Little-known provision reduces state unemployment insurance rates.

• Author: Josefowicz, Barbara
• Position: Brief Article

An obscure state law allows New York companies to reduce their unemployment insurance tax rates through voluntary contributions and can result in significant cost savings. Better yet, these savings are not restricted to New York companies; 22 other states also allow voluntary contributions (see the chart top right).

Under this little-known law, a company can reduce its unemployment insurance tax rate by making a voluntary contribution to its state unemployment insurance account--a potential cost-saving opportunity. For example, in one case, making a voluntary contribution of $13,089.38, a company reduced its state unemployment insurance tax rate from 7.1% (the highest rate imposed) to 4.6%. That difference in rates applied to the company's relevant wage base saved the company more than $30,000.

For the 1996 tax rate to be effectively reduced, the deadline to...