New unemployment rate brings RI employers $10 million more in tax relief in 2018.
Employee contribution rate to TDI fund drops to lowest rate in 20+ years.
CRANSTON, RI — The Department of Labor and Training (DLT) today announced next year's benefit levels and rates for the two biggest income support programs it runs for Rhode Island workers and employers — Unemployment Insurance (UI) and Temporary Disability Insurance (TDI) — and that UI tax rates will drop to the next-lower schedule starting January 1, 2018.
The 2018 UI taxable wage base will be $23,000 for most employers and $24,500 for those at the highest tax rate (9.49%). This is a $600 increase over 2017's rate for both groups of employers. By law, the UI taxable wage base represents 46.5 % of the average annual wage in Rhode Island. It is adjusted for inflation each year by tying it to a percentage of the average annual wage. As wages rise, so does the UI taxable wage base.
UI tax rates, which had ranged from 0.99% to 9.59% (Schedule H) in 2017, will drop to a range of 0.89% to 9.49% (Schedule G) in 2018. (See 1st attachment, tax tables.) This is a further result of the enactment of the Fiscal Year 2017 state budget in June 2016. That budget included Governor Gina M. Raimondo's proposal revising the "reserve ratio" of the UI trust fund downward. This policy change saved Rhode Island employers about $30 million a year in taxes this year and will save companies the same amount every year from now on. It also made the overall UI tax structure fairer by ensuring that companies with the lowest experience ratings pay the lowest tax — without jeopardizing the solvency of the UI trust fund. As of September 30, the trust fund had a balance of around $350 million.
As a result, in the aggregate, employers saved about $30 million in 2017 — and will save $10 million more on their UI taxes for a total of $40 million in relief in 2018.
UI provides temporary income support to workers who have lost their jobs through no fault of their own and have sufficient wages in the base period to meet the monetary requirements. It is funded entirely from state and federal UI taxes paid by RI employers.
As well, DLT announced that the 2018 UI rate for new employers will be 1.71%, which includes the 0.21% assessment to the Job Development Fund (JDF). Administered by the Governor's Workforce Board, the JDF is a long-standing state account dedicated to improving the skills and employability of Rhode Island's workforce.
DLT also announced that the 2018 Temporary Disability Insurance (TDI) taxable wage base will be $69,300 — which is an increase of $1,200 over the 2017 taxable wage base of $68,100 — and that the employee contribution rate to the TDI fund will drop one-tenth of a percentage point to 1.1 percent from 1.2 percent in 2017. This is the first rate decrease since 2012. The employee rate has not been this low since 1996. It is calculated by dividing total adjusted fund disbursements for the 12-month period ending September 30 by the taxable wages for the 12-month period ending June 30.
Paid by employees, not employers, TDI protects workers against wage loss due to a non-work related illness or injury, and through Temporary Caregiver Insurance (TCI), provides up to four weeks to bond with a new child or to care for a seriously ill family member. TCI is not a separate state program; TCI is part of the TDI program and can be considered to be TDI for TCI purposes. Workers pay for TDI through a payroll tax.
Through October, (the most recent month for which data is available), DLT had processed 39,827 TDI applications of which 9,206 — about 23 percent — were initial claims for TCI. To date in 2017, TDI payments have averaged $491 per week and TCI payments have averaged $536 per week.
Rhode Islanders may find the 2018 UI and TDI Quick Reference sheet helpful.
How DLT Calculates the Rates
DLT's Labor Market Information (LMI) division calculates the UI and TDI taxable wage bases using the average annual wages in "covered employment" for the year before the previous calendar year. Covered employment refers to those employers who fall under the coverage of the state and federal UI programs and pay unemployment taxes on their workers. In calendar year 2016:
UI Taxable Wage Base
Total Wages: $17,764,098,633 Average Monthly Covered Employment: 362,188 Average Annual Wage: $49,047 46.5% of the average annual wage: $22,807
(This is rounded up to the next higher multiple of $200, which in this case is $23,000.)
TDI Taxable Wage Base
- Is equal to the annual earnings needed by an individual to qualify for the TDI maximum weekly benefit rate ($831).
- This is determined by multiplying the maximum rate ($831) by the maximum TDI benefit duration (30 weeks) and then dividing by the percent of wages replaced (0.36%).
- Thus: $831 x 30 divided by .36 = $69,250 (which by law is rounded up to next higher multiple of $100, or $69,300).