In the last post ( http://ow.ly/g2DUQ ) I started to explain the Notice of Contribution Rates and Statement of UI Reserve Account. Today I’ll go into more detail on what the items are that affect your reserve.
Line 1 (Previous Reserve Balance) shows the ending balance of your account as of July 31 of the prior year (in the case of the statement received this month, the date is 7/31/11).
Additions to your UI Balance are as follows: Line 2 (UI Contributions Paid) is the amount of UI tax you paid on August 1, 2011-July 31 2012 on the wages of your employees for that calendar period. The ETT tax is not considered UI contributions and is therefore not included in this amount. Line 3 shows the interest earned for employers who had a positive balance in the fund. Line 4 Negative Balance Reduction (if you had a negative balance and the EDD reduced/removed the negative amount). Line 5 Benefit Overpayments collected (amounts recovered from claimants who were overpaid UI benefits as a result of error or fraud). Line 6 Positive Reserve Account Balance Cancelled (when an employer stops paying wages, their reserve account is canceled after 3 years and the amount is pro-rated among all employers). Line 7 Other Income (shows money deposited to your account from any other source not already listed). Line 8 is the sum of all the credits listed.
Reductions to your UI Balance are as follows: Line 9 UI Benefits Charged (amount paid to former employees from 7/1/11-6/3/12. These charges may also be a result of a transfer to another employer account (business sold and another employer account established, etc.)). Line 10 Increase in Negative Reserve Balances (shows the amount of prorated charges to your UI reserve account as a result of the increases in the total of all negative UI reserve account balances. Basically, this means you have to pay for other businesses who are paying out a lot of claims and don’t have enough funds to cover the claims). Line 11 Benefit Overpayments Established (amount charged to your account for benefit overpayments). Line 12 UI Benefits Not Charged to Reserve Accounts (the total of all benefit charges not paid by individual UI accounts is accumulated and prorated to all employers). Line 13 Other Expenses (any prorated charges to your account for miscellaneous expenses). Line 14 Total Charges is the sum of all items subtracted from your balance.
Line 15 calculates your new UI reserve balance (previous reserve balance plus total credits less total charges). Line 16 shows the total taxable payroll reported on the quarterly DE9 reports for the three prior years (in this case 2009, 2010, 2011). Line 17 Reserve Ratio (reserve account balance divided by average base payroll. The average base payroll is the line 16 total divided by the number of years the business had payroll over the last 3 years. If an employer all 3 years, the total payroll is divided by 3. If only in business two years, the amount is divided by 2). If taxable wages are reported in at least one quarter of the year, that is considered a full year with wages. Your UI taxable wages from July 2011 through June 2012 are shown in the last box. This figure is used to calculate the prorated credits and charges.
Complicated stuff, right? The next post will share information on what you can do to reduce the charges against your account.
