If employment is covered under the Pennsylvania Unemployment Compensation Law (Law), employers are responsible for UC coverage of their employees. However, political subdivisions and certain nonprofit employers have a choice of two methods of financing this coverage. The two methods are:
- Contributory Method - employers pay contributions (tax) based on a contribution rate and
taxable wage base paid to each employee each calendar year.
- Reimbursable Method - employers may elect, if qualified, to reimburse the UC Fund for the amount of UC benefits charged to their account and billed dollar-for-dollar on either a quarterly or monthly basis.
Nonprofit employers exempt under section 501(c)(3) of the Internal Revenue Code who elect the reimbursable method are required to reimburse the Fund for all regular benefits paid which are attributable to service with the employer, and for one-half of the extended benefits paid.
Political subdivisions of the Commonwealth who elect the reimbursable method are required to reimburse the Fund for all regular benefits attributable to their employ, and the full amount of extended benefits.
Collecting and Remitting Employee Withholding
When applicable, all employers are required to withhold employee contributions at the time wages are paid regardless of the method used to finance UC liability. The employee withholding tax rate is determined annually and is based upon the trigger mechanism in the PA UC Law under Sections 301.7 and 301.8 (43 P.S. §782.7 and §782.8). Whether the employer is a contributory or a reimbursable employer, payment in full of all withheld employee contributions must be remitted to the Office of UC Tax Services (UCTS) with the employer's quarterly tax and wage information.
Employee contributions are based on an individual's total (gross) earnings. The
taxable wage base ceiling does not apply to employee contributions. Employee contributions are not considered in determining an employer's experience rate, nor are they considered to be "contributions" for federal certification purposes under the Federal Unemployment Tax Act (FUTA).
Terminating Reimbursable Status
An employer may terminate reimbursable coverage after a period of not less than two taxable years and convert their status to that of a contributory employer at the end of any calendar year. The employer must submit their request in writing and it must be received thirty (30) days prior to the end of the calendar year (by December 1).
Under Section 1107(b) and 1202.5(b) of the PA UC Law (43 P.S. §907 and §912.5) employers who have elected the reimbursable method of financing UC coverage may be converted to the contributory method for failure to file all required quarterly reports, remit amounts due and/or provide collateral bond or deposit (if applicable). The conversion will be effective for two years, beginning the next calendar year through the following calendar year.
Solvency Fee Notice Alert
Employers using the reimbursable financing method have a yearly option to elect to be able to request relief from charges for individuals that have applied for unemployment benefits. To elect to request relief from charges the employer is required to pay a solvency fee and have all their quarterly tax reports filed through the 2nd quarter of the year prior to the calendar year of the solvency fee election. The solvency fee is due within 30 days of receiving notification from the department.
The Election for Relief from Charges and Notice of Solvency Fee for calendar year 2021 that notify these employers of their solvency fee amount have been generated on 10/29/2020 and are dated 11/2/2020. Reimbursable employers who chose to receive electronic notification of their Unemployment Compensation Tax Services (UCTS) correspondence should have received email notification of the availability of the Reimbursable Employer’s Election and Notice of Solvency Fee by logging into their account in the Unemployment Compensation Management System (UCMS). Reimbursable Employer’s Election and Notice of Solvency Fee were mailed on 10/31/2020 to reimbursable employers that did not choose to receive electronic notification of their UCTS correspondences.
To view the notification online, please login to your account at
www.uctax.pa.gov and select the Correspondence option from the menu.
Payments for Solvency fee elections for calendar year 2021 for Election for Relief from Charges and Notice of Solvency Fee dated 11/2/2020 need to be received on or before 12/2/2020. Please refer to the notice for instructions on how to make the solvency fee payment.
Act 9 of 2020 Automatic Relief from Charges Update
The Department has begun processing the relief from charge credits related to COVID 19 claims.
The credits from the automatic relief from charges for eligible claims for reimbursable employers that have an approved 2020 solvency fee election were processed on 11/10/2020 and were included on the Statement of Account dated 11/11/2020 for Article XI reimbursable employers. The credits will appear on the Statement of Account dated 1/11/2021 for Article X and Article XII employers.
Impacted contributory employers should see the updated benefit charge values in their reserve account by the end of November 2020.
Continued Assistance Act
On December 27, 2020, the Continued Assistance Act was enacted into law. This Act extends the timeframe for state and local governmental entities, certain nonprofit organizations, and federally recognized Indian tribes that make payments in lieu of contributions to their state’s unemployment fund to be reimbursed at 50 percent for payments made on benefit claims. The period covered by this Act includes claims paid from January 2, 2021 to March 13, 2021. Please see the Employer UC & COVID-19 FAQs for further information on how the Continued Assistance Act mitigates the economic effects of COVID-19 on reimbursable employers.
Changes to Statements of Account for Reimbursement of Benefit Charges as a Result of COVID-19
As a result of the national pandemic, Governor Wolf signed Act 9 of 2020, the COVID-19 Proclamation of Disaster Emergency, on March 6, 2020.
Act 9 of 2020 provided for the following temporary amendments:
- Generally, if not precluded by federal law, reimbursable employers who were approved to participate in the relief from charges option for the calendar year 2020 were entitled to automatic relief if a claimant’s unemployment was due to the COVID-19 outbreak.
- Reimbursable employers who were not approved to participate in the relief from charges option for the calendar year 2020 have 120 days from the mailing date of the Statement of Account to repay benefit charges related to COVID-19.
- Late payments for reimbursable benefit charges stemming from COVID-19 (beginning with AB date 03/06/2020 through and including 12/26/2020) did not incur interest until January 1, 2021.
- Interest-free payment plans for benefit charges related to COVID-19 were available for reimbursable employers demonstrating financial hardship.
Please note that Act 9's temporary changes to the Pennsylvania UC Law ended on January 1, 2021.
Reimbursable Statements of Account
- Statement of Accounts for reimbursable employers that do not have an approved 2020 solvency fee election will have new sections to indicate charges and adjustments/credits that are COVID-19 related.
Article XI Employers
- Due dates displayed in the Unemployment Compensation Management System (UCMS) for COVID-19-related benefit charge receivables will continue to show the due date based on the normal 30-day timeframe (10th of the month following the posting of the benefit charge receivable). Although the due date shown in UCMS will still reflect the current 30-day timeframe, be assured that due dates and interest charges, as specified in Act 9 of 2020, will be followed.
Article X and XII Employers
- Due dates displayed in UCMS for COVID-19-related benefit charge receivables for the 1Q/2020 will show a due date of 5/11/2020. Although the due date indicated in UCMS is a date not consistent with Act 9 of 2020, be assured that due dates and interest charges, as specified in Act 9 of 2020, will be followed.
- Payments that are applied to the 1Q/2020 will first be applied to regular benefit charges and then to COVID-19 related benefit charges.
- The best way to contact us is by logging into your account at
www.uctax.pa.gov and selecting “Inquiries” from the left-side menu and then “Submit Inquiry.” Select “COVID-19” from the “Inquiry Subject” list.