Employer Information on Federal and State Unemployment Tax Rate
The Impact of Borrowing on Employer Federal Tax Rates
One of the federal statutory mechanisms for repaying outstanding federal loans is through increased Federal Unemployment Tax Act (FUTA) taxes. Each state that has federal loans outstanding for at least two consecutive years subjects their employers to increased FUTA taxes each year until all loans are paid in full. The payments from FUTA tax increases are applied directly to that state’s outstanding federal loan balance.
As Connecticut has an outstanding loan balance, Connecticut employers will have a FUTA tax increase of 0.3%, applied to payroll paid from January 1, 2022, through December 31, 2022— up to $21 per full-time employee. The calendar year 2022 FUTA tax return payments will be due and payable in January 2023.
Please note that while the IRS will publish a list of FUTA credit reduction states, CTDOL is providing employers and their payroll agents this information in advance of the IRS notice to allow employers to budget for the federal tax increases and minimize retroactive adjustments.
Connecticut Reduced State Tax to Mitigate Federal Increases
To mitigate the impact of the FUTA tax increase to employers, the Connecticut Legislature passed Public Act 22-118, which contains a provision reducing the state unemployment tax rates by 0.2% for calendar year 2023. This state unemployment tax rate reduction lessens the impact of the FUTA tax increase for those that are paying State Unemployment Tax Act (SUTA) in 2023. For full-time employees, the state tax decrease provides more than 100% offset for the federal increase.
Public Act 22-118 creates a temporary reduction of 0.2% in the state’s new employer and fund solvency tax rates for calendar year 2023 only.
All employers (new and existing) will see a 0.2% reduction in their calendar year 2023 tax rate:
- The state’s new employer rate, originally 3.0% for 2023, is reduced to 2.8%.
- The fund solvency tax, originally 1.4% for 2023, is reduced to 1.2%.
State Tax Rates & Impact on Experience Rating
What is the impact of Public Act 21-5 on my experience rating?
Unemployment benefits paid to your former employees and your taxable wages for experience years ended June 30, 2020 and June 30, 2021, are not used to calculate any employer’s experience rate.
What is the impact of Public Act 21-5 on the state’s new employer rate?
The rate charged to new employers who have not participated in the system long enough to have their own experience rates will be calculated without regard to the benefits paid and the taxable wages reported during calendar years 2020 and 2021.