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October 4, 2021
2021-1799

Maryland legislation requires the governor to bolster the UI trust fund balance to lower the SUI tax rate schedule for 2022 and 2023; federal UI loan balance repaid avoiding FUTA credit reduction in 2022

Recently enacted emergency legislation (SB 811/Chapter 73) requires that Maryland Governor Larry Hogan deposit enough federal relief funds into the state's unemployment insurance (SUI) trust fund to ensure that Rate Schedule C, the midway point of SUI rate schedules under the state UI law, be in effect for calendar year 2022. The bill also requires that Rate Schedule C be used for calendar year 2023. SUI tax rates on Rate Schedule C range from 1.0% to 10.5%. (Governor's news release.)

The law requires Governor Hogan to include in the fiscal year 2022 annual budget bill an appropriation of federal American Rescue Plan Act (ARPA) funds sufficient to replenish the SUI trust fund to the point resulting in Table C for calendar 2022. The appropriation may also be used for administrative costs, including the repayment of the federal unemployment insurance (UI) loan balance. Governor Hogan previously estimated that $1.1 billion in federal funds would need to be allocated to the UI trust fund to accomplish this goal. (SB 811 fiscal note.)

2021 SUI tax rates increased from lowest rate schedule to highest rate

Rate Schedule F, the highest per law, is in effect for calendar year 2021. Due to the enactment of the Relief Act (SB 496/CH39), Governor Hogan's Executive Order 20-12-10-01 requiring that the 2021 SUI tax rates not be based on individual employer experience for fiscal year 2020 was codified. Although the computation of employer individual SUI tax rates did not take into account COVID-19 UI benefits for fiscal year 2020, the overall historic impact on the state's UI trust fund caused a significant increase in 2021 employer SUI tax rates. (See EY Tax Alert 2021-0427, 2-25-2021.)

The Maryland 2021 SUI tax rates range from 2.2% to 13.5% on Table F, up from 0.3% to 7.5% on Table A (the lowest rate schedule). Table A had been in effect for five consecutive years prior to 2021. (Maryland Department of Labor website.)

See the Department's website for frequently asked questions about the executive order and the governor's website for more information on the Relief Act.

Employers not charged with COVID-19 UI benefits until state of emergency ended on July 1, 2021

According to the Maryland Department of Labor website, employer accounts have not been charged with regular COVID-19 UI benefits during the COVID-19 state of emergency. Governor Hogan announced that the state of emergency ended as of July 1, 2021. (Executive Order 21-06-15-01.)

Ernst & Young LLP insights

According to the federal Treasury Direct website, as of September 27, 2021, Maryland paid off its federal UI loan balance by using ARPA funding as allowed under SB 811. Assuming the state does not borrow again, it has avoided the federal unemployment insurance tax (FUTA) credit reduction that was set to trigger in 2022.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

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