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The tax is paid entirely by employers.  There is no deduction from an employee’s paycheck.  The tax rates will vary based on the employer’s previous experience with unemployment and under federal law; these funds must be deposited with the U.S. Treasury and cannot be used for any other manner.  The fund does earn interest.  In Nevada, the rate for all new employers is 2.95% of taxable wages.  In 2007, the taxable wage base, or taxable limit will be $24,600.  Employers will pay at the new employer rate of 2.95% for approximately three and a half to four years until they are eligible for an experience rating.  Once eligible for an experience rating, an employer’s rate can range from a quarter of one percent to 5.4%, depending upon their previous experience with unemployment. There are 18 different tax rates.  The annual tax rate scheduled adopted applies only to experience rated employers.  It has no impact on new employers.  Out of approximately 57,000 employers, more than half, or 53% of all employers are eligible for an experience rating while the balance pay at the standard rate of 2.9% of taxable wages.  The standard rate established by federal law is 5.4%.  Rates lower than 5.4% can be assigned only under an experience rating system approved by the Secretary of Labor.  The intent of any experience rating system is to assign individual tax rates based on an employer’s potential risk to the trust fund.  Basically those employers with high employee turnover and a greater cost to the fund pay higher rates than those with low employee turnover.  In Nevada, along with a majority of the states, we use a reserve ratio experience rating system. Under the reserve ratio system, the Employment Security Division keeps separate records for each employer to calculate the reserve ratio each year.  In the formula displayed here, we add all contributions paid by the employer and subtract the benefits charged.  The result is then divided by the average taxable payroll to establish the employer’s reserve ratio.  Contributions are the quarterly taxes paid by the employer and the benefits charged are the employer’s portion of the unemployment benefits paid for former employees.  The purpose of this method is to put both large and small employers on an equal footing without regard for industry type.  In the example on this slide, the employer has paid $6,000 in contributions, had $2,000 in benefit charges and an average taxable payroll of $40,000, which gives him a reserve ratio a positive 10%.  The higher the ratio, the lower his tax rate will be.  If an employer has received more benefit charges than he has paid in taxes, his reserve ratio will be negative and he will generally have a higher tax rate.  Now to the chart noted on page 3 in your booklets. It shows the result of an estimated average unemployment insurance tax rate of 1.38%.  This is the UI tax rate currently in effect for calendar year 2006.  In the setting of the schedule, the 18 different tax rates do not change.  These rate classes are fixed by statute.  Rather, the law requires that the Administrator designate the ranges of reserve ratios to be assigned to each tax rate.  By doing so, the number of employers in each of the tax rates is changed, which increases or decreases the average rate and the total estimated revenues.  In other words, if you want to increase taxes, you’ll adopt a reserve ratio that puts more employers into the higher tax rates.  And to lower tax rates, you would select one that would put more employers in the lower tax rates.  The law also requires that the ranges between the reserve ratios must be uniform.  In this particular schedule, the

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