SDI / SUI Calculation

State Disability Insurance Expense and Withholding

State Unemployment Insurance Expense and Withholding

SDI / SUI

Background

State Disability Insurance and State Unemployment Insurance are state-levied fees used to provide benefits for unemployed employees, or employees who otherwise are unable to work. The rates are determined by the state, and may vary from employer to employer. Since the rates are variable, employers get specific rate information from the state authorities. In some cases, both employers and employees contribute to the insurance funds. Eligibility is also determined by the state authorities. Moreover, some states have additional workforce development programs that are paid by employers or employers and employees. You should contact your state authorities for complete details and rates specific to your company.

Implementation

AccountEdge uses two figures to track maximum SUI Tax expense.

Each SUI tax has a Wage Max and a Tax Max. AccountEdge calculates the Tax Max as SUI Rate times the Wage Max.

Example:
Maximum Wage is $10,000
SUI Rate is 5%

AccountEdge will stop expensing or withholding SUI for an employee once the employee has reached the Tax Max of .05 x $10,000, or $500.00.

SUI is troublesome because the rate sometimes changes after several paychecks have been written. When the rate goes down mid-year, it is often the case that AccountEdge will stop expensing or withholding SUI before the Wage Max is met. This is because the Tax Max has already been met.

As an example, suppose the rate was 5% for the first 3 months of the year. Using our $10,000 wage max and an employee who has earned $8,000 in the first quarter, the accrued SUI tax would be $400 (0.05 x $8000). Now, if the rate changed to 4% with the same Wage Max of $10,000, the Tax Max would be $400 (.04 x $10,000). As a result, AccountEdge would stop expensing SUI because the $400 Tax Max has been met, even though the Wage Max of $10,000 hasn't. This isn't a concern since the liability has been met.

There is a concern when the accrued SUI is greater than the liability. Suppose in the above example, the employee had earned $9,000. The accrued SUI is $450. When the rate changes, and the Tax Max becomes $400, we realize $50 had been over-expensed. There are 2 ways to handle this, depending on the reporting period. If the reporting period isn't an issue, that is, the pay liability does not need to be in a particular month or quarter, you can indicate a negative SUI expense of $50, in the Select & Edit paycheck window of the next pay period.

If the pay liability period is important, and it must be correct for a specific (past) period, you can edit already-processed paychecks, as long as you are changing only employer expenses. This is a multi-step process:

  1. Select Setup > Preferences > Security
  2. Check mark Transactions can't be changed; they must be Reversed
  3. Close the Preferences window
  4. Looking in the Transactions Journal with the Disbursements tab selected, find the payroll transaction you are interested in (in the correct date range)
  5. Click the arrow to the left of this transaction, opening it
  6. Print a copy of this transaction
  7. Looking at the opened transaction, select Reverse from the Edit menu at the top of the screen
  8. Record the reversal; this will effectively undo this paycheck
  9. Start to Process Payroll, and re-record the payroll transaction you just deleted, using same date, check number, etc.
  10. The amounts on this check should be the same as the original, with the exception of the SUI: per our example, we should indicated $50 less for SUI
  11. Record this new payroll transaction
  12. Select Setup > Preferences > Security
  13. Uncheck mark Transactions can't be changed; they must be Reversed
Payroll Liabilities will be correct for the desired period.