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UNEMPLOYMENT INSURANCE TRUST FUND AND TAX RATES The Colorado Unemployment Insurance (UI) Trust Fund consists of all taxes paid into the UI Program by Colorado employers, minus all UI benefits claims that have been paid, plus interest earned on the balance in the UI Trust Fund. The tax-rate schedule that is used for any given calendar year is dependent on the amount of money in the UI Trust Fund at the end of the previous state fiscal year. The state fiscal year is July 1 to June 30. July 1 is the computation date for calculating tax rates for the following calendar year. Most employers are assigned a computed tax rate, which is based on the history of the employer’s UI tax account and, if applicable, the predecessor’s account. Newer employers or reinstated employers who do not meet the Colorado Employment Security Act (CESA) requirements for receiving a computed tax rate are assigned a standard tax rate or an industry standard tax rate. Most employers are also assessed a tax surcharge. In addition, when the UI Trust Fund is below a certain monetary level, a solvency tax surcharge (STS) is assessed. The balance of the UI Trust Fund as of June 30, 2008, was at a monetary level that requires the assessment of the STS for calendar year 2009. STANDARD AND COMPUTED TAX RATES With the exception of employers in the construction industry, the standard rate for employers newly subject to pay unemployment taxes on or after July 1, 1997, is 1.7 percent (0.017). This standard rate applies unless the employer has 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). CESA 8-76-103 (3)(a)(I) authorizes the assessment of taxes for new employers at the standard or at the computed rate, whichever is higher. NOTE: A successor employer is most often a newly subject employer. However, the history and experience of a predecessor account and its computed tax rate is assigned to a qualified successor. A successor must acquire all of the organization, trade, or business or substantially all of the assets of the predecessor to qualify for the predecessor’s computed tax rate according to CESA 8-76-104. A computed rate is based on a formula using the activity on the employer’s account that includes length of time as a taxable employer, taxable payroll reported, taxes paid into the UI Trust Fund, and benefits that are charged to the employer and paid out of the UI Trust Fund. An employer account is not eligible for a computed rate until there are at least 12 consecutive months in which benefit payments could have been charged to the account prior to the July 1 computation date for UI tax rates. The quarters used consist of the first four of the last five completed calendar quarters. This equates to wages paid during at least 16 consecutive months for a standard employer. The computed rate replaces the previously assigned standard rate as the employer’s base rate. NOTE: For any given year, a computed rate for the next calendar year is not assigned until after July 1 of the current year. The second quarter is not reported until July 31. The second quarter is not included in the calculation for benefit chargeability that moves an employer from a standard rate to a computed rate.
Employers in the construction industry must have at least 36 consecutive months in which benefit payments could have been charged to their account prior to the July 1 computation date in order to qualify for a computed tax rate. The quarters used to compute the tax rate consist of the first four of the last five completed quarters. This equates to wages paid during at least 40 months for a construction-industry employer. The computed rate replaces the previously assigned standard rate as the employer’s base rate, unless the employer has qualified for a rate higher than the standard rate before the end of a 40-month period. NOTE: The minimum 40-month period of time consists of 24 consecutive months plus 16 consecutive months:
A percent of excess is used to determine an employer’s computed tax rate. Employers are assigned a positive percent of excess if the amount of UI taxes 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 taxes 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 taxes paid to that account and dividing the result by the average annual taxable payroll. The percentage is computed to the nearest 1 percent. This rate-computation formula applies 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 tax rate, while employers with a negative percent of excess are assigned a higher computed tax rate. STANDARD INDUSTRY RATE New construction-industry employers are assigned a standard industry rate according to their classification in the North American Industry Classification System (NAICS). These standard industry rates are assigned based on the entire industry activity within these NAICS construction codes and utilize the rate-computation formula for assignment of standard rates for the construction classifications in accordance with CESA 8-76-103 (3)(a)(III)(E). BASE TAX RATE FOR CALENDAR YEAR 2009 Because of an increase in the monetary level of the UI Trust Fund, the chart for the 2009 base rates for employers will remain unchanged. For calendar year 2009 the base tax rate will remain at the lowest base rates attainable. See CESA 8-76-103 (3)(b)(II)(B), column heading “450 Million Plus.” For example, an employer with a percent of excess of +8 has a base tax rate of 0.001 in calendar year 2008. If the same percent of excess is maintained, the same employer has a base tax rate of 0.001 in calendar year 2009. TAX SURCHARGE A tax surcharge is added to all standard tax rates and some computed tax
rates. The tax surcharge supports administrative costs. In addition, the tax
surcharge supports a general pool fund used to pay UI benefits not directly
charged to an employer. For example, when a full award is granted to pay UI
benefits on a job separation that meets the criteria under CESA for domestic
abuse, the employer account is not charged for UI benefits paid on the claim.
