August 24, 2021
Tennessee SUI tax rates continue at lowest rate schedule for last half of 2021; employers will not be charged for COVID-19 UI benefits through July 3, 2021
According to the Tennessee Department of Labor & Workforce Development website, the employer state unemployment insurance (SUI) tax rate schedule continues to be the lowest possible for fiscal year 2022 (July 1, 2021 to June 30, 2022).
Because the SUI trust fund balance continued to exceed $850 million as of June 30, 2021, SUI tax rates for experience-rated employers will continue to range from 0.01% to 10.0% on Premium Rate Table 6 (though individual SUI tax rates increased or decreased as of July 1, 2021 because tax rate factors affect tax rates on a fiscal year basis).
Most new employers continue to pay at 2.7% for fiscal year 2022. The new employer rate for construction employers may be found on Form LB-0441, Report to determine status.
Note that the SUI tax rate schedule may change as of January 1, 2022, increasing SUI tax rates for the first and second quarters of 2022, if the level of the state's UI trust fund balance falls below $850 million as of December 31, 2021.
Mailing of fiscal year 2022 rate notices
A Department representative told us that the FY 2022 SUI tax rate notices will be issued to employers by the end of August 2021. (Email response to inquiry.)
2021 SUI wage base
Employers continue to pay SUI taxes based on a taxable wage base of $7,000 for the remainder of calendar year 2021. The SUI taxable wage base for calendar year 2022 will be determined based on the UI trust fund balance as of December 31, 2021. If the UI trust fund balance continues to be over $1 billion at that time, the taxable wage base will remain at $7,000 for calendar year 2022.
By February 1 of each year the Department must report to the state legislature the UI trust fund balance as of the prior December 31 for purposes of determining the SUI taxable wage base for the calendar year. If the UI trust fund balance on December 31 of any year is less than $900 million, the taxable wage base is $9,000. If the trust fund balance is above $900 million, but less than $1 billion on December 31, the taxable wage base is $8,000. If the trust fund balance is over $1 billion on December 31, the taxable wage base is $7,000.
Employer accounts not charged with COVID-19 UI benefits through July 3, 2021
The Department announced that the procedure to not charge COVID-19 UI benefits against employer SUI accounts was extended through July 3, 2021. This extended the provision under Executive Order 77 issued by Governor Bill Lee on February 26, 2021,that allowed COVID-19 UI benefits to be non-charged through March 14, 2021. The Department had originally intended to start charging UI benefits to employer accounts on March 15, 2021.
Employers have not been charged with COVID-19 UI benefits since March 15, 2020 due to the 2020 enactment of SB 2520 (Chapter 745) that also codified the waiver of the one-week waiting period for COVID-19 UI benefits contained in Executive Order 15.According to a Department representative, Department Commissioner Jeff McCord does not plan to extend the non-charge provision past July 4, 2021 unless further legislation is enacted. (Email response to inquiry.)
Tennessee ended its participation in federal UI benefit programs, lawsuit filed
Governor Bill Lee announced that effective for the week ending July 3, 2021, the state ended its participation in all federally funded pandemic UI programs. However, a group of Tennessee residents filed a lawsuit that would force the state to extend these benefits through September 6, 2021. (The Nashville Tennessean, 7-28-2021; FAQs, Department website.)
Currently, the following federal UI benefits are no longer available:
Some other states that ended participation in the federal UI program, in which claimants sued their governors, have been ordered to temporarily resume paying federal UI benefits (i.e., Arkansas, Indiana, Maryland and Oklahoma).
Since October 2, 2020, unemployment claimants in Tennessee have been required to complete three weekly job searches to remain eligible for benefits. (Governor's press release.)
Ernst and Young LLP insights
Monthly transfers of CARES Act funds totaling $939 million in 2020 to Tennessee's UI trust fund kept the 2021 SUI taxable wage base at $7,000 for calendar year 2021 and the rate schedule at the lowest level for FY 2021 and the last two quarters of 2021. (Unemployment trust fund summary report, slide 8, August 2021; Report to the financial stimulus accountability group on the federal and state fiscal response to COVID-19, updated June 2, 2021.)
The report estimates that had the transfers of CARES Act funds not occurred, employer SUI taxes would increase by 300%.
According to the federal Treasury Direct website, as of August 24, 2021, Tennessee has not yet exercised the option to receive federal unemployment insurance (UI) Title XII advances (UI loans).
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