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OLR Bill Analysis
HB 5377
AN ACT CONCERNING THE REMOVAL OF COVID -19 RELATED
LAYOFFS FROM THE UNEMPLOYMENT COMPENSATION
EXPERIENCE ACCOUNT.
SUMMARY
This bill disregards an employer’s benefit charges and taxable
wages between July 1, 2019, and June 30, 2021, when calculating the
employer’s unemployment tax experience rate for taxable years
starting on or after January 1, 2022. In effect, this means that the
unemployment benefits paid to an employer’s former employees
during that period will not affect the employer’s experience rate. The
bill's provisions apply to the extent allowed by federal law and as
necessary to respond to the spread of COVID-19.
The bill similarly disregards the statewide benefits and taxable
wages for calendar years 2020 and 2021 when calculating the
unemployment tax rate that will apply to new employers for tax years
starting on or after January 1, 2022 (see BACKGROUND). Thus, the
rate charged to employers who have not participated in the system
long enough to have their own experience rates will not be affected by
the benefits paid during those years.
EFFECTIVE DATE: October 1, 2021
EXPERIENCE RATES
By law, an employer’s experience rate generally depends on the
amount of unemployment benefits its former employees received
during its “experience period,” which is the three-year period
preceding each June 30, when an employer’s rate is calculated. Under
current law, an employer’s rate is determined by calculating the ratio
between the amount charged to the employer’s experience account
(generally, the amount of benefits paid to its former employees) and 2021HB-05377-R000254-BA.DOCX
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the amount of the employer’s taxable wages during the experience
period. This ratio is converted to a percentage between 0.5% and 5.4%,
which becomes the employer’s experience rate (CGS § 31-225a(e)).
For tax years starting on or after January 1, 2022, the bill requires
that an employer’s experience period disregard the employer’s benefit
charges and taxable wages from July 1, 2019, through June 30, 2021,
when applicable. Thus, an employer’s experience rate would not be
affected by the chargeable benefits paid to its employees during that
period.
NEW EMPLOYER RATES
By law, employers that have not been chargeable with benefits for a
long enough time to have their own experience rate calculated must
pay 1% or the state's five-year benefit cost rate, whichever is higher.
Under current law, the state's five-year benefit cost rate is determined
by dividing the total benefits paid to claimants over the previous five
years by the five-year payroll over that period.
For tax years starting on or after January 1, 2022, the bill requires
that the five-year benefit cost rate be calculated without the benefit
payments and taxable wages for calendar years 2020 and 2021, when
applicable. Thus, the statewide benefits paid during those years will
not affect the rate charged to the new employers.
BACKGROUND
Unemployment Tax Rate
By law employers pay state unemployment insurance (UI) taxes to
support the state’s Unemployment Trust Fund, which provides UI
benefits to eligible claimants. An employer’s state UI tax liability
typically depends on three factors: (1) its experience rate, (2) the fund
balance rate (a tax rate tied to the financial solvency of the state’s
unemployment trust fund), and (3) its taxable wage base (the amount
of wages it paid that are subject to state UI taxes). Generally, the sum
of the first two rates, which can range from 0.5% to 6.8%, applies
against the first $15,000 of each employee’s wages (the taxable wage
base) (CGS § 31-225a). 2021HB-05377-R000254-BA.DOCX
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Related Bills
sSB 1002 (§§ 26-27) and sHB 6595 (§§ 26-27), reported favorably by
the Labor and Public Employees Committee, both contain identical
provisions as this bill.
SB 711, reported favorably by the Commerce Committee, creates a
“non-charge” against an employer’s experience rate for the
unemployment benefits paid to former employees because of COVID-
19.
COMMITTEE ACTION
Labor and Public Employees Committee
Joint Favorable
Yea 13 Nay 0 (03/18/2021)