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Full Printable Handbook PDF
SECTION 4: EMPLOYER UI TAX RATES
What UI taxes does an employer pay?
It depends. There are four types of covered employers: "new" employers, experience-rated employers, reimbursable employers, and state and local government employers. See the explanations below to determine what taxes each employer type pays.
What is a “new” employer?
A “new” employer is one that has been employing in Montana for less
than three complete federal fiscal years (October 1 to September 30). Experience-rated
employers have “new” employer rates for three years while they accumulate
a rating history with the Unemployment Insurance program. New employer
rates are the average rates paid during the previous year by employers in the
same type of industry as the new employer. New employers’ rates may change
during the three-year “new employer” period because their industry
average may change or if the new employer's benefit charges exceed taxes paid. A new employer must submit a completed employer registration
form to obtain the proper “new” employer industry rate.
What is an experience-rated employer? What taxes do they pay?
If you are a private, for-profit employer, you must pay all three UI related taxes:
> State Unemployment Insurance Contributions (SUTA): The UI program can only use this tax to pay Unemployment Insurance benefits to qualified individuals. This tax money cannot be used to operate the UI Program. All money collected from this tax is deposited into the UI Trust Fund.
> Administrative Fund Tax: This tax is assessed to help fund Department of Labor and Industry operations, including local Job Service. For experience-rated employers, this tax is 0.18% of taxable wages depending on the employers rate schedule & rate class. This tax is due each quarter and is computed by applying the tax rate to each quarter's total taxable wages.
> Federal Unemployment Tax Act (FUTA) Tax: This tax is paid directly to the Internal Revenue Service (IRS) to help finance the operations of Montana's UI claim, tax, and Job Service programs. Employers receive a reduced FUTA rate by paying their Montana UI tax.
How is it decided what an employer's rate will be each year?
If you are a private, for-profit employer, your tax rate is based on the contribution
rate schedule and your experience rating history. The Contribution
Rate Schedule determines the range of contribution rates assigned to all employers
each calendar year. The schedule is determined by the ratio of the UI Trust
Fund balance to total wages paid in covered employment for the state fiscal
year. A higher balance in the UI Trust Fund results in lower Unemployment Insurance
rate schedules.
Trust Fund balance/total covered wages = Ratio
The Schedule of Contribution Rates below reflects the range of rates in each rate schedule. For example, in 2013, Rate Schedule VI is in effect, which means that experience rated employers' rates range from 0.62% to 6.12%.
| SCHEDULE OF CONTRIBUTION RATES | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
I |
II |
III |
IV |
V |
VI |
VII |
VIII |
IX |
X |
XI |
||||
Minimum Ratio of Fund to Total Wages: |
(.0260) | (.0245) | (.0225) | (.0200) | (.0170) | (.0135) | (.0095) | (.0075) | (.0050) | (.0025) | (...) | |||
| Average Tax Rate: | 1.12 | 1.32 | 1.52 | 1.72 | 1.92 | 2.12 | 2.32 | 2.52 | 2.72 | 2.92 | 3.12 | |||
| Rate Class | Contribution Rates for Eligible Employers |
|||||||||||||
1 |
0.0% | 0.00% | 0.02% | 0.22% | 0.42% | 0.62% | 0.82% | 1.02% | 1.22% | 1.42% | 1.62% | |||
2 |
0.00 | 0.02 | 0.22 | 0.42 | 0.62 | 0.82 | 1.02 | 1.22 | 1.42 | 1.62 | 1.82 | |||
3 |
0.02 | 0.22 | 0.42 | 0.62 | 0.82 | 1.02 | 1.22 | 1.42 | 1.62 | 1.82 | 2.02 | |||
4 |
0.22 | 0.42 | 0.62 | 0.82 | 1.02 | 1.22 | 1.42 | 1.62 | 1.82 | 2.02 | 2.22 | |||
5 |
0.42 | 0.62 | 1.82 | 1.02 | 1.22 | 1.42 | 1.62 | 1.82 | 2.02 | 2.22 | 2.42 | |||
6 |
0.62 | 0.82 | 1.02 | 1.22 | 1.42 | 1.62 | 1.82 | 2.02 | 2.22 | 2.42 | 2.62 | |||
7 |
0.82 | 1.02 | 1.22 | 1.42 | 1.62 | 1.82 | 2.02 | 2.22 | 2.42 | 2.62 | 2.82 | |||
8 |
1.02 | 1.22 | 1.42 | 1.62 | 1.82 | 2.02 | 2.22 | 2.42 | 2.62 | 2.82 | 3.02 | |||
9 |
1.22 | 1.42 | 1.62 | 1.82 | 2.02 | 2.22 | 2.42 | 2.62 | 2.82 | 3.02 | 3.22 | |||
10 |
1.42 | 1.62 | 1.82 | 2.02 | 2.22 | 2.42 | 2.62 | 2.82 | 3.02 | 3.22 | 3.42 | |||
| Rate Class | Contribution Rates for Deficit Employers |
|||||||||||||
1 |
2.92% | 3.12% | 3.32% | 3.52% | 3.72% | 3.92% | 4.12% | 4.32% | 4.52% | 4.72% | 4.92% | |||
2 |
3.12 | 3.32 | 3.52 | 3.72 | 3.92 | 4.12 | 4.32 | 4.52 | 4.72 | 4.92 | 5.12 | |||
3 |
3.32 | 3.52 | 3.72 | 3.92 | 4.12 | 4.32 | 4.52 | 4.72 | 4.92 | 5.12 | 5.32 | |||
4 |
3.52 | 3.72 | 3.92 | 4.12 | 4.32 | 4.52 | 4.72 | 4.92 | 5.12 | 5.32 | 5.52 | |||
5 |
