Michigan Unemployment Payroll Tax Rate: A Manageable Expense
November 7, 2023
In late December 2023, the Michigan Unemployment Insurance Agency (UIA) will issue notices to Michigan employers announcing their Calendar Year (CY) 2024 unemployment payroll tax rate. The notices are titled “Tax Rate Determination for Calendar Year 2024” (UIA Form 1771) and are mailed to the employer or can be found on your Michigan Web Account Manager (MiWAM) account. Employers need to carefully review the notices to confirm the accuracy of the assigned payroll tax. The payroll tax is assessed on the first $9,500 earned by each employee during CY 2024. Note: Reimbursing employers (i.e.: most tax-exempt and governmental/municipal employers) do not pay the payroll tax and will not get a payroll tax rate notice.
On the surface, the notice appears to be a myriad of crazy formulas. But there are a few calculations on the notice that can easily be reviewed and verified:
- Non-Chargeable Benefits Component (maximum = 1%) — There is not much an employer can do to avoid or change this component. If you have had any payable unemployment claims during the last 10 years, this component is likely calculated at 1%.
- Chargeable Benefits Component (maximum 6.3%) — This is your experience rating component, and it looks at unemployment benefits charged to your account over a three-year period (July 1, 2020, through June 30, 2023). Low payable claims (benefit charges assessed) result in a lower tax rate for this component, whereas high payable claims result in a higher tax rate. You can reduce the tax component by carefully monitoring unemployment claims and charges and aggressively contesting disputable claims. The goal is to have very low benefit charges during the three-year period.
- Account Building Component (maximum 3%) — This component is intended to build a reserve for potential unemployment claims. But this is not a reserve that you own or will be refunded to you at any point. It is intended to build the state’s unemployment trust reserve. One key part of this formula looks at unemployment benefits charged to your account over a 12-month period (July 1, 2022, to June 30, 2023). Again, you want to ensure this number is kept as low as possible by carefully managing and aggressively contesting your unemployment claims.
At the bottom of the form, your total payroll tax rate is calculated. An additional line-item percentage may be added for a non-reporting penalty when appropriate. If there is a penalty listed, then you need to review your tax payments to the UIA during the past CY to determine if you were in fact late for any payment. If you were late, then you want to examine and amend your internal processes for paying the quarterly tax during CY 2024 so that the penalty is not assessed next year. You may want to appeal your tax rate determination if all your CY 2023 tax payments were timely or if you want to attempt to get a waiver for late payment due to a good and valid reason for the late payment.
Again, carefully review your CY 2024 payroll tax determination and file an appeal if you dispute any part of the calculation. Ultimately, you may want to request a hearing before an administrative law judge to present your case. An appeal of the payroll tax rate determination must be received by the UIA on or before the 30th day from the mail date listed on the determination. Note: A postmark on the 30th day is not good enough; the protest must be received by the UIA on or before the 30th day.
Finally, be sure that the person or company that pays or administers your unemployment payroll tax uses the correct rate for CY 2024. Send the determination to them and request that they verify with you the tax rate that will be used for CY 2024.
If you have any questions, need more information, or wish to consider representation in this area, please contact the MHA Unemployment Compensation Program (MHA UCP) — a division of the Michigan Health & Hospital Association, by contacting Courtney Pontack, senior director of operations, attorney at (517) 886-8387 or firstname.lastname@example.org. The MHA-UCP specializes in representing Michigan employers in all unemployment compensation matters. Having started in 1972, the MHA-UCP began supporting Michigan hospitals and grew to support other industries and offer services in multiple states. Today, the program represents over 700 clients throughout the United States and has saved millions of dollars for its clients. The program offers comprehensive unemployment services, including claims processing, detecting unemployment fraud, pre-hearing investigation and witness preparation before unemployment hearings with licensed attorneys as well as representation at unemployment hearings and appeals. The program also offers consultation on unemployment matters, including reviewing employers’ Tax Rate Determination notices.
SBAM is proud to offer its members an exclusive white paper from a fellow association, The Michigan Health and Hospital Association (MHA). The MHA established an Unemployment Compensation Program (MHA UCP) for its members over 50 years ago. This program has since grown to support other industries including education, non-profits and municipalities. The program has also expanded outside of Michigan. By using the information in this white paper, it can help you stay vigilant and save dollars. Unemployment remains a complex necessity, and having trusted partners in this space is invaluable. You may also connect directly with the MHA UCP, who can offer consultative services as well as complete claims management.