Question

Since the SUTA rates changes are made at the end of each year and there is much discussion about changes to the FUTA rate, the available 2017 rates were used for FUTA and SUTA. Note: For this textbook edition the rate 0.6% was used for the 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 2004 to 2013, inclusive, the company's total contributions to state unemployment compensation amounted to $18,135. For the calendar years 2014 to 2017, 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, 2018, 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	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 2014 to 2017. Calendar Year 2014 2015 2016 2017 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, 2004. Between that time and September 30, 2017, 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 2004-2017 and deduct benefits paid to get the balance in the reserve account as of 9/30. Compute rate for 2018 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 2018. % b. Rate for 2018 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 total reserve for 9/30/17 that you already calculated and compare it to benefits paid (add $2,000). On table, what tax rate corresponds to balance in reserve account now? — —

Answer 1

	2014	2015	2016	2017
	taxable payroll	taxable payroll	taxable payroll	taxable payroll
first quarter	12000	11000	13000	10000
second quarter	11750	11400	12700	9300
third quarter	12250	12400	12000	9350
fourth quarter	12500	12200	13750
total	48500	47000	51450	28650
conribution paid (total*3.7%)	1794.5	1739	1903.65	1060.05		6497.2	(total)
					add:	18135	(total contributions from 2004 to 2013)
					total contributions	24632.2
					less : total benefits paid	-23194.2
					balance in reserve account	1438.05
average taxable payroll of last 3 years =	42366.67
reserve ratio=	3.4
a)contribution rate for 2018 is 5.5 %	from table
b)add 2000 to benefits paid =	25194.2
total contributions	24632.2
less : total benefits paid	-25194.2
balance in reserve account	-562
for contribuitions falling below benefits paid the rate is 7.0 % from table excel formulas 2014 2015 2016 2017 taxable payroll taxable payroll taxable payroll taxable payroll first quarter 12000 11000 13000 10000 second quarter 11750 11400 12700 9300 third quarter 12250 12400 12000 9350 fourth quarter 12500 12200 13750 total =SUM(B4:B7) =SUM(C4:C7) =SUM(D4:D7) =SUM(E4:E7) conribution paid (total*3.7%) =B8*3.7% =C8*3.7% =D8*3.7% =E8*3.7% =SUM(B9:F9) (total) add: 18135 (total contributions from 2004 to 2013) total contributions =SUM(G9:G10) less : total benefits paid -23194.15 balance in reserve account =G11+G12 average taxable payroll of last 3 years = =ROUND((C8+D8+E8)/3,2) reserve ratio= =ROUND(G13/B15*100,1) a)contribution rate for 2018 is 5.5 % from table b)add 2000 to benefits paid = = 23194.2+2000 total contributions 24632.2 less : total benefits paid -25194.2 balance in reserve account =B22+B23 for contribuitions falling below benefits paid the rate is 7.0 % from table