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As part of the recently enacted fiscal-year 2012 state budget (article 4), Rhode Island changed the way in which the unemployment taxable wage base is calculated in §28-43-7 of the General Laws in C. 28-43.

2012 Will Be the First Year the New Formula Is Used

Beginning in 2012, the formula will be to calculate an “average annual wage in covered employment” for the calendar year preceding the “computation date” and multiply that figure by 46.5%. The resulting product, rounded up to the nearest $200, will be the unemployment wage base for the year following the computation date.

Computation Date Will Be September 30

The computation date will be September 30. For example, to calculate the unemployment wage base for 2012, the computation date will be September 30, 2011 and the look-back year will be 2010.

Negative Balances Can Lead To Surcharge

Employers with a reserve account percentage of negative twenty-four or less will have a taxable wage base of the standard taxable wage plus $1,500.

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Contact Vision Payroll if you have any further questions on the Rhode Island unemployment taxable wage base calculation.

New Jersey Governor Chris Christie recently signed into law A-3819 (S-2730), which reduces the unemployment tax rates that employers would have otherwise had to pay during the 2012 rate year (July 1, 2011 through June 30, 2012). The rates will increase, however, from the rate year 2011 rates.

Rates Will Be Determined Using Schedule D for 2012 Rate Year

During the 2011 rate year (July 1, 2010 through June 30, 2011), rates for employers in New Jersey were determined based on the rates in column C of the tax table. Without the passage of A-3819, employers would have had their rates for 2012 determined by column E of the tax table. Under A-3819, rates in 2012 will be determined by reference to column D of the tax table.

Minimum and Maximum Rates to Increase for 2012 Rate Year

The minimum rate for employers will increase from 0.5% for the 2011 rate year to 0.6% for the 2012 rate year. Had the rates changed to Schedule E, the minimum rate would have increased to 1.2%. The maximum rate for employers will increase from 5.8% for the 2011 rate year to 6.4% for the 2012 rate year. Had the rates changed to Schedule E, the maximum rate would have increased to 7.0%.

New Employer Rate Also Set to Increase for 2012 Rate Year

The rate for new employers will increase from 2.8% for the 2011 rate year to 3.1% for the 2012 rate year. Had the rates changed to Schedule E, the new employer rate would have increased to 3.4%.

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Contact Vision Payroll if you have any further questions on A-3819 and the impact on New Jersey unemployment tax rates.

The Washington Employment Security Department has announced an increase in the taxable wage base for 2012. The wage base will increase from $37,300 for 2011 to $38,200 for 2012.

Find Out the Wage Base for All States by Visiting the Vision Payroll Unemployment Taxable Wage Base Page

Contact Vision Payroll if you have any questions on the Washington unemployment taxable wage base or visit our Unemployment Taxable Wage Base page.

The Internal Revenue Service recently released Rev. Proc. 2011-32 which contained the 2012 inflation adjusted amounts for Health Savings Accounts or HSAs.

Deductions Limitation Set to Increase

The annual limitation on deductions will increase from $3,050 in 2011 to $3,100 in 2012 for those with self-only coverage. Those with family coverage will have the deduction limitation increase from $6,150 to $6,250.

High-Deductible Health Plan Minimum Deductibles Unchanged

The minimum deductibles of a high deductible health plan will see no change; they will remain at a minimum deductible of $1,200 in 2012 for self-only coverage and $2,400 for family coverage.

Annual Out-of-Pocket Limitation to Increase

The annual out-of-pocket limitation for 2012 will also increase from $5,950 in 2011 to $6,050 for those with self-only coverage; the out-of-pocket limitation for family coverage will increase from $11,900 to $12,100.

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Contact Vision Payroll if you have any questions on the updated 2012 inflation adjusted amounts for HSAs in Rev. Proc. 2011-32 or visit our Important Facts and Figures page for further information.

On April 8, 2011, Governor Susana Martinez vetoed portions of HB 59. The portion vetoed would have changed the contribution schedule from a floating schedule for 2012 to Schedule 3.

Schedule 3 Seen as Counter-Productive

According to Governor Martinez, “I do not support increasing job-killing taxes on small businesses while we are struggling to recover from a recession. Making it more expensive for small businesses to hire people would be counter-productive to our efforts to put more New Mexicans back to work.”

Protection of the Solvency of the Unemployment Fund Is a Priority

Governor Martinez also indicated support for returning to Schedule 1 for 2012. “I have already begun working with members of the legislature on a plan that will protect the solvency of the fund and keep the contribution rate locked at Schedule 1, in order to help small businesses create more jobs. I intend to include this issue on the agenda for the upcoming special session on redistricting. I seek a bi-partisan solution that will protect the solvency of the Unemployment Fund without crippling job growth.”

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Contact Vision Payroll for further information on changes to New Mexico unemployment taxes.

Illinois Governor Pat Quinn recently signed HB 1030 into law. The new law adds an unemployment tax surcharge, increases the taxable wage base, and reduces maximum benefits, among other provisions.

Surcharge Is for First Quarter of 2011

For the first quarter of 2011, employers are now required to pay a surcharge of 0.50% of taxable wages. Up to $90,000,000 of this surcharge is to be earmarked for interest payments for interest required to be paid under Title XII of the Social Security Act or for transfers to the state’s account in the unemployment trust fund.

Taxable Wage Base Will Increase in 2012

The taxable wage base will increase from $12,960 in 2011 to $13,560 in 2012.

Further Surcharge May Apply in 2012

If necessary to further interest payments, a surcharge will also apply to the first quarter of 2012 and the 2013 wage base will remain at $13,560. Otherwise, the 2013 wage base is scheduled to revert to the 2011 level of $12,960.

Maximum Benefits Reduced Starting in 2012

The new law also reduces the maximum total amount of benefits for an eligible individual, for specified benefit years starting in 2012, to 25 (instead of 26) times his or her weekly benefit amount plus dependents’ allowances, or to the total wages for insured work paid to such individual during the individual’s base period, whichever amount is smaller.

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Contact Vision Payroll for further information on the changes to Illinois unemployment taxes.

This week’s question comes from Cristina, a company president. We’re doing some planning for next year. What are the 2011 Highly Compensated Employee Limits?

IRS Releases 2011 Highly Compensated Employee Limits in IR-2010-108

In IR-2010-108, the Internal Revenue Service (IRS) announced that for 2011 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will remain unchanged. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”.

Highly Compensated Employee Compensation Limit Remains at $110,000

For 2011, an HCE is anyone who was a “5-percent owner” at any time during 2010 or 2011 or anyone who received in excess of $110,000 in compensation during 2010 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $110,000 for 2008 and 2009.

Look-back Provision Impacts HCE Testing Period

Since the law includes a look-back provision, employees who earned more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing, employees who will earn more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing, and employees who will earn more than $110,000 in 2011 are generally considered HCEs for 2012 plan year testing.

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Contact Vision Payroll if you have questions on changes to the HCE definition for 2010 and 2011 or get further information at Important Facts and Figures.

South Dakota Governor Mike Rounds recently signed SB 186, which increases the taxable wage base from $10,000 in 2010, to $11,000 in 2011, $12,000 in 2012, $13,000 in 2013, $14,000 in 2014, and $15,000 in 2015. The surcharge was reduced from 1.5% to 1.0% in 2010 and to 0.75% in 2011. The maximum rate for 2010 was increased, however, from 8.5% to 9.5%. Contact Vision Payroll if you have any questions on the South Dakota unemployment tax law changes.