Answer: A new employer pays unemployment insurance contributions at a rate consistent with an account balance reserve percentage of between 10.5 percent, but less than 11 percent. New employers in the construction industry pay at a rate consistent with the industry average.
Answer: The Massachusetts Division of Unemployment Assistance (DUA) maintains an individual account for every employer required to pay unemployment insurance contributions.
The account contains a record of: employer's wages subject to contribution, contributions actually paid by the employers, insurance benefits charged to the employer, and any account balance adjustment. The account also provides an opening and a closing balance for the computation year (October 1 through September 30). An account balance carries over from year to year as long as the employer is required to file quarterly reports.
DUA uses each employer's account to determine an annual contribution rate for that employer. The experience rating process is the method used to determine the rate.
Question: How is an experience rating computed?
Answer: Experience rating is in effect for those employers who have been liable under the law for a sufficient period to measure their experience with unemployment. The last day of each fiscal year, September 30, is called the "computation date" when employers' accounts are closed to compute the rates for the following calendar year.
Elements involved in the Experience rate Computation
All money paid for unemployment insurance contributions is deposited in a common fund, the unemployment compensation fund. All unemployment benefits are paid from this fund, Rate Notice. Your experience rate notice will contain all the elements used to determine your rate.
The following is a line-by-line description of each element which appears on the experience rate notice:
The amount shown represents the balance in your account as of the date indicated. Since this account is a "book account" only, there are no substantive rights to any balance shown.
Most payments received during the computation period, regardless of the year and quarter, are applied to your account balance as of the date paid (to be used in the current rating period the contribution payment must be received by October 31). Any overpaid contributions for the current year that have been credited to a subsequent computational year will not be used in the current computational period.
Unemployment benefits paid to a claimant are charged to the account of the employer for whom the claimant worked. Charges are made as of the date the benefits are paid.
Credits or other adjustments to the benefit charge account affect the account balance during the computational year in which they occur. Benefit charges can be adjusted only through DUA's Employer Charge Department.
Refunds that are issued are subtracted from your account balance during the computational year in which refunds are issued, regardless of when the overpayment occurred.
The state maintains a general account known as the "solvency account" which is used to finance benefits that are not chargeable to an individual employer account. These include charges for dependency allowances, benefits paid to individuals who leave employment for what are considered to be an urgent or compelling personal reasons, additional benefits paid to claimants who are in approved training programs, and benefits paid and charged to accounts whose reserves have been depleted. This mechanism distributes appropriate costs proportionally among all employers.
All contributory employers are required to have their account balance reduced by the amount of the solvency assessment enacted for that year
A reserve percentage is determined for the solvency account in the same way one is determined for individual employer accounts. For the solvency account, the formula used is the ratio between the closing balance of the account and the total taxable payrolls of all employers for the prior calendar year."
Account Balance Adjustments
Transfers from subsidiary accounts into the master account are recorded as adjustments. Subsidiary accounts and certain other type of adjustments are not rated. Voluntary contributions payments are also included.
Reserve percentage limits for employers are a positive 50 percent or a negative 25 percent. Amounts in excess of these limits are transferred either to or from the solvency account.
Wages Subject to Contributions and Payments
All wages subject to contribution that are reported for the computation period, and received prior to November 30th of each year, are used in the rating process. Payments received after October 31 of each year are not used in the rating process.
DUA will estimate the wages for any quarter in the computation period when wages have not been filed or filed late (beyond November 30*). Estimated wages are based on the highest wages subject to contribution filed in the computation period. Estimates usually result in a higher rate for the following year.
If an employer reports no wages subject to contribution during the applicable computation period, DUA will assign a rate based on a positive or negative account balance as of the computation date.
The result of dividing your account balance, by your wages subject to contribution, is called your reserve percentage. An account with a positive balance will have a positive reserve percentage. Negative balance accounts will have negative reserve percentages.
Experience Rate Schedule and Your Annual Contribution Rate
The rate schedule for all employers is determined by the reserve percentage of the unemployment compensation fund.
To arrive at the reserve percentage, the balance of the fund as of the computation date is divided by the total payrolls for all contributing employers in the preceding calendar year. This percentage determines which schedule is in effect for the year.
Your reserve percentage is applied to the contribution schedule in effect for the applicable calendar year to determine your rate for the year. This rate will be used throughout the calendar year on your quarterly reports.
Answer: The high experience rating industry contributions rate is assigned to new employers in industries that historically have high experience ratings. These include: residential, commercial or industrial construction; sand, gravel or limestone mining; manufacturing of concrete, concrete products or asphalt; and road building, repair or resurfacing, including bridges, tunnels and residential and commercial driveways and parking lots.