Reimbursable Employers

The two methods are:

• Contributory Method - employers pay contributions (tax) based on a contribution rate and taxable wage base paid to each employee each calendar year.
• Reimbursable Method - employers may elect, if qualified, to reimburse the UC Fund for the amount of UC benefits charged to their account and billed dollar-for-dollar on either a quarterly or monthly basis.

Nonprofit employers exempt under section 501(c)(3) of the Internal Revenue Code who elect the reimbursable method are required to reimburse the Fund for all regular benefits paid which are attributable to service with the employer, and for one-half of the extended benefits paid.

Political subdivisions of the Commonwealth who elect the reimbursable method are required to reimburse the Fund for all regular benefits attributable to their employ, and the full amount of extended benefits.

When applicable, all employers are required to withhold employee contributions at the time wages are paid, regardless of the method used to finance UC liability. The employee withholding tax rate is determined annually and based on the trigger mechanism in the PA UC Law under Sections 301.7 and 301.8 (43 P.S. §782.7 and §782.8). Whether the employer is a contributory or a reimbursable employer, payment in full of all withheld employee contributions must be remitted to the Office of UC Tax Services (UCTS) with the employer's quarterly tax and wage information.

Employee contributions are based on an individual's total (gross) earnings. The taxable wage base ceiling does not apply to employee contributions. Employee contributions are not considered in determining an employer's experience rate, nor are they considered "contributions" for federal certification purposes under the Federal Unemployment Tax Act (FUTA).

An employer may terminate reimbursable coverage after a period of not less than two taxable years and convert their status to that of a contributory employer at the end of any calendar year. The employer must submit their request in writing and it must be received thirty (30) days prior to the end of the calendar year (by December 1).

Under Section 1107(b) and 1202.5(b) of the PA UC Law (43 P.S. §907 and §912.5) employers who have elected the reimbursable method of financing UC coverage may be converted to the contributory method for failure to file all required quarterly reports, remit amounts due and/or provide collateral bond or deposit (if applicable). The conversion will be effective for two years, beginning the next calendar year through the following calendar year.

Employers using the reimbursable financing method have a yearly option to elect to request relief from charges for individuals who have applied for unemployment benefits. To elect to request relief from charges, the employer must pay a solvency fee and have all their quarterly tax reports filed through the 2nd quarter of the year prior to the calendar year of the solvency fee election. The solvency fee is due within 30 days of receiving notification from the department.

To view the notification online, please log in to your account at www.uctax.pa.gov and select the Correspondence option from the menu.

Payments for Solvency fee elections for the calendar year 2025 for Election for Relief from Charges and Notice of Solvency Fee dated 11/4/2024 are due on 12/4/2024.

On March 11, 2021, the President signed the American Rescue Plan Act into law. This Act amends certain provisions of the Continued Assistance for Unemployed Workers Act of 2020 and extended the previous expiration date of March 14, 2021, to September 6, 2021.

The applicable period for emergency unemployment relief for governmental entities and nonprofit organizations was extended to weeks of unemployment ending on or before September 6, 2021.

Additionally, the amount of emergency relief for weeks of unemployment beginning after March 31, 2021, increased from 50 percent of compensation paid to 75 percent.

Effective with the reimbursable billing Statement of Account (SOA) dated April 11, 2021, the SOA reflects the extension of the 50% Benefit Charge reimbursement program to include claim weeks ending January 2, 2021 to April 3, 2021. Additionally, with the May 11, 2021 SOA, the reimbursement information for claim weeks ending April 10, 2021 to September 4, 2021 will be calculated using the 75% formula.

On December 27, 2020, the Continued Assistance Act was enacted into law. This Act extended the timeframe for state and local governmental entities, certain nonprofit organizations, and federally recognized Indian tribes that make payments in lieu of contributions to their state’s unemployment fund to be reimbursed at 50 percent for payments made on benefit claims. The period covered by this Act includes claims paid from January 2, 2021 to March 13, 2021.

The Department has begun processing the relief from charge credits related to COVID 19 claims.

The credits from the automatic relief from charges for eligible claims for reimbursable employers that had an approved 2020 solvency fee election were processed on 11/10/2020 and were included on the Statement of Account dated 11/11/2020 for Article XI reimbursable employers. The credits appeared on the Statement of Account dated 1/11/2021 for Article X and Article XII employers.

Most relief from charge credits were issued in November 2020, however, additional relief from charge credits may continue to show on future Statements of Account.

As a result of the national pandemic, Governor Wolf signed Act 9 of 2020, the COVID-19 Proclamation of Disaster Emergency, on March 6, 2020.

