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Department of Labor

Unemployment Insurance

Introduction & Background

Important Highlights

Contributions

Federal Unemployment Tax Act (FUTA)

Experience Rating

Reimbursing Employers

Records, Reports, and Audits

Independent Contractors

Localized and Non-Localized Employment

Reciprocal Coverage

Combined Wage Claims

Interstate Claims

Benefit Payment Program

Employment Service

Forms

Glossary

FAQ'S

Experience Rating


How and When You Qualify

Experience rating is a system that relates the amount of contributions to be collected from employers to the cost of benefits paid to employees. An experience rating account is established for all registered employers. Lower rates are assigned to employers whose experience with their employees' risk of unemployment costs less, and higher rates to those whose experience costs more. Experience rating is designed to maintain an adequate reserve of funds to finance potential benefit payments in the near future. Employers newly subject to the law will be liable to pay contributions at a rate of 1.0% of taxable wages until they become eligible for contribution rates based on their experience. Employers become eligible for such rates after they have completed 12 calendar quarters of such experience by September 30 of any given year.

How your tax rate is computed

On a yearly basis, by December 31, the computed Current Reserve (The difference between contributions paid and benefits charged in an employer's experience rating account during a 12 quarter period ending September 30) of each employer's experience rating account is divided by the total wages paid for the same period to determine a reserve ratio. The lower the reserve ratio is the higher the assessed contribution rate and vice versa. Rates vary from a low 0.0% to a high 6.0%. The formula: Current Reserve/Total Wages = Reserve Ratio.

If benefits charged against an employer's experience rating account are less than the contributions paid to it, then the current reserve balance is positive and the resulting reserve ratio also positive. On the other hand, if the benefits charged against an employer's experience rating account are more than the contributions paid to it, then the current reserve balance is negative and the resulting reserve ratio also negative.

Application for Rate Redetermination

The contribution rate will be conclusive and binding unless written application setting forth the reasons for review and redetermination is filed with this Agency within 15 days after the notice was mailed or delivered to the employer's last known address.