Instead, paid UI benefits are charged to the general pool fund. SOLVENCY TAX SURCHARGE FOR CALENDAR YEAR 2009 In accordance with CESA 8-76-102 (5)(a)(I), an STS was assigned to ratable employer accounts beginning in calendar year 2004. This STS is a result of the UI Trust Fund’s level of solvency decreasing below a level that ensures the ability of the UI Program to pay UI benefits. The STS 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 one percent of the total wages reported by ratable Colorado employers for the calendar year or the most recent available four consecutive quarters prior to the last computation date. Calendar year 2009 is the sixth year that the STS is in effect. According to CESA 8-76-102 (5)(a)(I), the STS is a temporary, annual increase to the employer’s total tax rate. The STS is increased incrementally each year until:
As of June 30, 2008, the UI Trust Fund balance stood at eight-tenths of one percent of the total wages reported by ratable Colorado employers. Since the UI Trust Fund balance is less than nine-tenths of one percent of the total wages reported by ratable Colorado employers, the STS will be assessed for rate year 2009. For all new employer accounts or reinstated, ratable employer accounts that do not meet CESA requirements for a computed rate, the STS is 0.006 for the first reporting year and 0.012 for the second reporting year. Calculating Your Solvency Tax Surcharge RateTo calculate your STS rate for a given year, add the STS yearly increment for that year, which is based on your percent of excess, to your STS rate for the previous year.
NOTE: In accordance with
CESA 8-76-102
(5)(a)(II), the STS adjustment was in effect for calendar year 2006 only. In the
example above, the 2006 yearly increment of 0.006 was credited back to the
employer. For a Standard New Employer with a Liability Date of February 1, 2007 To qualify for a computed rate for calendar year 2009, this account must have 12 consecutive months in which benefit payments could have been charged to the account as of June 30, 2008.
*The maximum STS for percent of excess +3 is 0.013. For a Standard New Employer with a Liability Date of January 1, 2008 To qualify for a computed rate for calendar year 2009, this account must have 12 consecutive months in which benefit payments could have been charged to the account as of June 30, 2008. In this scenario, the employer’s STS for rate years 2008 and 2009 will be the standard STS for unrated employers.
For a Construction-Industry, New Employer with a Liability Date of March 31, 2006
To qualify for a computed rate for calendar year 2009, this account must have 36
consecutive months in which benefit payments could have been charged to the
account as of June 30, 2008.
For a Construction-Industry, New Employer with a Liability Date of January 31, 2005 To qualify for a computed rate for calendar year 2009, this account must have 36 consecutive months in which benefit payments could have been charged to the account as of June 30, 2008.
NOTE: In accordance with CESA 8-76-102 (5)(a)(II), the STS adjustment was in effect for calendar year 2006 only. In the example above, the 2006 yearly increment of 0.006 was credited back to the employer. COMBINED TAX RATE FOR CALENDAR YEAR 2009 In November 2008 Form UITR-7, Notice of Employer’s Tax Rate, is mailed informing employers of their combined standard or computed rate, surcharge tax rate, and STS for calendar year 2009. The 2009 tax rate is used beginning with tax reports due April 30, 2009 The following table provides examples of how an employer’s total combined tax rate for calendar year 2009 is established. NOTE: The grey section is not shown on Form UITR-7. The information in the grey section is provided here as additional information. The yellow section provides an example of an employer who has reached the limit for increments to the STS. The amount of accumulated solvency tax for each example depends on the employer's percent of excess each year as well as how many years the STS has been added to the employer’s tax rate, which, in turn, is dependent upon when the account was opened.
For more information on the STS and additional examples of
STS rate calculations, visit the Frequently Asked Questions About the Solvency
Tax Surcharge Web page.
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