3.72 | 3.92 | 4.12 | 4.32 | 4.52 | 4.72 | 4.92 | 5.12 | 5.32 | 5.52 | 5.92 | |||
6 |
3.92 | 4.12 | 4.32 | 4.52 | 4.72 | 4.92 | 5.12 | 5.32 | 5.52 | 5.92 | 5.92 | |||
7 |
4.12 | 4.32 | 4.52 | 4.72 | 4.92 | 5.12 | 5.32 | 5.52 | 5.72 | 5.92 | 6.12 | |||
8 |
4.32 | 4.52 | 4.72 | 4.92 | 5.12 | 5.32 | 5.52 | 5.72 | 5.92 | 6.12 | 6.12 | |||
9 |
4.52 | 4.72 | 4.92 | 5.12 | 5.32 | 5.52 | 5.92 | 5.92 | 6.12 | 6.12 | 6.12 | |||
10 |
6.12 | 6.12 | 6.12 | 6.12 | 6.12 | 6.12 | 6.12 | 6.12 | 6.12 | 6.12 | 6.12 | |||
To calculate your reserve ratio for the current calendar year, the department subtracts the benefits charged to your account from the contributions you paid for the same period (beginning October 1, 1981, through September 30th of the year prior to the effective rate year). The reserve is divided by the average annual taxable payroll for the last three completed federal fiscal years (October 1 - September 30) to arrive at your reserve ratio. The department computes your reserve ratio yearly.
Contributions paid - benefit charges = Reserve
Reserve/average taxable payroll = Reserve ratio
You are assigned a rate class based on your reserve ratio. Your contribution rate is determined by comparing your reserve ratio to all other employers' reserve ratios. The highest positive reserve ratio is assigned the lowest contribution rate.
Is there only one type of experience-rated account?
There are three types of experience-rated accounts: Eligible, Deficit and New.
Eligible: An eligible employer has been subject to UI (covered) for the entire three federal fiscal years ending September 30 immediately preceding the computation date, and has: > filed all required quarterly payroll reports;
> paid all taxes, penalties and interest;
> established a positive record (paid more in contributions than the UI benefits charged to their account); and,
> paid wages in at least 1 of the 8 calendar quarters preceding the computation date.Deficit: Deficit employers are covered employers who have more UI benefits charged to (paid out of) their account than they have paid in contributions. New: A new employer has not been subject for the three entire federal fiscal years immediately preceding the computation date and has established a positive record. New employer rates are the average contribution rate for employers in the same industry classification.
Can the experience rate from the business I purchased be transferred
to me?
Yes. If you acquire a business, you can request the experience rating record
of the previous employer be transferred to you. You and the previous employer
must apply jointly within 90 days of the date you acquire the business. Contact
the Unemployment Insurance Contributions Bureau at (406) 444-3834 to discuss
if it would be beneficial to transfer the experience rating record. If the
previous and new owners have not filed all the required wage reports or paid
all monies due, all the delinquencies must be satisfied before the department
may assign a rate based on the previous owner's experience. If the new ownership,
control and/or management of the business is substantially the same as the
prior ownership, control and/or management, you will assume the prior owner's
contribution rate and the related experience.
How may I take steps to control my contribution rate?
When a current or former employee files a claim for Unemployment Insurance
benefits, a Notice of Potential Benefit Charge or a Notice of Filing of Claim
for Benefits is mailed to employers who paid wages to the claimant in the base
period of the claim. If the employee left work for reasons other than
lack of work, return the notice, within 8 days, providing an explanation of
the reason the claimant left your employ. Please be specific about
the final incident that caused the separation and provide complete information. You
will receive a determination if your account will be charged or if the charges
will be relieved. If you are a chargeable employer, you will also receive a
Statement of Benefits Paid each quarter. If you have any questions about charges
to your account, please call the Employer Charging Line at (406)
444-0399.
Also, you can avoid a penalty rate (equal to 150% of your assigned experience rate) simply by filing all reports and payments timely.
Is a claimant's entire work history used to calculate benefit charges?
No. Benefits are based on the wages a claimant earned during a certain period
of time - the base period. The
regular base period is the first four of the last five completed calendar quarters
at the time an initial claim for benefits is filed. If a claimant does
not qualify using the regular base period, the claim may be established
using wages paid in the last four completed calendar quarters. If you employed
the claimant during the base period, your account may be charged.
