2014 FUTA Tax Increases and the Potential Relief of a SUB-Pay Plan

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2014 FUTA Tax Increases and the Potential Relief of a SUB-Pay Plan

With the prolonged effects of a troubled economy, a state’s ability to keep its unemployment insurance (“UI”) trust fund solvent is a challenge.  When states exhaust their UI trust funds and borrow from the federal government to pay UI benefits, the results can extend to decreased UI benefits, a decreased amount of UI benefit weeks and an increase to the rate by which employers are taxed for federal and state unemployment taxes.

FUTA tax is automatically increasing by approximately $21 per year in states that fail to repay federal loans, and it’s projected to jump even higher for 2014.  FUTA tax is normally only $42 per employee in states with outstanding loans; however this amount may dramatically increase in 2014 to $84 to $196 per employee in those states that paid out more in state UI benefits in comparison to their UI tax rates.