August 16, 2022
Connecticut second-quarter 2022 SUI tax return deadline extended due to new online reporting system; 2022 federal interest on the state's UI trust fund loan will be paid with federal stimulus funds
The Connecticut Department of Labor (CTDOL) announced that the deadline for filing the second-quarter 2022 state unemployment insurance (SUI) return and paying the associated taxes is extended by one month, from July 31 to August 31, 2022. The extension allows employers extra time to sign up for the new ReEmployCT online reporting system, which came online July 5, 2022. The extension applies to late fees and interest, which will not be assessed until September 1, 2022, and penalties, which will not be assessed until October 1, 2022.
Employers will need to register for a new user name and password in the new system; old user names and passwords will no longer work. When registering and creating a new account, employers will be asked for an eight-digit registration number. The number will be the employer's existing account number plus a zero at the end. For example, if an employer's account number is 7654321, the registration number will be 76-54321-0. Once registered, most transactions will require a 10-digit account number, requiring employers to add three zeroes at the end of their account number. For example, if an employer's account number is 7654321, the new account number will be 76-54321-0-00. All communication issued to employers on or near July 5, 2022, includes the 10-digit Employer Account Number. A new file format also applies.
The billing cycle will change for reimbursable employers from monthly to quarterly billing under the new system. The first quarterly bill was posted to the ReEmployCT system in July 2022 and included the charges for April, May, and June 2022.
Federal interest on the state's UI trust fund loan will be paid with federal stimulus funds
According to a CTDOL senior representative, the state will use part of the federal COVID-19 stimulus funds allocated to the agency by the state's fiscal year (FY) 2023 budget to pay the interest due for FY 2022 on the state's federal unemployment insurance (UI) loan, rather than issue a special assessment to employers. As of August 8, 2022, the U.S. Department of Treasury shows that Connecticut has an outstanding federal UI loan balance of $158,975,214.50 and must pay interest of $6,590,476.31 by September 30, 2022. (Email response to inquiry, 7-11-2022.)
Connecticut began borrowing from the federal government when the state's UI trust fund became insolvent in August 2020. 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 0.3% increase in the FUTA taxes that Connecticut employers pay. The Connecticut Department of Labor anticipates that without legislative intervention the outstanding loan balance will not be repaid in time to avoid a FUTA credit reduction for 2022 (additional taxes due by January 31, 2023).
Governor Ned Lamont authorized the state to pay the interest due on September 30, 2021 for FY 2021, thereby eliminating the need for Connecticut employers to pay a special assessment in 2021. (Connecticut Department of Labor website.)
Legislation lowers SUI tax rate computation for 2023
The Connecticut state budget for the biennium ending June 30, 2023 (HB 5506/Act 22-118) reduces state SUI tax rate computations for calendar year 2023. The legislation affects both the new-employer rate and experience tax rates for calendar year 2023. The SUI taxable wage base is expected to remain at $15,000 for calendar year 2023, but then increase as of calendar year 2024 to $25,000 under 2021 HB 6633/Public Act 21-200.
For calendar year 2023, the highest solvency tax rate will be reduced from 1.4% to 1.2% under HB 5506, anticipated to reduce the range of SUI experience tax rates by 0.2% with rates ranging from 1.7% to 6.6%. The HB 5506 fiscal note estimates that the legislation will result in a revenue loss to the state's UI trust fund of $40 million. Under HB 5506, $40 million in American Rescue Plan Act (ARPA) funds will be deposited into the UI trust fund to make up for this loss in revenue.
Legislation enacted in 2021 (HB 5377/Public Act 21-5) required that, effective for the computation of SUI tax rates for tax years beginning January 1, 2022, tax-rate computations not include UI benefit charges or taxable wages for the fiscal years ending June 30, 2020, and June 30, 2021. The 2022 SUI tax-rate factors remained the same as for 2021, with experience rates continuing to range from 1.9% to 6.8% (including the 1.4% solvency tax rate). Current UI law caps the solvency tax rate at 1.4%, with a decrease to 1.0% scheduled for 2024 under HB 6633.
Calendar year 2023 new-employer tax rate
House Bill 5377/Public Act 21-5 required that for new employers, the statewide UI benefits and taxable wages for calendar years 2020 and 2021 be disregarded when calculating the state's five-year benefit cost rate that applied to the 2022 new-employer tax rate. The benefit cost rate is determined by dividing the total benefits paid to claimants over the previous five years by the five-year payroll over that period.
By UI law, new employers that had chargeable with UI benefits for a period sufficient to establish an experience tax rate must pay either 1% or the state's five-year benefit cost rate, whichever is higher. For calendar year 2022, the new-employer rate is 3.0%, unchanged from 2021. (Connecticut Department of Labor website.)
For 2023, HB 5506 requires that the state's five-year benefit cost rate be calculated in the same way as for 2022, but then be further reduced by 0.2%.
HB 5377 also affects SUI rate computations for calendar years 2026—2027
In addition to the changes for 2022, 2021 HB 5377/Public Act 21-5 provides that for calendar year 2026, employer SUI tax rates will be based on employer experience for only the fiscal year ending June 30, 2025. For calendar year 2027, employer SUI tax rates will be based on the two fiscal years ending June 30, 2025 and June 30, 2026.
Governor Ned Lamont's Executive Order No. 7W provided that contributory employers were not charged for any UI benefit claims that were filed during the pandemic, commencing with week ending March 21, 2020 through week ending June 26, 2021. Therefore, for new claims filed during that period, contributory employers were not charged for the entire benefit year that followed from that effective date. (Executive Order No. 12B, issued on May 20, 2021, ending the non-charge provision of Executive Order No. 7W, issued on April 9, 2020; EY Tax Alert 2020-1074, 4-22-2020.)
2021 HB 6633 will increase the taxable wage base beginning calendar year 2024
House Bill 6633/Public Act 21-200 will increase the SUI taxable wage base for calendar year 2024 to $25,000, up from the current $15,000, and make other changes to Connecticut's UI law.
Beginning with calendar year 2025, the taxable wage base will be indexed each year for inflation. House Bill 6633 also, for calendar year 2024, expands the base rate schedule and reduces the maximum fund solvency tax rate from 1.4% to 1.0%. (Public Act 21-200 summary.)
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