The Exuberant Accountant - Scott Heintzelman

To start off, several of the factors are calculated by the DOL each year and are the same for every business, and they cannot be appealed.  These factors for 2011 include the State Adjustment Factor (.015), the Surcharge Adjustment (5.8% multiplied by the basic rate), Additional Contributions (.0065) and the Interest Factor (.0044).  The Interest Factor has been implemented this year to cover the interest expense on borrowed Federal money used to fill a depleted Pennsylvania UC Trust Fund. 

Next, we must look at a couple factors that can vary from business to business.   The Reserve Ratio Factor is a lifetime measurement of unemployment risk for a particular employer.  The ratio is calculated by taking the employer’s current reserve account balance (found at the bottom of the contribution rate notice) over the average annual taxable payroll for the past three years.  This rate is then categorized using a table that ranges from 0% to 2.7%.  Often times, this factor will be very low or even zero and will not significantly affect the overall contribution rate.

The Benefit Ratio Factor is calculated using the average annual benefit costs for the past 3 years over the average annual payroll coast for the same time period. You can find this information at the bottom of the contribution rate notices.  This factor can vary greatly from year to year, but will max out at 5%.   This is why in the example above the Basic Rate totals .0650 instead of .0950.

Due to a few increases in the predetermined rates along with increased unemployment benefits being paid out, many employers will experience an increased rate in 2011.  The Reserve Ratio and Benefit Ratio can be appealed if they do not fairly represent the history of the taxpayer.

If you have further questions, please contact me.