Employers should watch out for negative SUTA reserves

Every employer in the state of Michigan pays into the state unemployment fund (SUTA).  If a former employee makes a claim for unemployment, a portion of their unemployment payment would be charged against your SUTA account.  Enough unemployment claims against your company may eventually result in a negative SUTA account (or reserve).

Due to the economy in Michigan, many employers are finding that they now have a negative SUTA reserve.  If you had a negative reserve as of June 30, 2010, you will be subject to an additional 0.75% state unemployment tax for 2011.  The term for this tax is a “solvency tax”.

When the economy is doing well, employers tend not to pay attention to this; when few are claiming unemployment the reserve tends to stay positive.  The amount of people claiming unemployment makes it a particularly important time to pay closer attention to this.  To help minimize the hit that your account takes you want to ensure that only the former employees that qualify for unemployment receive it.  If the employer does not contest an incorrect employee claim, the unemployment agency will find in favor of the employee.

If you want more information regarding your SUTA account, or you have any other questions, please contact us.