The tax rate information for all 20 rate classes can be found here.

 

No. Employers assigned to tax class 1 will have lower tax costs in 2011 compared to 2010. Employers in tax class 1 typically paid $86.80 per worker per year in 2010. In 2011, their new cost is approximately $10.31 per worker per year.

 

The contribution increase an employer will see in 2011 will vary based on their assigned tax category. There are 20 possible rate categories within a contribution schedule. Contributions are paid on the first $10,000 paid in wages to an employee. Actual tax rates depend on the needs of the trust fund in a given year. The employers with the very lowest benefit ratios can expect to see a decrease in their unemployment tax costs in 2011. It is projected that average contributions in 2011 will be approximately $375 per worker per year. The projected range of contributions is $10 to $1,130.

 

The state has borrowed almost $890 million from the federal government to pay for unemployment benefits since December 2008. If the state does not increase premiums it will be forced to borrow additional money which must be repaid with interest. The state has already had two years of borrowing which will lead to an automatic increase in the federal unemployment taxes for all employers in 2010. The federal taxes would continue to increase until the state repays all outstanding loans. These increases would impact all employers regardless of their layoff history. By experience rating the increased cost, employers with the fewest layoffs will see the smallest increases in cost while those employers with the most layoffs will see the largest increases in costs.

 

No. In fact, many states have already had to raise their contribution rates and/or their taxable wage base. Additionally most states are expected to increase employer contribution rates next year as a measure to pay for the increased cost of benefits paid out during the recession.

 

The General Assembly has directed the agency to set tax rates each year so that the state will be able repay all outstanding loans to the federal government for unemployment insurance purposes by 2015. The state’s final interest payment on that loan is expected to be paid September 30, 2015.

South Carolina is one of 31 states currently borrowing from the federal government to continue making unemployment benefit payments to laid off workers. All states will have to determine their own plan for repaying these loans and how quickly they want to repay them.

 

No. The only benefits paid out of the South Carolina unemployment trust fund are for claims under the regular state unemployment program. All of the temporary emergency unemployment compensation programs passed by Congress to extend benefit collection are currently 100% federally funded. Additionally, the Extended Benefit program, which is a state/federal partnership program for which costs are normally split between the state and federal governments, is currently being funded entirely by the federal government.

 

The benefit ratio is defined as the total benefits charged to an employer’s account in the previous seven years divided by the employer’s taxable payroll over that same period. A higher benefit ratio indicates a greater use of the system and thus results in higher tax rates for that employer. Employers that have less than seven years of experience but more than one year will have their benefit ratio based on the number of years for which they have been liable employers. Employers’ benefit ratios for 2011 are based on the firms’ experience between July 1, 2003 and June 30, 2010.

 

Effective January 1, 2011, only the taxable wages and benefit charges will be used in the rate calculation. In accordance with Section 41-31-130 there are no provisions for a refund of any lawfully paid sum into the unemployment insurance trust fund which is used to pay benefits. However, the contributions paid into the employer’s account will continue to be available for certification purposes.

 

The following information is available to assist an employer in mitigating costs related to UI.

Stabilize Employment

• Screen prospective employees carefully to select the “right” employee for the job (to find qualified workers in your area, visit https://jobs.scworks.org/).
• Transfer employees to other job sites when feasible.
• Use regular employees for repairs and maintenance during slack periods.
• Contact our Rapid Response team (http://www.scworks.org/rapid.asp) to see what resources they can help you leverage to keep employment levels unchanged (866-SC1-STOP or 866-721-7867).

Minimize Charges to Your Account

• Keep accurate records of employment agreements, dates and details of work refusals, employee performance, dates and details of warnings and other disciplinary measures.
• Provide separation information to the department when requested by the due date specified.
•  Return the UCB-214 with specific information about the reason for the claimant’s separation from your employ if it was for other than a lack of work or if there is an error in reported wages.
• File an appeal if you believe a determination or decision is wrong.
• Notify us promptly if you have information that a claimant is not available for work, not able to work, has refused work, or is reemployed.
• Complete audit forms promptly when they are sent to you.
• Submit quarterly wage reports timely to avoid penalties.
• Pay taxes promptly to obtain the maximum Federal Unemployment Tax credit.
• Report all changes to your business promptly.
• Encourage your workers to seek and accept part-time or temporary work during seasonal layoffs, since all wages earned above their disregarded earning amount in a given week, reduces their unemployment compensation benefit amount on a dollar-for-dollar basis.

Report Fraud

• If you suspect someone may be receiving unemployment benefits that may not be entitled to such benefits, you are encouraged to submit the information to us (available online at http://www.dew.sc.gov/fraud)

 

In most cases, no. The Department imposes a disqualification between five and 20 weeks if the Department finds that a claimant was discharged for cause. Your account will not be charged for benefits received by a claimant after the claimant has served out a disqualification period unless you have elected to be a reimbursable employer in lieu of tax contributions. If you have elected to be a reimbursable employer, you will be charged for any benefits received by a claimant, even if the Department imposed a disqualification.

