April 20, 2022
Illinois employers can now take advantage of the workshare program; state unemployment insurance tax rates increase for 2022
After a delay of several years, Illinois employers can now take advantage of a state workshare (also known as short-time compensation) program. (June 2021 meeting minutes of the Illinois Department of Employment Security (IDES) Employment Security Advisory Board.) A state workshare program provides an alternative to layoff for employers faced with a reduction in force by allowing employees to receive a portion of their unemployment insurance (UI) benefits while working reduced hours.
As we previously reported (EY Tax Alert 2020-1322, 5-18-2020), Illinois UI law (820 ILCS 405/502) has allowed for the implementation a state workshare program through state regulations since 2015; however, the implementing regulations were not issued, and the state's program remained inactive, until this year.
As a result of the implementation of the program, the US Department of Labor (US DOL) awarded the IDES more than $4 million in grants to improve the state's UI system to support a workshare program and to raise awareness of the program.
For more information on the Illinois workshare program, see the IDES website.
2022 state unemployment insurance tax rates increase, wage base unchanged
The 2022 Illinois state unemployment insurance (SUI) experience-rated tax rates will range from 0.725% to 7.625%, up from 0.675% to 6.875% for 2021. The SUI taxable wage base remains $12,960 for 2022. (IDES website.)
New employers pay at 3.525% for 2022, up from 3.175% for 2021. For 2022, there are no special industry new-employer rates.
For 2022, an experience-rated employer whose contribution rate is higher than 5.4% and whose total quarterly wages are less than $50,000 pays contributions at 5.4% in that quarter.
Mailing of 2022 rate notices
The IDES mailed the 2021 SUI tax rate notices to employers on November 30, 2021. (Telephone conversation, Employer Services Hotline representative.)
2022 SUI rate factors increase
Rate factors used in the 2022 SUI rate calculation increased from those used in 2021. The 2022 State Experience Factor (a multiplier) is 111%, up from 95% for 2021. The Fund Building Rate (a flat addition) increased to 0.525% for 2022, up from 0.475% for 2021.
Legislation enacted in 2020 (HB 2455) holds the increase to the State Experience Factor for 2022 to 16% above 2021's factor; as a result, the 2022 factor is held at 111%. Normally the factor would have been held at 22% over the 2021 factor, which would have made the factor 116% for 2022. Had no limiter been provided for under Illinois law, the factor would have been 227%.
A chart of historical rates is here. For information on how the 2022 SUI rate factors were computed, go here.
COVID-19 UI benefits not charged against employer accounts through December 31, 2020
Also reducing the effect of COVID-19 on employer 2022 SUI tax rates, HB 2455 (820 ILSC 405/1502.4) stipulated that UI benefits directly or indirectly attributable to COVID-19 and paid for weeks of unemployment that began on or after March 15, 2020, and on or before January 2, 2021, not be charged against contributory employer accounts. (September 2021 meeting minutes of the Employment Security Advisory Board.)
Ernst & Young LLP insights
Illinois's UI trust fund became insolvent in June 2020 and the state began to borrow from the federal government to continue paying UI benefits. As of April 14, 2022, the U.S. Department of Treasury shows that the state has an outstanding federal UI loan balance of $1,812,645,002.82.
Interest of approximately $8 million due on the federal loan for September 6, 2021 through September 30, 2021, was paid through an appropriation of $10 million from the state's FY 2022 state budget.
Failure to repay this federal UI loan balance by November 10, 2022, would result in a federal unemployment insurance (FUTA) credit reduction of 0.3% for calendar year 2022 and a corresponding increase in the FUTA taxes that Illinois employers pay. According to the Advisory Board's September 2021 minutes, the IDES expects the state's trust fund balance to remain in a deficit condition through at least 2022 and possibly through 2024.
For more information, contact the IDES's Employer Services Hotline at +1 800 247 4984 or see the Department's website.
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