October 20, 2021
New Jersey calendar year 2022 SUI, TDI and FLI taxable wage bases to increase; fiscal year 2022 SUI tax rates increased
The New Jersey Department of Labor and Workforce Development released its proposed annual regulatory update to reflect an increase to the calendar year 2022 state unemployment insurance (SUI), temporary disability insurance (TDI) and family leave insurance (FLI) taxable wage bases.(New Jersey Department of Labor and Workforce Development regulatory update website.)
Other SUI and TDI amounts for calendar year 2022
Under the proposed regulations, other SUI and TDI amounts for calendar year 2022 will be as follows:
Fiscal year 2022 SUI tax rates increased
As we reported, the fiscal year 2022 (July 1, 2021 to June 30, 2022) SUI tax rates increased to range from 0.5% to 5.8% on Rate Schedule C, up from a range of 0.4% to 5.4% on Rate Schedule B for FY 2021 (July 1, 2020 to June 30, 2021). The new employer rate remains at 2.8% for FY 2022. (EY Tax Alert 2021-1582, 8-30-2021.)
The fiscal year 2022 tax rates continue to include the 0.1% Workforce Development Fund rate and the 0.0175% Supplemental Workforce Fund rate. (New Jersey Department of Labor & Workforce Development website.)
Fiscal year 2022 rate notices
Employer tax rate notices are available via the Employer Access system and were mailed to some employers by August 19, 2021. Experience-rated employers had the option to make a voluntary contribution to lower their assigned SUI tax rate within 30 days of the rate notice mailing date.
Law reduces impact of COVID-19 UI benefits on SUI tax rates over next three fiscal years
As we reported, AB 4853 reduces the effect of regular state COVID-19 UI benefits on New Jersey employer SUI tax rates for fiscal years 2022 through 2024. (New Jersey's fiscal year for SUI tax rating purposes is July 1 through June 30. (EY Tax Alert 2021-0395, 2-19-2021.)
AB 4853 prevents moving to a higher SUI rate schedule over the next three fiscal years, something that had been anticipated due to a reduction in the state's UI trust fund from COVID-19 UI benefit payouts. It is estimated that the highest rate schedule, Schedule E+, would have been in effect for FY 2022, with rates ranging from 1.3% to 7.7%.
Following are the maximum SUI tax rate ranges under AB 4853:
The law provides that if calculation of the actual fund reserve ratio would result in the selection of a rate schedule with lower contribution rates than those above for fiscal years 2022 through 2024, the lower rate schedule will apply.
COVID-19 benefit charging to employers
AB 4853 also confirmed that COVID-19 UI benefits will not be charged to individual employer accounts for experience rating purposes for the period of the public health emergency and state of emergency declared by Governor Phil Murphy on March 9, 2020, and through any subsequent extensions of the state of emergency. This provision prevents payments of regular state COVID-19 UI benefits from having a direct impact on fiscal year tax rates. Governor Philip D. Murphy ended the public health emergency on June 4, 2021 and did not issue an Executive Order extending the relief of charging COVID-19 benefits to employer accounts. (Executive Order 244; governor's news release, 6-4-2021.)
New Jersey federal UI loan and the future impact on employer costs
New Jersey began borrowing from the federal government in August 2020 when the state's UI trust fund became insolvent. As of October 7, 2021, the US Department of Treasury shows that New Jersey has an outstanding federal UI loan balance of $426,034,927.34. Failure to repay the federal loan balance by November 10, 2022, would result in a FUTA credit reduction of 0.3% for calendar year 2022. The Department estimates that under current conditions it may be May 2023 before the state's federal UI loan balance is fully repaid.
Under the American Rescue Plan Act (ARPA), interest was waived on federal UI loans through September 6, 2021. States that continue to have a federal UI loan balance after September 6, 2021 will see interest start accruing at a rate of 2.2777%. States are not allowed to use regular UI trust fund monies to pay the interest. Most states charge the interest back to employers through a special surcharge, with others using general state funds or loans to avoid increasing employer SUI taxes.
Due to the financial crisis of 2008, New Jersey obtained federal UI loans and employers were charged a federal interest assessment to pay the interest on the loan balance.
Under N.J.A.S. 43:21-14.3, the Department is required in June of each year to determine the anticipated amount of federal interest that will be due on an outstanding federal UI loan balance by September 30 that year. If there are not sufficient funds in the state's unemployment compensation auxiliary fund to pay the entire amount due, the Department must issue federal interest assessments to employers, determined by multiplying the amount of an employer's calendar year SUI contributions by a ratio calculated by the Department under N.J.A.S. 43:21-14.3(c). The minimum assessment amount is $5.00. These interest assessment notices are usually issued in July of the year the federal interest is due (i.e., July 2022 to pay federal interest due on September 30, 2022). Payment is due within 30 days of the assessment's mailing date.
Although the Department has not yet announced how any federal interest due by September 30, 2021 will be paid, the fiscal year 2022 budget summary indicated the intention to pay the interest due from the unemployment compensation auxiliary fund if there is enough available in the fund. As of September 13, 2021, the US Department of Treasury showed that New Jersey had accrued interest of $97,503.16 for fiscal year 2021.
See also the Department's Analysis of the fiscal year 2022 Budget (dated 4-2021) for more information on payment of federal interest. According to the analysis, Governor Phil Murphy anticipates $26 million in interest payments would need to be paid for FY 2022. The analysis states the intention to change the language of N.J.A.S. 43:21-14.3 to allow partial payment from the unemployment compensation auxiliary fund so that even if there are not sufficient funds in the auxiliary fund to completely cover the FY 2022 interest, New Jersey employers would pay a reduced amount in interest assessments.
The analysis shows that the unemployment compensation auxiliary fund is projected to carry $15.5 million into fiscal year 2022, with the total reaching $16.1 million by the close of the fiscal year. The auxiliary fund is the repository for all interest and penalties imposed upon employers for violating UI regulations.
The New Jersey Business & Industry Association (NJBIA) reports that state Republican legislators are calling for a special legislative session in 2021 to pass legislation to relieve employers of the burden of increased SUI taxes over the next three years to replenish the state's UI trust fund balance. The NJBIA also reports that some legislators have been calling on the governor to instead use federal COVID-19 relief funds to replenish the UI trust fund.
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