The very basics
The unemployment insurance program is designed as a partnership between the federal government and state governments. States collect quarterly unemployment insurance taxes (combined tax - see terms) and wage information to pay unemployment insurance benefits to qualified workers. In Nebraska these taxes are paid by employers only and are not a withholding from worker wages. The federal part, Federal Unemployment Tax, is paid to the I.R.S. and one of the primary uses is to pay the administrative costs of state programs.
Employers Complete an Application For An Unemployment Insurance Account* to be assigned an account number. During 2005 new employer and other non-experience rated employers are assigned a tax rate of 3.5%. Beginning January 1,2006, new employers and other non-experience rated employers are assigned a tax rate equal to the state average tax rate or 2.5% - whichever is less. This tax rate applies to the taxable wage base. The taxable wage base in 2005 is $7,000. The Taxable wage base in 2006 is $8,000 and in 2007 and thereafter it will be $9,000.
Once an employer is determined liable, he or she is issued an unemployment insurance account number - a ten digit number starting with a zero. This number is different from the state revenue number or I.R.S. number.
Once an employer has an account, employers are mailed quarterly Combined Tax Reports* and Wage Reports* each quarter. Reports and payments are due back at the Department of Labor by the end of the month following the end of the quarter.
*Requires Adobe Acrobat Reader
New employer registration
Employers must apply for an account as soon as they have had enough payroll or employment as defined in the Law. For most employers this is $1500 paid in a calendar quarter or having any employees working in 20 different weeks of a calendar year. These amounts vary for agricultural employers, and domestic employers.
Employers with an active account are automatically mailed two forms at the end of each quarter. These are a Combined Tax Report (form U.I. 11T)* and a Wage Report (form U.I. 11W)*. Due dates are as below:
Employers who have had $100,000 or more in payroll in either of the two preceding years are required to file and pay electronically.
Click here to find more about electronic filing and payment using UIConnect.
If a report is not received timely it is subject to a penalty ranging between $25.00 and $200.00. Be sure to submit reports timely even if payment of the tax at that time is not possible. This will help minimize your cost.
Mail the report and check in the light blue pre-addressed envelope provided.
Nebraska Department of Labor
Unemployment Insurance Tax
P.O. Box 94600
Lincoln, NE 68509-4600
*Requires Adobe Acrobat Reader
Electronic reporting and paying
Electronic filing of reports and payment of tax is required for employers who have had an annual payroll of $100,000 or more in either of the two preceding years. We offer UIConnect as a convenient means of reporting and paying electronically. This includes an FTP option for filing wage reports by larger employers.
Contact the UIConnect help line at (402) 471-9898 if you need assistance.
Taxable wage base
The taxable wage base is the amount paid to each employee each year which is taxed for unemployment insurance. Earnings above the taxable wage base are called excess wages and are not taxed. The taxable wage base in Nebraska was $7,000 between 1983 and 2005. In 2006 the taxable wage base was $8,000 and in 2007 and thereafter the taxable wage base will be $9,000.
Remember when you complete federal unemployment tax form 940 or 940 EZ for years 2006 and beyond that the taxable wage base will be different than the state's. The federal tax base will continue to be $7,000.
Tax rates and employer experience rating
New Employer Rates
New employers and others who are not eligible for an experience rate are assigned one of two combined tax rates as follows. Employers not in the construction industry are assigned a combined tax rate equal to the state's average tax rate (category 12 on the rate table) but no lower than 1.25% and no higher than 2.50%. All construction industry employers who are not eligible for experience rating will be assigned a combined tax rate equal to the highest tax rate (category 20) for the year. These rates will be recalculated each year so an employer cannot expect to have the same combined tax rate each of the two years it takes to qualify for experience rating.
Construction industry employers are defined as those primarily engaged in business activities classified as sector 23 activities under the North American Industrial Classification System.
Experience rated employer rates
Employers are eligible for experience rating once they have had combined tax payable and credited to their account in each of the two previous four-calendar quarter periods ending September 30. Rates are assigned in December each year for the coming year and are mailed to the employer at that time. Employers must be current with all combined tax reports to be eligible for experience rating.
