation only impacts an employer's unemployment liability that accrues on or after May 13, 2021.

TWC instructs employers that have laid of employees or reduced their hours due to the COVID-19 pandemic to report when responding to the Notice of Application for Unemployment Benefits, that the employees' job separation or reduction in hours was due to the pandemic.

Also, if the employer has laid off multiple employees, the employer can send one blanket employer response for all the affected employees. Employers should include their TWC Account Number on the response. TWC will apply the response to all the affected employees who have applied for benefits.

Texas opts out of federal COVID-19 UI benefit programs as of June 26, 2021

Texas Governor Greg Abbot announced that the state will end participation in federal pandemic-related UI benefit programs as of June 26, 2021 and return to its pre-pandemic UI benefit program. Texas joins about half of the US states that have decided to opt out of the federally funded COVID-19 UI programs, citing a workforce shortage now that businesses are reopening.

As a result, the following federal UI benefits will no longer be available:

• Federal Pandemic Unemployment Compensation (FPUC), an additional $300 weekly payment to recipients of unemployment compensation
• Pandemic Unemployment Assistance (PUA), benefits for those who would not usually qualify, such as the self-employed, gig workers, and part-time workers
• Pandemic Emergency Unemployment Compensation (PEUC), an extension of benefits once regular benefits are exhausted

See the TWC's website for more information.

Deadline for first- and second-quarter 2021 tax payments extended

The TWC announced that because the issuance of the 2021 SUI tax rates was delayed, employers are given an extension of the deadline to pay their first- and second-quarter 2021 SUI contributions.

For the 2021 first quarter, the deadline is extended from April 30, 2021 to August 2, 2021. For the 2021 second quarter, the deadline is extended from August 2, 2021 to September 30, 2021.

Note, however, that the deadlines to file the first- and second-quarter SUI returns were not extended from the original due dates of April 30, 2021 and August 2, 2021, respectively. The third- and fourth-quarter 2021 SUI tax payment and return deadlines are not extended.

TWC ends COVID-19 waiver of work search/acceptance of suitable work requirements

The TWC announced that because economic conditions are continuing to improve, workers are again required to register and search for work, and may not refuse suitable job offers and continue to collect UI benefits.

Both federal and state UI law require individuals collecting UI benefits to actively search for work and be able and available for work. Refusing a suitable offer of work can result in a loss of UI benefits.The TWCstates, however, that it will continue to apply state UI law andTWCrules to investigate suitable work issues, such as health and safety concerns, on a case-by-case basis.

To be eligible for UI benefits, claimants must be willing, able, and available for full-time work and they must apply for and accept suitable work.

Employers are required to report employees who refuse to return to work or accept suitable job offers to the TWC. For more information, go here.

Ernst & Young LLP insights

According to the federal Treasury Direct website, as of July 1, 2021, Texas has a federal UI Title XII loan balance of $6,915,964,929.05. Failure to repay the loan balance by November 10, 2022, will result in a FUTA credit reduction for calendar year 2022 (to be paid with the 2022 Form 940 due January 31, 2023).

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