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By Lia Coniglio, Esq. on Jan 26, 2024 11:52:23 AM

Three States, Virgin Islands May Face Credit Reduction for 2024

The U.S. Department of Labor (DOL) released its list of potential FUTA credit reduction states for 2024 [DOL, Potential 2023 Federal Unemployment Tax Act (FUTA) Credit Reductions, 1-2-24]. California, Connecticut, New York, and the Virgin Islands face a potential credit reduction for 2024. The determination will be made after November 10, 2024.

If states have an outstanding Federal Unemployment Account (FUA) loan on January 1 of at least two consecutive years and on November 10 of the second year, they are subject to a credit reduction on their Federal Unemployment Tax rate until the loan has been paid off. Each consecutive year a state has an outstanding loan balance on January 1, the credit reduction increases by 0.3%, though states that have made an effort to keep their balances in check have some opportunities to avoid the reduction.

Potential Credit Reductions for 2024

California and New York have a credit reduction of 0.6% for 2023 and may have a credit reduction of 0.9% for 2024.

Connecticut paid off its outstanding loan balance by the November 10, 2023, deadline and was not subject to a credit reduction for 2023. However, Connecticut resumed borrowing and had an outstanding loan balance on January 1, 2024. Because it had outstanding loans on three consecutive January 1 (in 2022, 2023, and 2024), it is subject to a potential credit reduction of 0.9% for 2024. If Connecticut pays off its loan by November 10, 2024, it will not be subject to a credit reduction for 2024.

The Virgin Islands began borrowing in August 2009, has a current outstanding loan balance of $87,510,622.10, and might be subject to a credit reduction of 5% for 2024.

Interested in more state and local payroll coverage? PayrollOrg’s PayState Update eNewsletter is perfect for you.


Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.