 

Under South Carolina law, rate schedules adjust automatically each year based on a formula that considers factors such as the amount of reserves in the trust fund, the recent and projected benefit costs paid, and the amount of outstanding loans.

For 2011, South Carolina projects that benefit payments will average $500 million, loan repayments will be $146 million, and interest payments will be $34 million. The 2011 tax rates are set to raise approximately $680 million to fund these three components.

As the amount of required income falls, tax rates also fall. As the taxable wage base increases, the tax rates also adjust downward.

The projections for the amount of benefits that will be paid in the upcoming year are based on historical relationships between the national unemployment rate and the state unemployment rate and between the state unemployment rate and the amount of benefits previously paid. An estimate for the national unemployment rate for 2011 comes from the Congressional Budget Office in Washington DC. All historical data for projecting benefit payments comes from data maintained by the US Department of Labor.

 

The reform bill changed the method South Carolina uses to experience rate employers. Previously, South Carolina used the reserve ratio system but effective January 1, 2011, South Carolina will use a benefit ratio system.

Under the reserve ratio system, all contributions paid by an employer are credited to the individual employer account. When a former employee receives unemployment insurance benefits, the employer’s account is debited for the amount of benefits paid. The employer’s balance referred to as the “reserve” is carried forward from year to year and was previously used to compute the employer’s tax rate.

The benefit ratio system does not consider employer’s tax contributions. The benefits charged to an employer’s account over a defined period of time are divided by the employer’s taxable wages during the same time. This benefit ratio is then used to determine an employer’s tax rate. Employers with the highest benefit ratios will pay higher tax rates while employers with the lowest benefit ratios will pay the lowest.

 

No. Employer contributions paid to the unemployment trust fund can only be used to pay benefits and outstanding loans. All operating costs required to administer the South Carolina Unemployment Insurance program are paid 100% with Federal funds received from the U.S. Department of Labor.

Each South Carolina employer in 2011 will be assessed a small surcharge for interest payment on the state’s outstanding federal loans. This collection is reported with your normal state unemployment taxes but will not be deposited in the state’s trust fund. Additionally, all employers pay an administrative contingency of 0.06% each year which is used for employment and training programs.

 

Voluntary contributions for the purpose of obtaining a lower tax rate are disallowed as the new tax structure does not take into consideration contributions when computing an employer’s tax class or tax rate.

 

The timely payment of state unemployment taxes allows an employer to receive a tax credit of 5.4 percent on the Federal Unemployment Tax Return Form 940. South Carolina employers have received this tax credit until the year 2010. Since South Carolina has had outstanding federal unemployment loans for two consecutive Januarys the state will have a reduction of its credit by 0.3 percent effective January 1, 2010. This will increase the federal unemployment tax cost by approximately $21 per worker. This increase will be reported on the Federal Form 940 and is due to the IRS no later than January 31, 2011. More information on the FUTA tax credit reduction can be found here.

 

The contribution rate, which includes the loan principal surcharge, is creditable and reported on IRS Form 940. The interest surcharge and contingency assessment are not creditable for FUTA on IRS Form 940.

 

The federal taxable wage base will remain at $7,000 per employee. Although the South Carolina state unemployment taxes are changing to the first $10,000 of an individual’s wages, the federal taxable wage base will not change in tax year 2011.

 

Annual rate notices are sent to each employer on or about January 31st of each year. Taxable wages used in the calculation period must be received no later than July 31. Note: Employers that have been involved in an acquisition, merger, consolidation, joint and/or related activity from July 1 through December 31 are generated notices as of March 15.

 

Employers who have not accomplished 12 months of liability will be charged the tax rate for employers in tax class 12. (Note: Current state law requires that new employers pay at rate class 13; there is legislation in the South Carolina General Assembly pending that will reduce this to 12 for all new employers except for those in temporary staffing industry; any changes that result from the passage of this bill will be mailed to the affected employers and additional time will be granted to pay first quarter taxes.) This rate will change from year to year depending on the required income of the fund. See the contribution table for 2011 for CY2011 tax rate for new employers. Once an employer has accomplished 12 months of liability, they will have a benefit ratio computed on the date of the next rate computation based on their own benefit charges and taxable wages.

 

The taxable wages shown on the rate notices are for fiscal years (July 1st through June 30th). Only wages for which the taxes were paid by July 31st are used in the calculation. Also, a difference could be the result of a missing or amended report.

 

In response to significant declines in the balance in the state’s unemployment insurance Trust Fund and the dramatic rise in the value of outstanding loans from the federal government to cover unemployment benefit payments, the South Carolina Legislature passed significant reforms to the unemployment tax rate system.

