O F F I C E O F L E G I S L A T I V E R E S E A R C H
P U B L I C A C T S U M M A R Y
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PA 21-5—HB 5377
Labor and Public Employees Committee
AN ACT CONCERNING TH E REMOVAL OF COVID -19 RELATED
LAYOFFS FROM THE UNE MPLOYMENT COMPENSATI ON
EXPERIENCE ACCOUNT
SUMMARY: This act 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 (see BACKGROUND). 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 act’s provisions apply to the extent allowed by
federal law and as necessary to respond to the spread of COVID-19.
The act 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.
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. The 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 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)).
But for tax years starting on or after January 1, 2022, the act 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 either 1% or O L R P U B L I C A C T S U M M A R Y
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the state’s five-year benefit cost rate, whichever is higher. 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, however, the act 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
State Unemployment Tax
By law, an employer’s state unemployment tax liability typically depends on
three factors: (1) its individual experience rate, (2) the statewide fund balance rate
(a tax rate tied to the trust fund’s financial solvency), and (3) the amount of wages
it paid that are subject to the tax (the taxable wage base). Generally, the sum of
the first two rates applies against the taxable wage base (CGS § 31-225a).