August 18, 2021
Hawaii legislation lowers SUI tax rates for 2021 and 2022; COVID-19 benefits continue not to be charged to employer accounts
Hawaii legislation (HB 1278/Act 1) freezes employer state unemployment insurance (SUI) tax rates for 2021—2022 at Rate Schedule D, with rates ranging from 0.2% to 5.8%, rather than issuing SUI tax rates at Rate Schedule H, the highest schedule provided for under state law. The result of HB 1278 is a lower new employer rate for 2021—2022 of 3.0%, rather than 5.2% under Rate Schedule H.
Hawaii employers continue to pay an Employment & Training Assessment for 2021 of 0.01%.
The Hawaii Department of Labor & Industrial Relations previously announced that SUI tax rates for 2021 would increase significantly to range from 2.4% to 6.6% on Rate Schedule H, up from 0.0% to 5.6% on Rate Schedule C for 2020. Although the 2021 tax rates continue to be higher than in 2020, the move from Rate Schedule C, which had been in effect for several years, to Rate Schedule D, reduces the impact of the COVID-19 pandemic on the 2021 SUI tax rates. (EY Tax Alert 2021-0251, 2-3-2021.)
According to Hawaii Governor David Ige's news release, the average SUI taxes for 2021 would have been $1,800 per employee under Rate Schedule H. Under Rate Schedule D, the average tax per employee is $850, a savings $950 per employee in 2021. It is anticipated that there will be an additional savings of $880 per employee for 2022.
2021 SUI taxable wage base
The 2021 Hawaii SUI taxable wage base is $47,400, down from $48,100 for 2020.?
COVID-19 benefits will not be charged to employer accounts
HB 1278 also directs the Department to omit UI benefit charges from the computation of employer SUI tax rates for calendar years 2021—2022. The Department was previously not charging COVID-19 UI benefits against employer SUI tax accounts. (EY Tax Alert 2020-1205, 5-4-2020.)
For more information on SUI taxes, contact the Department at +1 808 586 8915 or see the Department's website.
Ernst & Young LLP insights
At the end of 2019, the state had a UI trust fund balance of $597,673,732. As a result of the pandemic, by June 2020 the state's trust fund was insolvent and Hawaii began to borrow from the federal government to continue to pay state UI benefits.
As of August 15, 2021, the US Department of Treasury shows that Hawaii has an outstanding federal UI loan balance of $680,762,173.08. Because Hawaii started borrowing in 2020, failure by the state to repay its federal UI loan by November 10, 2022 will result in an increase to employer federal unemployment (FUTA) taxes, starting in calendar year 2022.
The Department's federal UI loan will soon begin accruing interest that must be repaid by September 30 each year from a source other than the state's UI trust fund. Typically this means that employers must pay an interest surcharge, but the governor has directed the state to pay the interest on the loan rather than charge employers.
EY Payroll News Flash