General Information

Unemployment Insurance (UI) is a federal-state program financed through federal and state employer payroll premiums. It is regulated under the Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA).


Federal Unemployment Tax Act (FUTA)

Most employers who pay state unemployment insurance premiums must also pay federal unemployment premiums (FUTA). Premiums are a flat rate of 6.2% of the first $7,000 in gross wages paid to an employee during the calendar year. The federal government provides a 5.4% credit to companies that submit payroll reports and pay their state premiums on time. This results in an effective premium rate of 0.8% of the first $7,000 in wages ($56 per employee per year).

According to federal law, if a state has received a UI Trust Fund advance and not repaid it in two years, the federal credit on premiums will be reduced by 0.3%. Each year the state has not fully repaid its UI Trust Funds advance the credit will be reduced by an additional 0.3%. Indian received its first advance in November of 2008. One January 1, 2011, the state's balance of approximately $2 billion had not been repaid. This resulted in the 2011 effective FUTA premium rate increasing to 1.1%. In 2012 it will increase to 1.4%, 2013 to 1.7%, and so on. The credit reduction will be capped when Indiana's UI Trust Fund is structurally balanced (bringing in more premium revenue that paid out in benefits) for two consecutive years. Revenue generated from the decrease in the FUTA credit is applied directly to the balance of Indiana's UI Trust Fund Advance until it is fully repaid.


State Unemployment Tax Act (SUTA)

Employers pay State Unemployment Tax Act (SUTA) premiums to the state. Premiums are paid by the employer without deduction from the wages of an employee.

Factors such as number of former employees receiving benefits, voluntary payments, and the employer's partial sale or purchase of other businesses also impact the rate. Your rates may also be affected by how long you have been subject to SUTA, your recent reporting and late payments. Premiums are deposited into the state UI Trust Fund. The money from this fund is used only to pay UI benefits to those eligible.

Employers Unemployment Information

Source: Indiana Department of Workforce Development