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May 23, 2022
2022-0818

Alabama law strengthens work search requirements for unemployment benefit claimants; 2022 employer SUI tax rates decrease but wage base remains unchanged

Alabama Governor Kay Ivey has signed into law SB 224, which, effective January 1, 2023, modifies the rules governing eligibility for unemployment insurance (UI) benefits by requiring that claimants contact prospective employers at least three times per week for each week of unemployment claimed to be eligible to receive unemployment compensation benefits.

Governor Ivey stated that she enacted SB 224 "to ensure we are helping those [who] truly need unemployment assistance while also making sure we hold everyone accountable in their efforts to seek work when there are numerous job openings available." (Governor Ivey press release, April 12, 2022.)

State unemployment insurance tax rates decreased for 2022

According to an Alabama Department of Labor representative, Rate Schedule C is in effect for calendar year 2022, down from Rate Schedule D for 2021. In addition, the 2022 state unemployment insurance (SUI) tax rates include a shared cost assessment of 0.2% (down from 0.5% for 2021).

As a result, the 2022 SUI tax rates range from 0.64% to 6.24%, down from 1.09% to 7.24% for 2021, but up from 0.59% to 6.74% for 2020, plus the 0.06% Employment Security Enhancement Assessment. (Email response to inquiry.)

New employers continue to pay at a total of 2.7%.

The average SUI tax rate is 1.1% for 2022, down from 1.54% for 2021, reflecting a decrease in the average tax cost per employee to $88, down from $123 for 2021.

For tax years 2016—2020, there was no shared cost assessment rate added to employer tax rates. Shared costs are benefit charges that can't be attributed to any one employer and are shared by all Alabama employers. Bankruptcies and business closings are examples of shared costs that may be divided among employers that remain active entities.

2022 taxable wage base unchanged

The taxable wage base remains at $8,000 for calendar year 2022.

Alabama governor transferred CARES/ARP Act funds to state UI trust fund to allow for a rate decrease for 2022 and prevent increase in SUI tax rates for 2021

Under provisions in the 2022 first special session legislation (HB 1/Act 2022-1) Governor Ivey allocated $79.5 million in American Rescue Plan Act (ARPA) funds to the state's UI trust fund. This deposit, and others made previously, allowed the SUI tax rate schedule to decrease for 2022. According to Alabama Labor Secretary Fitzgerald Washington, employers are anticipating an average 29% cut in their SUI 2022 taxes. (Alabama Department of Labor news release ; governor's news release, 1-27-2022; UI trust fund update as posted to the Alabama Retail Association's website, 1-19-2022.)

The deposit of ARPA and Coronavirus Aid, Relief and Economic Security (CARES) Act funds helped to offset the non-chargeable benefit costs incurred during March through October 2020 when employer accounts were not directly charged with state COVID-19 UI benefits, which in turn lowered the shared cost assessment rate. According to the Department, without the deposit of ARPA funds, the shared cost assessment rate would have been 0.7%, causing employers to experience a 3% shared cost increase for 2022.

2022 tax rates only available electronically

The 2022 Alabama SUI tax rate notices continue to be available only electronically — the Department will not mail paper rate notices to employers. Instead, employers (or employer representatives) must download the notice from the Department's website. The 2022 tax rate notices electronically posted on February 8, 2022.

According to information posted to the Department's electronic reporting system, the 2022 SUI tax rates may have been updated from those that were posted originally to the website. Employers should revisit the "Tax Rate/Advanced Payment Rate Notice" section of the website to ensure that the most current and accurate information has been downloaded.

Ernst & Young LLP insights

Alabama has not requested the option, if needed, to receive federal UI Title XII advances (UI loans).

For more information on SUI taxes in Alabama, see the Department's website or call +1 334 954 4741.

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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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