The new system is designed to limit further federal borrowing, repay outstanding loans and interest, and rebuild the trust fund to an acceptable level. The state will no longer operate with a fixed tax rate table or reserve ratios. The new experience rating system will be based on benefit ratios and the tax rates will be set each year so that they generate the desired level of funding for a given year.

The new structure places employers into one of twenty tax rates based on benefit ratios. Based on taxable wages, 5% of employers with the lowest benefit ratios will be placed into the lowest tax rate, category one. The remaining employers will be arrayed into the remaining nineteen categories such that the 5% of employers with the highest benefit ratios will be placed into the highest tax rate class, category twenty.

 

The South Carolina Department of Employment and Workforce Laws that govern the rate assignment of an employer into their individual tax class do not have an appeal process. The taxable wage and benefit charge experience (historical data) of an employer record which may include the data of an acquired, merger, consolidated, joint, and/or related employer account are printed only for the purpose of informing you of the data used in the rate calculation. You may submit a written request within 30 days from the date of the notice for a review of the information should there be any differences noted between the notice and the employer record. You must provide documentation with the request. Your request should be sent to:

Attn: Experience Rate Section
PO Box 995
Columbia, SC 29202
rateinfo@dew.sc.gov
803-737-2862 (FAX)

 

If the employer has failed to file a quarterly report by the rate computation date, a delinquent tax rate class is assigned for the period for which the computation applies.

Beginning January 1, 2011 South Carolina will use a traditional base period or an alternate base period to determine if an individual monetarily qualifies for unemployment insurance benefits. Because of the addition of an alternate base period, employers are requested to file their quarterly contribution and wage reports within 15 days after the quarter ends. The shorter reporting time is expected to reduce additional contacts to the employer from SCDEW’s staff, reduce paperwork and clerical costs for the employer, and expedite the claims filing process. This is currently a request as it requires legislative approval. The legal filing date continues to be the last day of the month following the end of a quarter.

 

If on the rate computation date, the employer has failed to file any quarterly report that is to be used in the computation of the tax rate, a delinquent tax rate class 20 is assigned for the period in which the computation applies.

If on the rate computation date, a tax execution is on file against the employer’s account a delinquent tax rate class 20 is assigned until the quarter in which the tax lien is paid. At such time, the employer’s rate reverts to their computed rate based on their own experience of benefit charges and taxable wages.

 

Form UCE-101 will be updated so employers can calculate their contributions and contingency and interest assessment on the new taxable wage base of $10,000 per employee.

 

Effective January 1, 2011, the taxable wage base for South Carolina is $10,000. Wages earned by each employee in excess of $10,000 are not taxable. The taxable wage base increases to $12,000 in 2012 and $14,000 in 2015.

 

Yes, there are new surcharges for the 2011 tax year which replace the previous “unemployment surcharges” from prior years. There is a surcharge added to all base contribution rates for repayment of federal unemployment insurance loans. This will be added to the regular base rates and is considered creditable for FUTA purposes on IRS Form 940.

The second new surcharge is the interest surcharge which is used to pay for interest on outstanding federal unemployment insurance loans. This surcharge is lumped in with the contingency assessment and is discussed in further detail in the question below.

 

In accordance with Section 41—27-410 of the South Carolina Code of Laws, all employers, with the exception of those who have elected to make payments in lieu of contributions as prescribed in 41-31-620 are subject to a 0.06% departmental administrative contingency assessment which became effective January 1, 1986. The funds generated by the departmental administrative contingency assessment are used to assist with the Department with employment and reemployment activities, to undertake programs and activities which further the goals of the Department of Employment and Workforce, and to provide information and analysis to the legislature and program managers about issues related to employment and unemployment.

In accordance with Section 41-31-55(a), effective January 1, 2011, all contributory employers are subject to an interest surcharge. The funds from the interest surcharge will be used to pay interest on any outstanding debts to the federal government for unemployment benefits. An interest surcharge was necessary to pay these interest costs since federal law prohibits the use of regular tax contributions in the unemployment Trust Fund from being used for this purpose.

 

All contributory employers will be responsible for the interest surcharge and contingency assessment, including employers assigned to tax rate class 20. Certain governmental entities and non-profits that have not made the election to reimburse the Department in lieu of contributions will only be subject to the interest surcharge. Certain other governmental entities and non-profits that have elected to reimburse the Department in lieu of contributions will continue to be exempt from these assessments.

 

The interest surcharge will be in effect until all outstanding loans for unemployment benefits from the federal government have been repaid. The Department anticipates that this surcharge will be in effect through 2015.

 

The individual interest surcharge and contingency assessment components included in the employer’s tax rate will not be line itemed on the contribution report. Employers will see a contributions tax, which will include the loan principal surcharge component and a contingency and interest assessment which will include the interest surcharge component and the contingency assessment of 0.06%.

The trust fund replenishment surcharge is included in the total rate on line 3A of the Contribution report. The interest surcharge is included with the contingency rate on line 3B of the form.