List of states at risk with estimated potential BCR Add on increases estimated by US DOL
The FUTA tax, which is already automatically increasing by approximately $21 per year each year in states that fail to repay federal loans, is projected to jump even higher for 2014. The size of the increase is determined by a formula in federal law that is tied to the state UI tax efforts in comparison to average benefit payout over a five year period. Particularly in states where benefit payout was high but tax effort in comparison was low the additional BCR Add on increase is significant.
The FUTA tax, which is normally only $42 per employee in states without outstanding loans will dramatically increase for 2014 in these states to $84 to $196 per employee, unless the state is approved for a waiver. States at serious risk include:
Arkansas Indiana North Carolina
California Kentucky Ohio
Connecticut Missouri Rhode Island
Delaware New Jersey South Carolina
Georgia New York Wisconsin
Virgin Islands
Indiana and South Carolina successfully requested a waiver for 2013.
To avoid the BCR add on states must request a waiver from US DOL before July 1, 2014 and the request must meet the requirement that there not be a “net decrease in solvency” in the state UI trust fund for the period from October 1, 2013 to September 30, 2014.
A “net decrease in solvency” is defined in 20 CFR §606.21(b) as:
.. any action is or was taken (legislative, judicial, or administrative), that is effective during the 12-month period ending on September 30 of such taxable year, which has resulted in or will result in an increase in benefits without at least an equal increase in taxes, or a decrease in taxes without at least an equal decrease in benefits.
States on this list and employers in the state should make sure that a waiver is requested that meets the federal requirements.
