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.

NOTE: The minimum 40 month period of time consists of 24 consecutive months plus 16 consecutive months:

1. Wages reported for the first 24 months.

2. The first four of the last five completed quarters (at least 16 months used to determine the computed tax rate).

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 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 2008

Because of the increase in the monetary level of the UI Trust Fund, there is a decrease in the 2008 base tax rate for many employers. For calendar year 2008 the base tax rate is moving one rate schedule to the left. According to the tax-rate schedule in CESA 8-76-103 (3)(b)(II)(B), this rate schedule (“450 Million Plus”) has the lowest base rates. For example, an employer with a percent of excess of +8 has a base tax rate of .002 in calendar year 2007. If the same percent of excess is maintained, the same employer has a base tax rate of .001 in calendar year 2008. An employer with a percent of excess of +2 has a base tax rate of .012 in calendar year 2007. If the same percent of excess is maintained, the same employer has a .011 base tax rate in calendar year 2008.

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.

A tax surcharge is not assessed on employers who have had less than a total of $100 charged to their accounts from UI benefits paid out in the last three state fiscal years by the July 1 tax-rate computation date.

In accordance with CESA 8-76-102 (4)(d), the tax surcharge rate is .22 percent (.0022).

SOLVENCY TAX SURCHARGE FOR CALENDAR YEAR 2008

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 2008 is the fifth 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:

A maximum STS, as mandated by law, is reached.

-or-

The UI Trust Fund reaches a monetary level such that the STS is no longer necessary.

NOTE: The STS is not assessed to state and local government agencies, reimbursable and group-rated political subdivisions, and nonprofit organizations that are reimbursable employers.

As of June 30, 2007, 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 2008. For all new employer accounts and reinstated, ratable employer accounts that do not meet CESA requirements for a computed rate, the STS is .006.

Calculating Your Solvency Tax Surcharge Rate

To 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.

General STS Calculation

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 .006 was credited back to the employer.

*The maximum STS for percent of excess +1 is .020.

In the scenario above, this account’s STS for 2007 of .019 plus the 2008 STS increment of .004 equals .023. This is in excess of the maximum limit for the percent of excess +1 (see CESA 8-76-102 [5][b]). Therefore, this employer’s STS for 2008 is the maximum STS limit of .020.

For a Standard New Employer with a Liability Date of 02/01/2006

To qualify for a computed rate for calendar year 2008, this account must have 12 consecutive months in which benefit payments could have been charged to the account as of 06/30/2007.

 NOTE: Employers whose initial increment is in 2006 are not eligible for the STS Incremental Adjustment. CESA 8-76-102 (5)(a)(II) specifies that only those employers who see an incremental increase to the previous year’s STS rate are eligible.

*The maximum STS for percent of excess +3 is .013.

For a Standard New Employer with a Liability Date of 01/01/2007

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 06/30/2008. In this scenario, the employer’s STS for rate years 2007 and 2008 will be the standard STS for unrated employers.

For a Construction-Industry, New Employer with a Liability Date of 03/31/2005

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 06/30/2008.

Calendar Year	Percent of Excess	STS Yearly Increment	STS 2006 Incremental Adjustment	STS Rate
2005 (initial assessment year)	NA	.006	NA	.006
2006	NA	.006	-.006	.006 (see "Note" below)
2007	NA	.006	NA	.012
2008	NA	.006	NA	.018

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 .006 was credited back to the employer.

For a Construction-Industry, New Employer with a Liability Date of 01/31/2004

To qualify for a computed rate for calendar year 2008, this account must have 36 consecutive months in which benefit payments could have been charged to the account as of 06/30/2007.

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 .006 was credited back to the employer.

COMBINED TAX RATE FOR CALENDAR YEAR 2008

In November 2007 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 2008.

The following table provides examples of how an employer’s total combined tax rate for calendar year 2008 is established.

NOTE: The grey section is not shown on The Notice of Employer’s Tax Rate. 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 STS and additional examples of STS rate calculations, visit the Questions and Answers Regarding the Solvency Tax Surcharge Web page.

If you have further questions regarding STS or your tax account, please contact UI Operations at 303-318-9100 (Denver-metro area) or 1-800-480-8299 (outside Denver-metro area). You may also send an e-mail to unemp.tax@state.co.us.