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Computation of Rates

The components of an experienced-based tax rate:

Reserve Ratio Factor
Benefit Ratio Factor
State Adjustment Factor
Basic Rate
Solvency Measures and the Trigger Mechanism
Surcharge
Additional Contributions
Interest Factor

Reserve Ratio Factor

An employer's reserve ratio factor is a lifetime measure of the employer's risk with unemployment and is determined by dividing the balance in the employer's reserve account (i.e., the lifetime unemployment contributions paid by the employer minus the lifetime benefits charged against the employer's account) by the employer's average annual taxable payroll for the last three fiscal (July - June) years. This ratio (percentage) is then cross-referenced to the applicable table in the PA UC Law, See Reserve Ratio Factor Table. The reserve ratio factor is part of the contribution rate for experience rated employers. This factor is determined annually and ranges from 0 percent to 3.2 percent. The employer's reserve ratio factor is identified on the Contribution Rate Notice (Form UC-657).

In determining experience rates, the Pennsylvania UC Law places employers into groups for contribution rate computation purposes. These groups are based on the length of time that an employer has paid contributions.

Group 1:
An employer who paid contributions for at least one quarter during the 12-month period ending on the computation date (June 30), and for one or more of the four completed calendar quarters immediately preceding such 12-month period, qualifies as a Group 1 employer. A Group 1 employer's reserve ratio factor is equal to one-third of the Group 3 rate.

Group 2:
If an employer paid contributions for at least one quarter in each of the two 12-month periods ending on the computation date (June 30), and for one or more of the four completed calendar quarters immediately preceding such two 12-month periods, the employer will be assigned to Group 2. An employer assigned to Group 2 has a reserve ratio factor equal to two-thirds of the Group 3 rate.

Group 3:
An employer who paid contributions for one or more quarters in each of the three 12-month periods ending on the computation date (June 30), and for at least one or more of the four completed calendar quarters immediately preceding such three 12-month periods, is classified as a Group 3 employer.

NOTE: An employer who has sufficient employer experience to be classified in Group 3 cannot be classified in either Group 1 or Group 2, nor can an employer who has sufficient employer experience to be classified in Group 2 be classified in Group 1.

Example:

Lifetime Reserve Account Balance divided by the Average Annual Taxable Payroll equals Employer Percentage which is applied to the Reserve Ratio Factor Table to determine the Reserve Ratio Factor
2,144 ÷ 16,583 = .1292 or 12.92% =
0.2% for Group 1 Employers
0.4% for Group 2 Employers
0.6% for Group 3 Employers

Utilizing the Reserve Ratio Factor Table, in the example given, the 12.92 percent translates to a reserve ratio factor of 0.2 percent for a Group 1 employer, 0.4 percent for a Group 2 employer and 0.6 percent for a Group 3 employer.

Reserve Ratio Factor Table - 2017 and Thereafter

Employer's Reserve Account as a Percentage of Taxable Wages
[Employer Percentage]

Reserve Ratio Factor
Group 1
[1/3 of Group 3 Rate]

Reserve Ratio Factor
Group 2
[2/3 of Group 3 Rate]

Reserve Ratio Factor
Group 3

Greater than 25%

0.0% (.000)

0.0% (.000)

0.0% (.000)

Greater than or equal to 21% but less than 25%

0.1% (.001)

0.2% (.002)

0.3% (.003)

Greater than or equal to 18% but less than 21%

0.2% (.002)

0.3% (.003)

0.4% (.004)

Greater than or equal to 15% but less than 18%

0.2% (.002)

0.4% (.004)

0.5% (.005)

Greater than or equal to 12% but less than 15%

0.2% (.002)

0.4% (.004)

0.6% (.006)

Greater than or equal to 9% but less than 12%

0.3% (.003)

0.5% (.005)

0.7% (.007)

Greater than or equal to 7% but less than 9%

0.3% (.003)

0.6% (.006)

0.8% (.008)

Greater than or equal to 5% but less than 7%

0.3% (.003)

0.6% (.006)

0.9% (.009)

Greater than or equal to 3% but less than 5%

0.4% (.004)

0.7% (.007)

1.0% (.010)

Greater than or equal to 1% but less than 3%

0.4% (.004)

0.8% (.008)

1.1% (.011)

Greater than or equal to 0% but less than 1%

0.4% (.004)

0.8% (.008)

1.2% (.012)

 
Less than 0% but greater than -1%

0.5% (.005)

0.9% (.009)

1.3% (.013)

Less than or equal to -1% but greater than -2%

0.5% (.005)

1.0% (.010)

1.4% (.014)

Less than or equal to -2% but greater than -3%

0.5% (.005)

