Note: For this textbook edition the rate 0.6% was used for the net FUTA tax rate for employers. Example 5-10 Applebaum Security Company is located in State H, which enables employers to reduce their contribution rates under the experience-rating system. From 2007 to 2016, inclusive, the company's total contributions to state unemployment compensation amounted to $18,135. For the calendar years 2017 to 2020, inclusive, the contribution rate for Applebaum was 3.7%. The contributions of each employer are credited to an account maintained by the State Unemployment Compensation Commission. This account is credited with contributions paid into the account by the employer and is charged with unemployment benefits that are paid from the account. Starting January 1, 2021, the contributions rate for all employers in State H will be based on the following tax rate schedule: Reserve Ratio Contribution Rate Contributions falling below benefits paid 7.0% 0.0% to 7.9% 5.5% 8.0% to 9.9% 4.5% 10.0% to 11.9% 3.5% 12.0% to 14.9% 2.5% 15.0% or more 1.5% The annual payroll for calculation purposes is the total wages payable during a 12-month period ending with the last day of the third quarter of any calendar year. The average annual payroll is the average of the last three annual payrolls. The SUTA tax rate for the year is computed using the information available (benefits received and taxes paid) as of September 30 of the preceding year. The schedule below shows the total payroll and the taxable payroll for the calendar years 2017 to 2020. Calendar Year 2017 2018 2019 2020 Total Payroll Taxable Payroll Total Payroll Taxable Payroll Total Payroll Taxable Payroll Total Payroll Taxable Payroll First Quarter $12,000 $12,000 $11,000 $11,000 $13,000 $13,000 $10,000 $10,000 Second Quarter 11,750 11,750 11,500 11,400 12,750 12,700 9,300 9,300 Third Quarter 12,500 12,250 12,750 12,400 12,200 12,000 9,350 9,350 Fourth Quarter 13,000 12,500 12,500 12,200 14,000 13,750 — — Unemployment benefits became payable to the company's qualified unemployed workers on January 1, 2007. Between that time and September 30, 2020, total benefits amounting to $23,194.15 were charged against the employer's account. Hint: First total each year's taxable payroll. Using those numbers and SUTA rate you can figure out how much has been paid into the reserve from 2007-2020 and deduct benefits paid to get the balance in the reserve account as of 9/30. Compute rate for 2021 by dividing balance in reserve by average of last three years payroll.
Note: For this textbook edition the rate 0.6% was used for the net FUTA tax rate for employers.
Example 5-10
Applebaum Security Company is located in State H, which enables employers to reduce their contribution rates under the experience-rating system. From 2007 to 2016, inclusive, the company's total contributions to state
The contributions of each employer are credited to an account maintained by the State Unemployment Compensation Commission. This account is credited with contributions paid into the account by the employer and is charged with unemployment benefits that are paid from the account. Starting January 1, 2021, the contributions rate for all employers in State H will be based on the following tax rate schedule:
| Reserve Ratio | Contribution Rate |
| Contributions falling below benefits paid | 7.0% |
| 0.0% to 7.9% | 5.5% |
| 8.0% to 9.9% | 4.5% |
| 10.0% to 11.9% | 3.5% |
| 12.0% to 14.9% | 2.5% |
| 15.0% or more | 1.5% |
The annual payroll for calculation purposes is the total wages payable during a 12-month period ending with the last day of the third quarter of any calendar year. The average annual payroll is the average of the last three annual payrolls. The SUTA tax rate for the year is computed using the information available (benefits received and taxes paid) as of September 30 of the preceding year.
The schedule below shows the total payroll and the taxable payroll for the calendar years 2017 to 2020.
| Calendar Year | ||||||||
| 2017 | 2018 | 2019 | 2020 | |||||
| Total Payroll | Taxable Payroll | Total Payroll | Taxable Payroll | Total Payroll | Taxable Payroll | Total Payroll | Taxable Payroll | |
| First Quarter | $12,000 | $12,000 | $11,000 | $11,000 | $13,000 | $13,000 | $10,000 | $10,000 |
| Second Quarter | 11,750 | 11,750 | 11,500 | 11,400 | 12,750 | 12,700 | 9,300 | 9,300 |
| Third Quarter | 12,500 | 12,250 | 12,750 | 12,400 | 12,200 | 12,000 | 9,350 | 9,350 |
| Fourth Quarter | 13,000 | 12,500 | 12,500 | 12,200 | 14,000 | 13,750 | — | — |
Unemployment benefits became payable to the company's qualified unemployed workers on January 1, 2007. Between that time and September 30, 2020, total benefits amounting to $23,194.15 were charged against the employer's account. Hint: First total each year's taxable payroll. Using those numbers and SUTA rate you can figure out how much has been paid into the reserve from 2007-2020 and deduct benefits paid to get the balance in the reserve account as of 9/30. Compute rate for 2021 by dividing balance in reserve by average of last three years payroll.
In your computations, round amounts to the nearest cent. When required, round your final percentage answers to one decimal place.
a. Contribution rate for 2021.
fill in the blank 1 %
b. Rate for 2021 if $2,000 additional benefits had been charged by mistake to the account of Applebaum Security Company by the State Unemployment Compensation Commission. Hint: Compare
fill in the blank 2 %
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