Pennsylvania Continues Employer Surcharges for Unemployment Contributions

Due to the insolvency of the Pennsylvania Unemployment Trust Fund, employers will be assessed various add-ons to their basic contribution rate in 2012. These add-ons are the same percentages assessed in 2011.

A surcharge adjustment of 5.8% will be assessed to the employer’s basic contribution rate. For example, an employer with a basic contribution rate of 7% would be assessed a surcharge adjustment of .406%. This component of the experience rate is established by a formula and is the same for all employers. The formula divides the unemployment fund balance (as of June 30) by the average benefit costs for the last three years (known as the “trigger mechanism”). A resulting percentage of less than 50% triggers a surcharge of 5.8%.

An additional contribution factor of .65% will be added to the employer’s experience rate. This contribution is determined annually by the same “trigger mechanism” formula.

Lastly, an interest factor of .44% is anticipated to be added to the employer’s experience rate in 2012 (same amount as 2011). This is the component of the experience rate created to generate necessary revenue to satisfy interest payments on outstanding loans Pennsylvania has with the federal government. The outstanding loans also create a reduction in the credits that can be claimed against the Federal Unemployment Tax (FUTA). Employers can normally claim a 5.4% credit against the 6% FUTA. The credit is reduced to 5.1% due to the outstanding federal loans.

 

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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