Alabama employers should pay less in unemployment compensation insurance tax this year, thanks to legislation the governor signed into law Jan. 28.
Most employers should see a 29% reduction in their tax liability in 2022, Alabama’s labor secretary said. “These savings will hopefully allow employers to continue to hire employees and help businesses thrive,” Labor Secretary Fitzgerald Washington said in a statement. The average rate will go from 1.54% to 1.10% and the per employee cost will drop from $123 to $88 for the average employer.
>> Full statement from Alabama Department of Labor
A $79.5 million appropriation included in Act No. 2022-1, which received unanimous approval from the Alabama Legislature in its special session, returns the Alabama Unemployment Compensation Insurance Trust Fund to almost pre-pandemic levels. The trust fund currently stands at $614 million, Washington told lawmakers. The influx of the appropriation backed by federal pandemic relief funds puts that balance at $693.5 million, close to the $697 million that was in the fund in March of 2020, he said.
The Alabama Department of Labor says your individual 2022 unemployment insurance rate is now available for download from its website:
The department offers these instructions for determining your 2022 rate:
Go to https://www.labor.alabama.gov/eGov/ and login. Once logged in, go to Tax Rate / Advanced Payment Rate Notice. Enter your account number/FEIN when prompted, then click 2022.
The first quarterly tax payment for 2022 is due May 2 and delinquent May 3. Your tax rate will be the same for all of 2022.
Unemployment insurance taxes are paid 100% by employers on the first $8,000 of wages earned per employee. The tax rate is individual to each business based on a formula that takes into account wages paid; the amount of unemployment among current and former employees; the average duration and cost of unemployment benefits paid to claimants over a three-year period; as well as shared costs, which ALL employers pay.
From 2010, just after the Great Recession, through 2021, Alabama employers paid UC taxes based on Schedule D, the highest unemployment compensation tax rate schedule possible.
Alabama waived $400 million in individual employer costs for pandemic related unemployment claims between March and October of 2020. Those costs went into the shared costs portion of the tax rate computation distributed among all employers. An influx of $385 million in pandemic funds in 2020 and 2021 plus taxes paid by employers made it possible for the state’s unemployment tax rate schedule to drop to Schedule C.
The $79.5 million appropriation in 2022 brings the total in federal pandemic relief funds deposited into the UC trust fund to $464.5 million.
“We have dropped to Schedule C for 2022, which lowers the tax burdens on employers,” Washington said in a document presented to the Legislature’s budget-writing committees. “This should have occurred in 2021 but did not happen due to the pandemic.”
>> Labor Dept. explanation of how annual rates are calculated and the employer tax rate table
With the 2022 infusion, the shared costs for employers this year will be 0.2%. Shared costs in 2021 were a half a percent (0.5%). Shared costs were at zero for the prior five years. Without the infusion, shared costs would have been 0.7%. Washington said the average employer would have paid 3% more in unemployment taxes in 2022 had the $79.5 million not been appropriated.
Schedule C carries a minimum individual rating of 0.5%, which when added to the 0.2% in shared costs, results in a minimum tax rate of 0.7%. Alabama has 23 unemployment tax experience ratings. The maximum rate in 2022, including shared costs, is 6.30%.
The bulk of the $772 million in spending authorized by this new law will be split between broadband projects; water and sewer projects and compensation for hospitals and assisted living homes. Slightly more than 10% of the total package was set aside for the state trust fund underwritten by employer unemployment taxes.
>> Summary sheet on all of the allocations
Alabama will get another $1 billion in federal aid in May or June. A summer special session is anticipated to appropriate those funds.
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Originally posted 8:30 a.m. Jan. 28, 2022