January 19, 2023
Preliminary state unemployment insurance tax facts for 2023 (as of January 17, 2023)
SUI wage bases
SUI trust funds are largely financed by employer contributions (in Alaska, New Jersey and Pennsylvania employees also make contributions). States are required to maintain a SUI taxable wage base of no less than the limit set under the Federal Unemployment Tax Act (FUTA). The 2023 FUTA wage limit of $7,000 has remained unchanged since 1983, despite increases in the federal minimum wage and annual cost-of-living adjustments over the last 40 years.
Some states are conservative in their approach to maintaining adequate SUI trust fund reserves. Consequently, the SUI wage base is flexible in those states, meaning, it is indexed to the average wage or varies based on the trust fund balance. According to the U.S. Department of Labor, in 2022, 25 jurisdictions had a flexible wage base. (U.S. Department of Labor, Comparison of State Unemployment Laws-2022, December 2022.)
For a comparison of the 2022 and 2023 SUI wage bases and percentage of increase/decrease, if applicable (as of December 19, 2022), see EY Tax Alert 2022-1913.
For information concerning the state minimum wage effective January 1, 2023, see EY Tax Alert 2022-1930.
SUI tax rates
The COVID-19 emergency put a strain on SUI trust funds, and that could have resulted in across-the-board increases in employer SUI taxes. Many jurisdictions avoided that outcome because they deposited federal COVID-19 stimulus funds into their unemployment insurance (UI) trust funds and/or enacted legislation to reduce the impact on employer tax rates caused by the reduction in their trust funds. In addition, most jurisdictions relieved employers of regular COVID-19 UI benefits during at least a part of the pandemic, and some continue to provide this relief, further reducing the impact of COVID-19 unemployment insurance benefits on individual employer tax rates.
See the footnotes in our chart (in the attached PDF) for details about special actions some states took to lessen increases in their SUI tax rates and/or wage bases in 2023.
Other state payroll and withholding taxes
For information concerning the 2023 contribution rates and wage bases for state disability, paid family and medical leave and long-term care insurance as of December 21, 2022, see EY Tax Alert 2022-1920.
For information concerning the 2023 state income tax withholding rates and hyperlinks to the latest formulas/instructions as of January 4, 2023, see EY Tax Alert 2023-0027.
See what the employer SUI cost outlook is for 2023
To assist you in forecasting your SUI costs for 2023, the attached PDF provides a preliminary chart of the 2023 SUI wage bases and tax rates, including surcharges that are not certified and not included in state SUI wages on the federal Form 940. Information is also provided concerning the date that the 2023 SUI rate notices were/will be available.
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
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