Magazine article The CPA Journal

Voluntary Contributions to Unemployment Insurance Trust Funds; New Jersey and Other States

Magazine article The CPA Journal

Voluntary Contributions to Unemployment Insurance Trust Funds; New Jersey and Other States

Article excerpt

Employers can save payroll tax dollars by making voluntary contributions to state unemployment insurance trusts. An employer's unemployment tax rate is dependent upon its experience rating. The experience rating is determined by reference to the employer's reserve ratio. This ratio is an employer's prior contributions reduced by benefits paid to former employees divided by the average covered wages paid in prior years. Voluntary contributions are used to redetermine the employer's reserve ratio and can therefore put the employer in a lower tax bracket and save out-of-pocket tax dollars.

Example of a Voluntary Contribution

Assume an employer receives a notice that his or her reserve ratio is 4.95%. This reserve ratio is the employer's balance in the trust fund, divided by its average taxable wages in the prior three years. Also assume that the employer's balance in the trust fund is $100,726 and the employer's average covered wages is $2,034,870. Using this reserve ratio, the tax rate is fixed at 2.6%. For reserve ratios of 5.0% or higher, the tax rate drops to 2.4%. By making a voluntary contribution of $1,017 the employer would increase the reserve ratio to 5. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.