The U.S. Department of Labor (DOL) has updated its list of potential FUTA credit reduction states for 2018. While California and the Virgin Islands are both listed, the Virgin Islands might be the only state/territory subject to a FUTA credit reduction for 2018. The 2018 determination will be made after November 10, 2018 [DOL, Potential 2018 Federal Unemployment Tax Act (FUTA) Credit Reductions, rev. 7-18-18].
California and the Virgin islands were subject to a credit reduction for 2017. For 2018, the total credit reduction for California could be 2.4% and for the Virgin Islands it could be 3.7% or 2.4% if the Benefit Cost Rate (BCR) add-on is waived.
Outstanding FUA Loans
If states have outstanding Federal Unemployment Account (FUA) loans on January 1 of two consecutive years and have not paid off the balance by November 10, they are subject to a credit reduction for state payments on their Federal Unemployment Tax rate until the balance has been paid off. California paid its FUA loans earlier this year, and if it does not take out additional loans by the November 10, 2018, deadline, it will not be a credit reduction state for 2018.
Waiver of Additional Add-ons
Once a state has had outstanding FUA loans for several years, additional types of credit reduction might also be added. States may apply to the DOL for a waiver of the BCR add-on. Both California and the Virgin Islands have applied for the waiver.
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