September 28, 2021
Ohio repays federal UI loan balance, removing FUTA credit reduction for 2022; employers resume being charged with UI benefits
Ohio Governor Mike DeWine announced that the state's federal unemployment insurance (UI) loan was repaid in full using federal American Rescue Plan Act (ARPA) funds. Ohio began borrowing from the federal government in June 2020. As of September 2, 2021, the outstanding balance was $1,471,765,771. As of September 6, 2021, the US Treasury Direct website shows a zero balance for Ohio.
As a result of the loan repayment, and if the state can avoid having an outstanding balance in 2022, Ohio employers will be spared a Federal Unemployment Tax Act (FUTA) credit reduction for calendar year 2022, which would increase the FUTA tax rate by 0.3%.
Repayment by September 6, 2021, also avoids the need to assess employers an additional surcharge for interest on the federal UI loan. Under the ARPA, interest is waived on federal UI loans through September 6, 2021. States that continue to have a federal UI loan balance after this date will be assessed interest at a rate of 2.2777%.
Repayment of the federal UI loan balance was made possible through the enactment of Ohio HB 168, which provides for the allocation of ARPA funds to the state's UI trust fund. According to the bill analysis, the Ohio Department of Job and Family Services must certify to the governor and other key state officials the outstanding amount owed on the federal UI loan on August 31 and December 27, 2021. If there is a federal UI loan balance as of the latter date, the Ohio Director of Budget and Management must, by the end of December 2021, remit the remaining loan balance from the state fiscal recovery fund, saving employers from a 2022 FUTA credit reduction.
Employer accounts resume being charged for UI benefits
To lessen the impact of COVID-19 UI benefit payments on individual employer state unemployment insurance (SUI) accounts, these benefits were not charged to individual employer accounts, but instead, to the mutualized account, for the duration of the state's emergency period (Executive Orders 2020-24D, 2020-03D; 2020-01D; EY Tax Alert 2020-0781,3-30-2020.)?
On June 18, 2021, Governor DeWine lifted the state of emergency under Executive Order 2020-01D. Consequently, employer UI accounts will be charged with COVID-19 benefits effective June 21, 2021. The cutoff date for computing Ohio 2022 SUI tax rates was June 30, 2021, so employers will be minimally affected by UI benefit charges charged against their accounts, although employer SUI tax rates will most likely still be affected by the addition of a flat "mutualized" tax rate. (Email response to inquiry, 9-7-2021.)
As we reported, the Ohio 2021 SUI tax rates range from 0.8% to 9.8%, up from the 2020 range of 0.3% to 9.4%. The increase is due to an inclusion of a "mutualized" flat tax rate of 0.5%, which was added to bolster the state UI trust fund and pay the COVID-19 UI benefits charged to the mutualized account rather than to individual employer accounts. (EY Tax Alert 2021-07, 4-13-2021.)
For more information regarding SUI taxes in Ohio, see the Department's website or contact the Contribution Section at +1 614 466 2319. See the Department website for information regarding the Department's response to COVID-19.
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