Act 9 of 2020 provided for the following temporary amendments:

• Generally, if not precluded by federal law, reimbursable employers who were approved to participate in the relief from charges option for the calendar year 2020 were entitled to automatic relief if a claimant’s unemployment was due to the COVID-19 outbreak.
• Reimbursable employers who were not approved to participate in the relief from charges option for the calendar year 2020 had 120 days from the mailing date of the Statement of Account to repay benefit charges related to COVID-19.
• Late payments for reimbursable benefit charges stemming from COVID-19 (beginning with AB date 03/06/2020 through and including 12/26/2020) did not incur interest until January 1, 2021.
• Interest-free payment plans for benefit charges related to COVID-19 were available for reimbursable employers demonstrating financial hardship.

Please note that Act 9's temporary changes to the Pennsylvania UC Law ended on January 1, 2021.

Questions

• The best way to contact us is by logging into your account at www.uctax.pa.gov and selecting “Inquiries” from the left-side menu and then “Submit Inquiry.” Select “COVID-19” from the “Inquiry Subject” list.

Collateral Deposits

The solvency fee rate is periodically re-determined in accordance with Section 213 of the PA UC Law. The chart below reflects the rate at which the solvency fee due is calculated for the respective year:

THE INFORMATION IN THIS PAMPHLET IS DESIGNED TO INFORM EMPLOYERS OF THEIR RIGHTS AND RESPONSIBILITIES UNDER THE PENNSYLVANIA UNEMPLOYMENT COMPENSATION LAW. STATEMENTS IN THIS PAMPHLET ARE INTENDED FOR GENERAL INFORMATION ONLY AND ARE NOT TO BE CONSTRUED AS LEGAL INTERPRETATIONS OF THE LAW OR OF THE UNEMPLOYMENT COMPENSATION REGULATIONS.

Auxiliary aids and services are available upon request to individuals with disabilities.
Equal Opportunity Employer/Program

The purpose of this pamphlet is to provide general information regarding the two methods by which Pennsylvania employers may finance state Unemployment Compensation (UC) coverage for their employees, and includes related benefit information. Three types of employers are eligible to elect reimbursable status, in accordance with the Pennsylvania UC Law:

• Article X (Benefits to Employees of the Commonwealth),
• Article XI (Employees of Nonprofit Organizations) and
• Article XII (Employees of Political Subdivisions).

The two methods of financing UC coverage are explained in detail.

If employment is considered "covered" under the Pennsylvania UC Law, employers are mandated to provide UC coverage for their employees. The law provides two methods of financing UC coverage:

1. Contributory Method – employers pay contributions (tax) based on a contribution rate and taxable wage base ($10,000 per calendar year) paid to each employee each calendar year. Contributory employers are eligible to request relief from UC benefits paid to claimants that are charged to the employer’s UC account (charges). Conceptually, this is a “shared risk” plan based on the individual employer’s history/experience with the UC Fund.
   
   
2. Reimbursable Method – employers may elect, if qualified, to reimburse the UC Fund for the amount of UC benefits charged to their account and are billed dollar-for-dollar on either a quarterly or monthly basis (see page (7)). Under this method the employer is not eligible for relief-from-charge unless the employer has an approved election to participate in the relief-from-charge option under Section 213 of the law described on page (6) of this pamphlet. Conceptually, this is a "self-insured" plan.

Article X, Commonwealth Agency accounts, employers must use the reimbursable method of financing UC coverage. Article XI, Internal Revenue Code Section 501(c)(3) non-profits, and Article XII, Political subdivisions, employers are liable as contributory employers unless they elect and are approved for the reimbursable method of financing.

Article XI employers must submit a Form UC-1692, Election or Re-election of Reimbursement, along with a collateral bond or deposit, to UCTS within 30 days of becoming subject to UC coverage, or by Dec. 1 in subsequent years.

Article XII employers must submit Form UC-1692, Election or Re-election of Reimbursement, within 30 days of becoming subject to UC coverage, or by Dec. 1 in subsequent years. An Article XII political subdivision is not required to submit a collateral bond or deposit.

All elections are subject to the approval of the PA Department of Labor and Industry. An employer approved to use the reimbursable method must maintain that status for a period not less than two calendar years.

Article XI employers who have elected the reimbursable coverage will be required to renew their election and collateral every four years (48 months). Written notification will be sent approximately three months prior to the required due date of Dec. 1. (For more information, see "Employer Initiated Change of Financing Status" and "UCTS Initiated Change of Reimbursable Financing Status".)

Article XI employers with IRC Section 501(c)(3) status, who elect reimbursable coverage, must also submit a collateral bond or deposit with their application to UCTS. This collateral is security for employer UC payments due. The amount of collateral bond or deposit must be 1% of the employer’s most recent four calendar quarters of taxable wages prior to the effective date of election of reimbursable status. If the employer did not pay wages for this period, there are three alternative methods to establish the collateral amount:

1. Estimate the number of employees to be hired over the first 12 months of operation. Multiply the number of employees by the taxable wage base (for the following calendar years: $9,500 in 2016, $9,750 in 2017, $10,000 in 2018 and thereafter), and then multiply the result by 1% or $95 per employee in 2016, $97.50 per employee in 2017, or $100 per employee in 2018 and thereafter.
   
