Are you ready for the labor law changes in 2023? There are several important changes to labor laws on the state level that will impact most employers in the state of Connecticut. Employers should be aware of all the changes and make sure to take action to meet compliance requirements in a timely manner. For more federal-level labor law updates, please read about it here. If you need expert assistance regarding your company’s compliance, you can always seek help from an HR Consulting Company like The Human Resource Consulting Group.
FUTA Credit Reductions - Tax Rate Increase for Connecticut
According to the U.S. Department of Labor, on November 10, 2022, Connecticut became a Federal Unemployment Tax Act (FUTA) credit reduction state with a 0.3% FUTA credit rate reduction. Employers in Connecticut would compute their FUTA tax liability for that state by reducing the 6.0% standard FUTA tax rate by a FUTA credit of only 5.1% instead of 5.4% (the standard 5.4% credit minus the 0.3% credit reduction) for an effective FUTA tax rate of 0.9% for the year. This is because Connecticut has an outstanding loan balance of $76 million, according to the US Department of Labor, due to the pandemic borrowing.
The FUTA credit reduction will lead to a 0.3% FUTA tax rate increase for CT employers as a result. This is because employers are getting less money back. Employers in Connecticut will have to pay an additional 0.3% in federal unemployment tax for wages paid to employees, or up to $21 in additional tax for each employee, based on the FUTA taxable wage base of $7,000, from January 1, 2023, through December 31, 2023.
The calendar year 2022 FUTA tax return payments will be due and payable in January 2023.
CT State Unemployment Tax Rate Reduction
The good news is, for the calendar year 2023, the Connecticut state unemployment tax rate will be reduced by 0.2% to mitigate the impact of the federal increase for employers, according to the Public Act 22-118.
All employers (new and existing) will see a 0.2% reduction in their calendar year 2023 tax rate:
- The state’s new employer rate, originally 3.0% for 2023, is reduced to 2.8%.
- The fund solvency tax, originally 1.4% for 2023, is reduced to 1.2%.
Please note that this reduction is temporary and only applies to the calendar year 2023.
CT Public Act 21-5 & Experience Rating
Public Act 21-5 modified the method of calculating tax rates for tax years beginning on or after January 1, 2022. This mitigates the impact of previous high Unemployment Insurance claims due to the pandemic.
How Does Public Act 21-5 Impact Employers' Experience Rating?
According to Public Act 21-5, the new experience rate calculation will not include unemployment benefits paid to a company's former employees and taxable wages for experience years ended June 30, 2020, and June 30, 2021.
How Does Public Act 21-5 Impact New Employers' Rates?
For new employers who don't currently have an experience rate, the rate charged to them will be calculated without factoring in the benefits paid and the taxable wages reported during calendar years 2020 and 2021.
CT Special Assessment Waive
An annual Special Assessment is a supplemental bill that covers accrued interest levied in August each year on active Connecticut contributory employers. Generally, the state would collect these from employers to pay off the federal loan interests. In response to the pandemic, all interests on Unemployment Insurance trust fund loans through September 6, 2021, were waived. However, for Connecticut, there was still approximately $1 million of interest from September 7, 2021, through September 30, 2021, which was due September 30, 2021.
The good thing is the Special Assessment for last year is waived for all Connecticut employers. Governor Lamont authorized the state to pay off the interest without needing employers to pay, in order to eliminate some financial burden on Connecticut businesses caused by the pandemic.
Furthermore, foreseeing the continuing accrual of outstanding pandemic-related loan interest through September 2026, Governor Lamont committed that the state will pay the interest due from September 2022 through September 2026. This will lift the burden of any special assessments for CT employers and will relieve up to $30 million of interest costs.
Note For CT Employers
Don't let the upcoming labor law changes in Connecticut catch you off guard. Act now to ensure compliance and protect your business. Contact The Human Resource Consulting Group for personalized guidance and support through the compliance process.