August 8, 2022
New York employers will pay an interest assessment in 2022 for the state's federal UI loans
The New York Department of Labor announced that employers will soon receive a bill from the Department, known as the Interest Assessment Surcharge (IAS), the proceeds of which will be used to pay federal interest charges of approximately $162 million owed by the state on its federal UI loans.
The IAS rate for 2022 is 0.23%, resulting in employers' paying approximately $27.60 per employee. According to the Department, "unless the federal government chooses to abate all or part of the interest incurred or the principal balance amount is repaid with no more interest accrued, businesses will be required to make annual IAS payments until all interest has been fully paid off."
The IAS is calculated as the taxable wages reported by the employer for the fourth quarter of 2020 through the third quarter of 2021 multiplied by the IAS rate of 0.23% (.0023 in decimal form). The IAS will vary from year to year, depending on the outstanding loan balance, wages subject to contributions and the federally prescribed interest rate.
When the state received federal UI loans in the past, the IAS payment was due within 30 days of the notice mailing date or, for 2015, with their quarterly state unemployment insurance (SUI) tax filing.
Now, the Department is encouraging employers to pay the amount due electronically with their second quarter 2022 Form NYS-45, Quarterly Combined Withholding, Wage Reporting and Unemployment Insurance Return, on their UI Online Services account.
The second quarter SUI return and payment is due on August 1, 2022. Employers that choose not to pay the IAS with their second quarter return may write a check payable to "NYS Unemployment Insurance" and send it to NYS Unemployment Insurance, P.O. Box 4301, Binghamton, New York 13902—4301. Be sure to include your UI tax account number on the check and note that the payment is for the IAS.
The U.S. Department of Labor approved the state's request to defer three-fourths of the interest due for 2021 to future years, and the one-fourth due for 2021 was paid by state general funds. Legislation (SB 3969) introduced on February 1, 2021 to repeal the section of law that allows the Department to collect the surcharge has been in the Senate Labor Committee since January 5, 2022. (EY Tax Alerts 2021-1846, 10-11-2021; 2021-1997; 11-2-2021.)
2022 SUI tax rates continue at highest level
The 2022 New York SUI tax rates continue to range from 2.025% to 9.825%. Due to the insolvency of the state's UI trust fund, 2022 SUI base rates are based on Size of Fund Index, with the column heading of less than 0%. In addition, a variable subsidiary contribution rate is included in the 2022 employer tax rates.
All contributory employers continue to pay an additional 0.075% Re-employment Services Fund surcharge, which is not credited to employer accounts and is not reported to the federal government as SUI taxes for use in computing FUTA taxes.
The new employer rate for 2022 continues at 4.025%.
Taxable wage base increases
The 2022 SUI taxable wage base increased to $12,000, up from $11,800 for 2021.
The SUI taxable wage base will continue to increase over the next several years until it reaches $13,000 in 2026. For each year thereafter, the SUI taxable wage base will be computed as 16% of the state's average annual wage. (2013—2014 budget bill AB 3007, Chapter 57, signed by the governor on March 29, 2013.)
Below is the schedule of increases for years 2023 through 2026:
Ernst & Young LLP insights
New York's state UI trust fund became insolvent in May 2020; the state is one of seven jurisdictions that continues to have a federal UI loan balance in 2022. As of July 11, 2022, the U.S. Department of Treasury shows that New York has an outstanding federal UI loan balance of $8,149,528,233.09, second only to California.
According to a June 2022 report by the New York Office of the State Comptroller, although the state paid $1.2 billion of its federal UI loan balance in May 2022 the amount owed "remains stubbornly high despite steady employment gains and State tax rates that have already increased to maximum permissible levels." According to the report, the state's federal UI loan balance reached as high as $10.2 billion in March 2021, and then declined and plateaued to an average $9.3 billion from September 2021 through April 2022.
New York has not allocated any of its federal COVID-19 stimulus money to the federal UI loan balance; nor did the Enacted Budget for State Fiscal Year 2022-23 include use of federal or state funds to pay down the loan. According to a report issued by the Citizen's Budget Committee (a nonprofit, nonpartisan organization), without use of funds other than from the state's UI trust fund, the federal UI loan balance is not likely to be repaid fully until 2027.
Failure to repay the federal UI loan balance in full by November 10, 2022 will 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 New York employers pay. The FUTA tax rate will continue to climb each year by 0.3% or more until the state repays its federal loan balance in full.
A total of 22 jurisdictions were approved in 2020 to receive federal UI loans (California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Ohio, Pennsylvania, Texas, Virginia, the Virgin Islands and West Virginia) when their trust fund balances became insolvent. Approximately half of these states repaid their federal UI loan balances throughout 2020 and 2021. Under the American Rescue Plan Act (ARPA) (P.L. 117-2), interest on federal UI loans starting in 2020 began to accrue as of September 7, 2021 (extended from January 1, 2020, by the FFCRA (P.L. 116-127) and from March 16, 2021, under the Appropriations Act (P.L.116-260).
For more information on SUI taxes, see the New York Department of Labor's website.
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