The Tennessee Dept of Employment Security announced that all employers will see a .6% reduction in their state unemployment insurance rate starting July 1 (the beginning of the 3rd quarter).

As a result of the recession of 2008 and the tremendous demand on state unemployment funds, the depletion of the state’s unemployment insurance trust fund resulted in an increase in SUTA taxable wages  from $7,000 to $9,000 and the implementation of a .6% surcharge on all tax rates. The current trust fund balance now exceeds $750,000,000 (tier 5). Thus the Dept announced that the .6% surcharge would be permanently removed as of July 1, 2013.  All employers will see this reduction in their tax rates when their rate change notice is sent out in August. A “temporary” tax surcharge that actually was temporary!

Payroll Service depts should also take note that employers will see that on the coming tax rate notice, the state will provide information on a system implemented to allow employers to review and question a state unemployment tax rate increase that is a result of benefits paid.

All employers have an individual  SUTA account with a balance depending upon two factors:

  • How much has the employer contributed into the account with their quarterly SUTA payments
  • How much has been paid out in unemployment benefits to former employees.

An employer’s rate is a direct function of this account balance. The more benefits paid out in relation to the amount contributed, the higher an employer’s SUTA rate will be. This is why employers  always want to carefully review all claims against their SUTA account and verify their validity.

This quarter, the state has implemented a system that will allow employers to review all claims against their account for the past year and how they relate to their SUTA rate. If the employer wishes to question those benefits and appeal a rate increase, they have 30 days to do so.   Employers should take note of the URL and the code required to get onto the states site that will be defined on their SUTA notice this quarter.