OTHER NEWS
Employers face 1.5 percent unemployment compensation surcharge

By Bob O'Connell
Public Affairs & Communications Director

The South Dakota Unemployment Insurance (UI) Trust Fund has been severely impacted by the recession. Weekly payments to unemployed workers from the Trust Fund have been two to five times higher than normal. A permanent provision in South Dakota law automatically assesses a surcharge to employers when the State Unemployment Insurance Trust Fund falls to low levels. The state's UI fund dropped to $2.8 million at the end of the third quarter in 2009, below the "trigger" point of less than $11 million in the fund at the end of any quarter.

Therefore, the lower balance triggered a 1.5 percent employer surcharge on taxable wages paid from Oct. 1-Dec. 31, 2009. This is in addition to the regular unemployment compensation amount. The surcharge does not count against the employer's account balance but must be paid under the law, SDCL 61-5-23, which has been part of unemployment insurance law since 1939.

The taxable wage base was $9,500 in 2009 and is $10,000 in 2010. The surcharge impact on individual employers is determined by the number of employees and how much in taxable wages they are paid.

An example provided on the Department of Labor's website states: "For example, if all the firm's employees were paid $9,500 or more by Sept. 30, 2009, the employer would have no surcharge due by the fourth quarter of 2009. If a new employee started work on Oct. 1, 2009 or after, the 1.5 percent surcharge would apply to wages paid to that employee (up to $9,500) paid through Dec. 31, 2009. The actual payment for the surcharge on the fourth quarter 2009 wages will be due Jan. 31, 2010. The maximum amount any business would pay per employee in 2009 would be $142.50."

Unemployment insurance provides temporary financial assistance for persons who have lost their jobs, through no fault of their own, until they find other employment or benefits are exhausted. South Dakota's unemployment insurance program is financed by employers through payroll taxes; workers do not contribute to this plan. The surcharge is projected to remain in effect at the 1.5 percent rate through June 30, 2010 because the trust fund will have a negative balance on Dec. 31, 2009 and on March 31, 2010.