   
2. Estimate the number of employees to be hired over the first 12 months of operation. Multiply the number of employees by the anticipated annualized wage to be paid to each employee who will earn less than: $9,500 in 2016; $9,750 in 2017; $10,000 in 2018 and thereafter. Additionally, multiply the number of employees who will earn the taxable wage base of $9,500 in 2016, $9,750 in 2017, $10,000 in 2018 and thereafter. Multiply the combined result of the previous calculations by 1%. (This option can only be used if there is reasonable assurance of earnings of each employee.)
   
   
3. Allow UCTS to establish the amount of the collateral bond or deposit.

A collateral bond must be the original surety bond. The surety bond insures repayment for UC benefits paid to eligible claimants whose base year wages were paid during the period of the bond. The customary term of a surety bond is 48 months. A surety bond with the accompanying Power-of-Attorney must be issued by an approved bonding company. A surety bond cannot replace other forms of collateral unless the collateral to be replaced is held along with the bond for a period of 2 1/2 years beyond the effective date of the bond.

To submit a deposit, login at www.uctax.pa.gov and select "Make a Payment" then "Pre-payment" and then "Collateral." Payment options are ACH debit, ACH credit, credit card or check. Select a payment option and follow the prompts to complete your payment.

Note: If paying by check under the payment option, you will be required to "Print Payment Voucher" and continue by following the prompts.

All collateral bond or deposits will be reviewed every four years (48 months) to ensure compliance with statutory requirements.

If the collateral is cashed or liquidated to reimburse the UC fund for benefits paid, a replacement collateral is required if the reimbursable method of financing is to be continued.

Article XI and Article XII employers that elect reimbursable status must maintain that status for a period of not less than two calendar years. A reimbursable employer may elect to change to the contributory method, but must maintain contributory status for a period of not less than one calendar year. A request to change to the contributory method must be submitted in writing and received by UCTS no later than Dec. 1, to be effective for the subsequent calendar year.

If an Article XI and Article XII employer elects to change from the contributory method after a period of not less than one calendar year, a request to change to the reimbursable method must be submitted in writing and accompanied by Form UC-1692. Article XI employers must also provide proof of their 501(c)(3) status and collateral bond or deposit. Requests should be received no later than Dec. 1, to be effective for the subsequent calendar year. If the reimbursable election is approved, the employer must maintain that status for a period not less than two calendar years.

UCTS may convert an Article XI and Article XII employer’s reimbursable election to the contributory method if the employer is delinquent. The reimbursable election of an Article XI employer may also be converted if the employer has not complied with collateral or reporting requirements. The conversion from reimbursable to contributory will be effective at the beginning of the next calendar year and is binding for that year and the following calendar year.

Under Section 213 of the law, which became effective Jan. 1, 2003, reimbursable employers are provided the opportunity to request relief from charges, in accordance with Section 302(a) of the law, by paying a non-refundable solvency fee to the UC Fund.

REIMBURSABLE EMPLOYERS ARE NOT REQUIRED TO PARTICIPATE IN THE RELIEF-FROM-CHARGE OPTION. PARTICIPATION IS VOLUNTARY.

All employers financing UC coverage under the reimbursable method will receive notification towards the end of each calendar year to exercise an option to elect relief-from-charge for the subsequent calendar year. To be eligible to elect this option, a reimbursable employer must:

• Pay a non-refundable solvency fee as assessed by UCTS for the applicable calendar year. The solvency fee must be paid no later than 30 days from the date on the solvency fee notice sent to the employer by UCTS and
  
  
• File all required quarterly tax reports through the second quarter of the calendar year preceding the year of election.

The yearly notification will include the amount of the solvency fee due, which is calculated by multiplying the predetermined solvency fee rate by the employer’s gross wages for the four consecutive calendar quarters ending June 30 of the preceding calendar year. A minimum solvency fee of $25.00 must be paid if the employer’s total gross wages multiplied by the solvency fee rate results in an amount that is less than $25.00. The solvency fee rate is periodically re-determined in accordance with Section 213 of the PA UC Law.

Auxiliary aids and services are available upon request to individuals with disabilities.

Additional UC information can be found above, or you may call 833-728-2367 (833-PA UC EMP).

If you have questions regarding Quarterly Report Filing and/or Payment, Contribution Rates, Solvency Fee calculation and reimbursable employer election and/or requirements, please call our Employer Contact Center toll free at 866-403-6163. Written inquiries may be sent to:

Office of UC Tax Services
Status Determinations Unit
651 Boas Street, Room 800
Harrisburg, PA 17121-0750

To report UC fraud, telephone the PA UC Fraud Hotline at 800-692-7469.