1.0% (.010)

1.5% (.015)

Less than or equal to -3% but greater than -4%

0.6% (.006)

1.1% (.011)

1.6% (.016)

Less than or equal to -4% but greater than -5%

0.6% (.006)

1.2% (.012)

1.7% (.017)

Less than or equal to -5% but greater than -6%

0.6% (.006)

1.2% (.012)

1.8% (.018)

Less than or equal to -6% but greater than -7%

0.7% (.007)

1.3% (.013)

1.9% (.019)

Less than or equal to -7% but greater than -8%

0.7% (.007)

1.4% (.014)

2.0% (.020)

Less than or equal to -8% but greater than -9%

0.7% (.007)

1.4% (.014)

2.1% (.021)

Less than or equal to -9% but greater than -10%

0.8% (.008)

1.5% (.015)

2.2% (.022)

Less than or equal to -10% but greater than -11%

0.8% (.008)

1.6% (.016)

2.3% (.023)

Less than or equal to -11% but greater than -12%

0.8% (.008)

1.6% (.016)

2.4% (.024)

Less than or equal to -12% but greater than -16%

0.9% (.009)

1.7% (.017)

2.5% (.025)

Less than or equal to -16% but greater than -20%

0.9% (.009)

1.8% (.018)

2.6% (.026)

Less than or equal to -20% but greater than -28%

0.9% (.009)

1.8% (.018)

2.7% (.027)

Less than or equal to -28% but greater than -100%

1.0% (.010)

2.0% (.020)

3.0% (.030)

Less than or equal to -100% or lower

1.1% (.011)

2.2% (.022)

3.2% (.032)

Reserve Ratio Factor Table through 2016

Employer's Reserve Account as a Percentage of Taxable Wages
[Employer Percentage]

Reserve Ratio Factor
Group 1
[1/3 of Group 3 Rate]

Reserve Ratio Factor
Group 2
[2/3 of Group 3 Rate]

Reserve Ratio Factor
Group 3

Greater than 25%

0.0% (.000)

0.0% (.000)

0.0% (.000)

Greater than or equal to 21% but less than 25%

0.1% (.001)

0.2% (.002)

0.3% (.003)

Greater than or equal to 18% but less than 21%

0.2% (.002)

0.3% (.003)

0.4% (.004)

Greater than or equal to 15% but less than 18%

0.2% (.002)

0.4% (.004)

0.5% (.005)

Greater than or equal to 12% but less than 15%

0.2% (.002)

0.4% (.004)

0.6% (.006)

Greater than or equal to 9% but less than 12%

0.3% (.003)

0.5% (.005)

0.7% (.007)

Greater than or equal to 7% but less than 9%

0.3% (.003)

0.6% (.006)

0.8% (.008)

Greater than or equal to 5% but less than 7%

0.3% (.003)

0.6% (.006)

0.9% (.009)

Greater than or equal to 3% but less than 5%

0.4% (.004)

0.7% (.007)

1.0% (.010)

Greater than or equal to 1% but less than 3%

0.4% (.004)

0.8% (.008)

1.1% (.011)

Greater than or equal to 0% but less than 1%

0.4% (.004)

0.8% (.008)

1.2% (.012)

 
Less than 0% but greater than -1%

0.5% (.005)

0.9% (.009)

1.3% (.013)

Less than or equal to -1% but greater than -2%

0.5% (.005)

1.0% (.010)

1.4% (.014)

Less than or equal to -2% but greater than -3%

0.5% (.005)

1.0% (.010)

1.5% (.015)

Less than or equal to -3% but greater than -4%

0.6% (.006)

1.1% (.011)

1.6% (.016)

Less than or equal to -4% but greater than -5%

0.6% (.006)

1.2% (.012)

1.7% (.017)

Less than or equal to -5% but greater than -6%

0.6% (.006)

1.2% (.012)

1.8% (.018)

Less than or equal to -6% but greater than -7%

0.7% (.007)

1.3% (.013)

1.9% (.019)

Less than or equal to -7% but greater than -8%

0.7% (.007)

1.4% (.014)

2.0% (.020)

Less than or equal to -8% but greater than -9%

0.7% (.007)

1.4% (.014)

2.1% (.021)

Less than or equal to -9% but greater than -10%

0.8% (.008)

1.5% (.015)

2.2% (.022)

Less than or equal to -10% but greater than -11%

0.8% (.008)

1.6% (.016)

2.3% (.023)

Less than or equal to -11% but greater than -12%

0.8% (.008)

1.6% (.016)

2.4% (.024)

Less than or equal to -12% but greater than -16%

0.9% (.009)

1.7% (.017)

2.5% (.025)

Less than or equal to -16% but greater than -20%

0.9% (.009)

1.8% (.018)

2.6% (.026)

Less than or equal to -20% or lower

0.9% (.009)

1.8% (.018)

2.7% (.027)

Benefit Ratio Factor

The benefit ratio factor is a short-term comparison of the employer's taxable payroll and UC benefits charged. This factor is determined by dividing the employer's average annual benefit costs for the last three fiscal years (July - June) by the employer's average annual payroll for the last three fiscal years ending on the computation date (June 30). The benefit ratio factor is determined annually and ranges from 0 percent to 5 percent. This factor is identified on the Contribution Rate Notice (Form UC-657).

