As a result of California’s default on the Federal Unemployment Tax Act (FUTA) loans, PrimePay, LLC is simplifying the payment process for business owners, and ensuring compliance with federal government.
On the last scheduled payroll of the year, PrimePay will automatically facilitate FUTA payments for all active clients impacted by the tax. Utilizing monies from bank accounts on file for each client, payments will be made according to that company’s specific Form 940 filing information.
“At PrimePay, we work in partnership with small businesses everywhere. This payment arrangement allows our clients to remain in good standing with the government, minus the time and hassle involved if handling it themselves,” said Jeffrey Sorrell, Vice President of Payroll Tax & Benefit Services at PrimePay.
FUTA is a United States federal law that levies a federal employer tax used to help fund state workforce agencies. Employers report this tax by filing an annual Form 940 with the Internal Revenue Service.
In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment such as in 2007 through 2009) and provides for a fund from which states may borrow, if necessary, to pay benefits.
“As a direct result of the country’s most recent recession, the unemployment rate in California rose significantly as jobs became scant,” said Sorrell. “In the summer of 2008, when the unemployment rate was at 5.6%, Congress approved a 13-week extension. As the recession deepened, Congress passed additional expansions.”
At its peak, California offered 63 weeks of unemployment benefits. Those extensions ended on Dec. 28, 2013. However, beginning in January 2009, California began borrowing to cover the deficit on its regular 26 weeks of benefits as well as for the additional 37 weeks being provided.
These funds came from the Federal Unemployment Account (FUA) which serves as a loan fund for state unemployment programs to guarantee a continued stream of benefits during times of economic downturn.
As of Aug. 2, 2016, California’s Trust Fund Loan balance was $3,244,555,18.