Written by: Heather Graham, CPA, CVA

Changes to the Michigan Employment Security Act, Effective for 2012

On December 19, 2011 the State of Michigan made several changes to the Michigan Employment Security Act. 

  • The State issued $3.323 billion in revenue bonds and retired the debt due to the federal government for funds used to pay Michigan unemployment benefits.  The bonds are scheduled for a 10 year repayment.
  • The repayment of the debt to the federal government will remove the credit reduction tax from the Federal Unemployment Tax computation. (Previously this was expected to be 1.2% on the first $7,000 of each employee’s wages.)
  • Michigan unemployment wage base has been increased from $9,000 per employee to $9,500 for 2012.  The $9,500 wage base will continue until the Unemployment Insurance Trust Fund reaches a positive balance of $2.5 billion.
  • There is a new component to the Michigan Unemployment Tax Rate Determination this year.  It is called the Obligation Assessment (OA).  The OA will be applied to all contributing employers until the revenue bonds are repaid.  According to the Department of Licensing and Regulatory Affairs, “the OA is structured to incorporate your experience rate and a base assessment of $42 per employee for 2012, and is currently estimated to be $63 per employee for 2013 and beyond.”  At this time, we have not yet seen this “calculation”.

It will be very important that you provide your payroll preparer with a copy of your annual Tax Rate Determination.  It is expected that your new state unemployment rate will be significantly higher than last year.