Example:

Average Annual Benefit Costs divided by the Average Annual Taxable Payroll equals Benefit Ratio Factor
3,794 ÷ 117,488 = .0322 or 3.2%

NOTE: Compute to a tenth of a percentage, with fractional parts rounded to the nearest tenth. If the computed factor is greater than 5 percent (.05), then decrease the factor to 5 percent (.05). The true percentage will be shown on the Contribution Rate Notice (Form UC-657).

State Adjustment Factor

The state adjustment factor acts as an assessment on all employers and uniformly levies the common benefit costs that are paid out of the Pennsylvania UC Fund, but which are not charged to any specific employer account. This factor is determined annually. The state adjustment factor is uniformly applied to all experience rated contributory employers and is not subject to appeal. The state adjustment factor is identified on the Contribution Rate Notice (Form UC-657).

Year

Maximum State Adjustment Factor

2012 and prior

1.5%

2013 through 2016

1.0%

2017

0.85%

2018 and thereafter

0.75%

Basic Rate

The basic rate is determined by adding together the Reserve Ratio Factor, Benefit Ratio Factor and State Adjustment Factor.

Solvency Measures and the Trigger Mechanism

The UC Law contains four solvency measures that "trigger" on or off depending on the balance in the UC Fund. Two of the solvency measures apply to employer contribution rates: Surcharge and Additional Contributions. The other solvency measures are employee contributions and a reduction in the amount of weekly benefits payable to each claimant.

The solvency measures trigger on when the "trigger percentage" is less than 250 percent and trigger off when the trigger percentage is 250 percent or more.

Based on contribution and benefit activity for 2016, the solvency measure rates in effect for calendar years 2018 through 2022 are as follows:

Solvency measure rates with outstanding UC debt

 

Target Amount

Rate

Employer surcharge

$100,000,000

5.4%

Employer additional contributions

$225,000,000

0.5%

Employee tax

$166,666,667

0.06%

Benefit reduction

$52,000,000

2.4%

Solvency measure rates with no outstanding UC debt

 

Target Amount

Rate

Employer surcharge

$138,000,000

7.4%

Employer additional contributions

$310,000,000

0.7%

Employee tax

$230,000,000

0.08%

Benefit reduction

$72,000,000

3.3%

Every five years, the department recalculates the rates so that each solvency measure generates a targeted amount of revenue for each solvency measure as required in the PA UC Law.

Surcharge

The surcharge is added into the contribution rate and determined by multiplying the employer's Basic Rate by the surcharge adjustment percentage applicable for that year. The result of the computation is the "Surcharge Adjustment." The Surcharge Adjustment is identified on the Contribution Rate Notice (Form UC-657).

YEAR

SURCHARGE ADJUSTMENT

2008 - 2012

Positive 5.8%

2013 - 2017

Positive 5.1%

2018 - 2021

Positive 5.4%

Additional Contributions

The Additional Contributions component of the overall contribution rate is applicable to all contributory employers (except those subject to newly liable contribution rates). The Additional Contributions is identified on the Contribution Rate Notice (Form UC-657).

Year

Additional Contributions

2008 - 2009

0.25%

2010 - 2017

0.65%

2018 - 2021

0.50%

 

Interest Factor

The Department has determined that the 2021 Interest Factor remains at zero (0.0%). This remains unchanged from the 2020 interest factor. The chart below shows the most recent interest factor percentages by year.

YEAR

Interest Factor

2011

0.44%

2012

0.20%

2013 - 2019

1.1%

2020 - 2021

0.00%

Background:

The Interest Factor uniformly applies to all contributory employers (except those employers subject to newly liable contribution rates) and is not subject to appeal. The Interest Factor is identified on the Contribution Rate Notice (Form UC-657).

Payments attributable to the Interest Factor, like employee contributions, are not credited to an employer's reserve account and are not credited to the employer's experience record for future rate computation purposes. In addition, the Interest Factor is not considered to be a "contribution" for federal certification purposes under the provisions of the Federal Unemployment Tax Act.