The claimant's regular base period is the shaded area below, if the claim is filed in quarter indicated:
 |
||||||||||||||
| Months filed claim | Base Period | |||||||||||||
| Jan, | Feb, | or | Mar | October 1 two prior years - end of September previous year |
||||||||||
| Apr, | May, | or | Jun | January 1 previous year - end of December previous year | ||||||||||
| Jul, | Aug, | or | Sept | April 1 previous year - end of March current year | ||||||||||
| Oct, | Nov, | or | Dec | July 1 previous year - end of June current year | ||||||||||
| For Example: If a claim is filed in January, February, or March of 2013, the regular base period is October 2011 through September 2012. | ||||||||||||||
| If the claimant doesn't qualify using the regular base period, the alternate base period, January 2012 through December 2012, would be used. | ||||||||||||||
As an experience-rated employer, do I pay taxes on all the wages I pay my employees?
It depends. You must report all wages you pay your employees on your quarterly
report. However, each year you pay taxes on wages paid to each employee
up to and including the taxable wage base. The taxable wage base is listed
in the upper right hand corner of the quarterly report form and may change
from year to year. The taxable wage base for 2013 is $27,900. Any wages
you pay an employee over the taxable wage base are considered excess wages.
The example below illustrates taxable wages versus excess wages, using
the 2013 wage base.
Computing Excess Wages per Employee
(based on 2013 UI wage base of $27,900) |
||||||||
Quarter |
Total Wages Paid In Quarter |
Total Wages Paid To Date |
Taxable Wages |
Excess Wages |
||||
First |
$ |
10,000 | $ |
10,000 | $ |
10,000 | $ |
0 |
Second |
10,000 | 20,000 | 10,000 | 0 | ||||
Third |
10,000 | 30,000 | 7,900 | 2.100 | ||||
Fourth |
10,000 | 40,000 | 0 | 10,000 | ||||
If the department transfers the experience rating record of the predecessor employer to your account, you may use the wages paid by the previous employer to calculate your excess and taxable wages for the year the experience was transferred.
What is a reimbursable employer? What taxes do they pay?
Some non-profit organizations may choose to reimburse the UI Trust Fund for benefit
payments. To be a reimbursable employer,
a non-profit organization must meet the criteria defined in the Internal Revenue
Code (IRC), Section 501(c)(3), provide the UI Contributions Bureau with a copy
of the Internal Revenue Service (IRS) exemption letter and apply to the UI
Contributions Bureau for approval. For more information on the IRS code, please
contact the IRS office at 1-800-829-1040. The election must last two years.
As a reimbursable employer, you must pay into the UI Trust Fund an amount equal to the benefits charged to your account. You will be charged for all benefits paid to former employees regardless of the reason they left your employment. Benefit charges are prorated according to the percentage of wages you paid to the total wages in the claimant's base period.
Example: Your employee, Jane Doe, is offered a better-paying job with another employer. She quits your employ and accepts the job. The other business suffers a set back and Jane is laid off. She files for unemployment insurance benefits and is found eligible. You paid Jane 64% of the total wages Jane received during her base period. Your reimbursable account is charged for 64% of the benefits paid to Jane even though she quit your business.
Example: An individual had two steady jobs; one of them with a private, for-profit employer and the other a reimbursable employer. The individual was laid off from the private employer and filed for partial benefits. The reimbursable employer would not be charged for benefits paid if there has been a reduction of 10% or less in hours or wages in the four weeks after the claim is filed as compared with the four weeks prior to the claim effective date.
You must advise the UI Claims Processing Bureau if there has been no change in employment for the charges to be relieved.
Reimbursable employers must submit quarterly wage reports and pay a 0.08% (.0008) Administrative Fund Tax on total wages paid each quarter. The UI Contributions Bureau will notify you monthly of the benefits charged to your account and you may pay these monthly or pay the entire quarterly charges within thirty days following the end of the quarter.
What taxes do governmental employers pay?
Governmental entities may also choose coverage as a reimbursable employer (see
above) or to make tax payments based on the government experience rating system
where the tax rate is applied to total wages. Governmental
entities choosing experience rating pay a 0.09% (.0009) Administrative
Fund Tax (AFT) on total wages paid each quarter.
Governmental employers who paid wages to the claimant during the base period are charged for UI benefits paid regardless of the reason the claimant left the employment. Benefit charges are prorated according to the percentage of wages paid by the governmental entity to the claimant's total wages in their base period.
Benefit charges can only be removed from a governmental employer if there has been no change in the employment.
Example: Your employee, Jane Doe, is offered a better-paying job. She quits your employ and accepts the job. Jane’s new employer suffers a set back and Jane is laid off. She files for unemployment insurance benefits and is found eligible. You paid Jane 64% of the total wages Jane received during her base period. Your governmental account is charged for 64% of the benefits paid to Jane even though she quit your business.
Example: An individual had two jobs, one of them with a private, for-profit employer and the other with a governmental employer. The individual was then laid off from the private employer. The governmental employer would not be charged for the benefits paid if there has been a reduction of 10% or less in hours or wages in the four weeks after the claim is filed as compared with the four weeks prior to the claim effective date.
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