UIT Solvency Tax Surcharge FAQs

In accordance with the Colorado Employment Security Act (CESA) 8-76-102 (5)(a)(I), ratable employer accounts were assigned a solvency surcharge beginning in calendar year 2004. This solvency surchargeis the result of the Unemployment Insurance (UI) Trust Fund’s level of solvency decreasing below a level that ensures the ability of the UI Program to pay UI benefits. The solvency surcharge is added to the standard or computed rate when the UI Trust Fund balance, on any June 30, is equal to or less than nine-tenths of 1 percent of the total wages reported by ratable Colorado employers for the calendar year or the 4 consecutive quarters prior to the last computation date.

FOR WHAT LENGTH OF TIME IS THE SOLVENCY SURCHARGE ASSESSED?

The solvency surcharge is a temporary surcharge that is increased in yearly increments until:

• A maximum solvency surcharge, as mandated by law, is reached.
NOTE: The solvency surcharge limit (maximum) can vary from employer to employer. The solvency surcharge limit is determined by the employer’s percent of excess for the current calendar year. The solvency surcharge cannot exceed the limit established for each percent of excess in CESA 8-76-102 (5)(b).
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• The UI Trust Fund reaches a monetary level such that the solvency surcharge is no longer necessary.

HOW IS THE SOLVENCY SURCHARGE CALCULATED?

Annual incremental increases to the solvency surcharge are outlined in the solvency surcharge rate schedule in CESA 8-76-102 (5)(b). As shown in the solvency surcharge rate schedule, an employer’s accumulative solvency surcharge rate depends on his or her percent of excess during each year the solvency surcharge has been in effect.

To calculate your solvency surcharge rate for calendar year 2010 add the annual incremental increase (which is based on your percent of excess) to your 2009 solvency surcharge rate.

What Is the Percent of Excess?

The percent of excess is used to determine an employer’s computed rate. Employers are assigned a positive percent of excess if the amount of UI premiums they paid to the UI Trust Fund is greater than the amount of UI benefits charged to their account. Employers are assigned a negative percent of excess if the amount of UI premiums they paid to the UI Trust Fund is less than the amount of UI benefits charged to their account.

The percent of excess is computed by subtracting the benefits charged to an employer account from the premiums paid to that account and dividing the result by the average annual payroll. The percentage is computed to the nearest 1 percent. This rate-computation formula applies only to accounts that have met the qualifications for a computed rate in accordance with CESA 8-76-103 (3)(a)(I) or 8-76-103 (3)(a)(III)(E).

NOTE: Employers with a positive percent of excess are assigned a lower computed rate, while employers with a negative percent of excess are assigned a higher computed rate.