December 14, 2021
Colorado 2022 SUI rate notices delayed; SUI rate schedule moves to highest range; SUI taxable wage base to increase
The Colorado Department of Labor & Employment (CDLE) announced that issuance of the 2022 state unemployment insurance (SUI) tax rate notices will be delayed until early to mid-December 2021 due to the volume of work to determine correct charging of COVID-19 UI benefit claims. SUI tax rate notices are usually issued by late November.
The CDLE also confirmed that the highest of seven rate schedules by law will be used to compute experience-rated employer SUI tax rates for 2022. The 2022 SUI tax rates will range from 0.75% to 10.39%, up from 0.71% to 9.64% for 2021 (on the second highest schedule).
The 2022SUI tax rates will continue to consist solely of the base tax rates under Colorado unemployment law(under the column heading "Reserve Ratio .000 to Deficit").Due to legislation enacted earlier this year (SB 20-207), there are no fund-building surtaxes or additional rates added to the 2022 SUI base tax rate.
The CDLE states that employers needing their 2022 SUI tax rate prior to the rate notice mailing may view it in MYUI Employer starting in mid-November. SUI tax rate calculation details will not be available until after the rate notices have been mailed.
The deadline to protest the individual employer rate computation factors is 20 days from the mailing date on the SUI tax rate notice. Experience-rated employers may make a voluntary contribution to reduce their tax rate prior to March 15, 2022.
2022 SUI wage base to increase
SB 20-207 held the SUI taxable wage baseat$13,600 for calendar year 2021 but will then incrementally increase it each year until it reaches $30,600 in 2026. Thereafter, the taxable wage base will be adjusted by changes in the annual average weekly wage.
The 2022 SUI taxable wage base will be $17,000 and $20,400 in 2023.
Counterbalancing the increase in the SUI taxable wage base, the law requires that employers not be assessed a solvency surtax for calendar years 2021 and 2022, even if the state UI trust fund balance falls low enough to warrant this move. It is expected that a solvency surtax will be necessary for calendar year 2023. (Legislative council staff website, September 2021 forecast, pages 36-38.)
State paid September 30, 2021 federal interest on the UI loan with pandemic relief funds
Colorado Governor Jared Polis announced that employers would not be charged a federal interest surcharge in 2021 to cover the interest due on the state's federal UI loan, choosing instead to use Coronavirus Relief Funds (CRF) to prepay interest of approximately $6 million due for the last four months of 2021. This included the payment of $1.5 million due as of September 30, 2021.
It has not yet been announced if there will be an interest assessment in 2022.
Employer accounts were not charged with COVID-19 UI benefits
The CDLE has not been charging employer SUI tax accounts with regular UI benefits that were paid to claimants in connection with COVID-19. Colorado Governor Jared Polis ordered in March 2020 that regular COVID-19 UI benefits not be charged against employers' UI tax accounts. (Executive Orders 2020-012, 2020-100, and 2021-118; UI benefit non-charging extended most recently by Executive Order 2021-122 on July 8, 2021.)
According to the CDLE, it has been working diligently to remove such charging from employer accounts. For reimbursing employers (typically nonprofits and government agencies) benefit charges were reduced by a percentage in accordance with federal relief efforts. Due to the overwhelming volume of work involved with sorting all these charges, this process has taken significantly longer than anticipated.
To prevent these charges from contributing to employer experience rates for 2022, the CDLE ran a program to automatically remove these charges from employer accounts. It continues to review and monitor the charging on accounts and is taking necessary steps to make adjustments to any charging reversals that may have been missed through that automated process. It is taking the extra time necessary to ensure the overall accuracy of the process to negate and limit the impacts to employer accounts.
Ernst & Young LLP insights
Colorado's UI trust fund became insolvent in August 2020 and the state began to borrow from the federal government to continue to pay UI benefits. According to the 2021 Colorado unemployment insurance trust fund report (released August 31, 2021), prior to the beginning of the pandemic, the trust fund balance stood at just over $1.1 billion. According to the federal Treasury Direct website, as of November 18, 2021, Colorado has a federal UI loan balance of $1,014,167,918.51.
According to the report, the trust fund would become solvent by 2024 in a strong economic growth scenario, and by 2026 under a weak economic growth scenario. However, the forecasted additional years of insolvency, and the subsequent need to continue borrowing from the federal government to pay regular state UI benefits, is expected to trigger a FUTA credit reduction for employers starting in 2022. A weak forecast has the 2026 year-end fund balance reaching $840 million, while a strong forecast shows a balance of about $2.4 billion. The solvency surtax is expected to be in effect 2023 through 2025 under the strong economic growth scenario, while remaining on after 2026 under the weak economic growth scenario. The CDLE estimates that the UI trust fund balance will need to exceed roughly $1.1 billion for the solvency surtax to trigger off.
EY Payroll News Flash