NOTE: Employers who are delinquent any combined tax report will be assigned to the highest tax rate for the following year.
For more on this see The system we use to set combined tax rates.
The system we use to set combined tax rates
Combined tax rates are assigned using an array system. The array system uses employer reserve ratios as the primary determiner of rates. The higher the reserve ratio, the lower the tax rate.
Each November the revenue needs for the upcoming year as defined in statute are determined. Revenue to be collected (Planned Yield) amounts to a replacement for benefits paid adjusted by a factor that considers the health of the unemployment trust fund (the yield factor). Click here for more information about determining the planned yield.
Once the Planned Yield is determined a state average tax rate is calculated which is the rate necessary to generate the revenue needed and is the key to calculating all other rates. The average tax rate is calculated by dividing the next year planned yield by the statewide total taxable wages for the twelve months ending September 30.
Once the state’s average tax rate is calculated, it is assigned to category twelve in a twenty category rate table. Each of the other nineteen categories in the rate table is a fixed percentage (an experience factor) of the category twelve rate. The range of rates runs from 0% to 260% of the state average. Category twenty can never be less then 5.4%.
Employers are assigned to one of the twenty rate categories by their reserve ratio. The employers with the best reserve ratios are assigned to category one and those with the worst ratios are assigned to category twenty. Each category is limited to the number of employers required to equal five percent of the state’s taxable wages.
Tax rate notices will be mailed to employers in December. Employers will have until January 10 to make a voluntary contribution to lower their tax rate if they so desire. Voluntary contributions are limited to the amount necessary to reduce the tax rate one category.
The tax rate assigned is based upon each individual account's reserve ratio. At times a slightly better reserve ratio would qualify an account for a lower tax rate and the amount of money required to make that small improvement in the reserve ratio is minimal. For this reason employers are allowed to make voluntary contributions order to qualify for a lower tax rate.
A voluntary contribution form will be included with the rate notices that are mailed each year. The form will show the amount of voluntary contribution required to qualify for a lower rate. These will only go to employers who are not already at the lowest tax rate and who are not delinquent with any tax reports. Voluntary contributions will be accepted until January 10 each year. Employers will only be allowed to reduce the tax rate by one step through a voluntary contribution.
State Unemployment Insurance Tax (SUIT)
The State Unemployment Insurance Tax (SUIT) is one of two components of the “combined tax” that employers pay. (The other component is contributions.) The SUIT/Contributions split of combined tax can vary on an annual basis between 0/100% and 20/80%. Whenever SUIT rate is above zero percent, the contribution rate is reduced by the same percent. Therefore, the total amount paid is not dependant on where the SUIT rate is set.
IMPORTANT NOTE: In years when SUIT rate is above 0%, your contribution rate will be less than your combined tax rate. When completing your federal IRS form 940 for federal unemployment tax, be sure to report your state contribution rate (not combined tax rate).
The SUIT fund is a dual purpose fund. One purpose is to generate interest to fund grants to employers through Nebraska’s Worker Training program. The other purpose is to hold funds in reserve in case they are needed to pay unemployment benefits.
Non-Profits and governmental employers
Non-profit employers who have received a 501(c)(3) exempt status from the IRS have a different liability criteria and a payment option for meeting their unemployment insurance liability. This applies only to employers who have received a 501(c)(3) exemption.
A 501(c)(3) employer becomes subject if the organization had four or more individuals in employment for some portion of a day in each of twenty different weeks, whether or not such weeks were consecutive, within either the current or preceding calendar year, regardless of whether they were employed at the same moment of time.
A governmental entity becomes subject immediately upon hiring an employee.
A 501(c)(3) employer or a governmental employer has the option of choosing to be a contributory employer and paying the quarterly unemployment insurance tax or choosing to be a reimbursable employer instead. Each quarter, a reimbursable employer repays the Department of Labor dollar for dollar for any benefit payments made to former employees.
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