Frequently Asked Questions - Employers

As a sole-proprietor, the draws (remuneration) you receive from your business are not subject to UI contributions. Wages paid to your spouse, parents, or children under the age of 21 years old are also excluded and not subject to contributions. The same exclusions apply to a single member LLC electing treatment as a disregarded entity.

Hawaii UI tax law allows for the transfer of a predecessor’s tax rate and reserve balance in those instances where an employer succeeds to or acquires the organization, trade, or business, or substantially all of the predecessor’s assets (including employees). For a transfer to be considered, a properly executed Form UC-86, “Waiver of Employer’s Experience Record” must be executed by both parties and filed within statutory time limits. This is available at https://huiclaims3.hawaii.gov/

To determine whether or not an employing unit has acquired substantially all of the assets of a predecessor employer, we consider:

• The particular facts and circumstances in the case.
• Whether the capacity to furnish employment was transferred.
• Whether the employing unit employs all or nearly all of the predecessor employer’s employees.

There are three crucial dates employers must adhere to:

1. Form UC-86 must be completed and returned within 60 days from the date of the transfer to obtain the predecessor’s current rate. Predecessor must file all reports and pay all contributions due within the same 60 days. Since the experience waiver due date of 60 days may be before the quarterly due date, it is imperative that employers submit the predecessor’s contribution report and payment on a timely basis.
2. If Form UC-86 is filed after the 60-days from the date of transfer but before March 1 of the year following the year of the transfer, the successor’s reserve will be combined with the predecessor’s reserve balance to determine the successor’s experience rate. Although the successor will be assigned the new employer’s rate for the remaining quarter(s) of the current year, the successor’s reserve balance along with the predecessor’s reserve balance will be used to compute the successor’s experience rate for future years.
3. A Form UC-86 that is filed after the March 1 deadline must be submitted no later than December 31 of the year following the year of the transfer. Upon approval, the successor’s reserve will be combined with the predecessor’s reserve balance to determine the successor’s experience rate. Although the successor will be assigned the new employer’s rate for the remaining quarters of the current year, the successor’s reserve balance along with the predecessor’s reserve balance will be used to compute the successor’s experience rate for future years. A Form UC-86 that is received after December 31 of the year following the year of the transfer will be returned unprocessed.

The Hawaii Employment Security Law is clear and unambiguous regarding the filing deadlines for Form UC-86. The postmark date for applications sent by mail or the received date for applications hand delivered or faxed are strictly adhered to in resolving timeliness issues. Form UC-86 is available at: https://huiclaims3.hawaii.gov.

TIP: Successor employers have the opportunity to withhold the filing of the application when the predecessor’s reserve balance becomes negative or would be detrimental to the successor at the end of the year due to circumstances beyond the successor’s control.

A family-owned corporation employing no more than two (2) family members, who each own at least fifty (50) percent of the shares issued by the corporation, may apply for exclusion from coverage. An application must be filed and qualifying requirements met. To elect this exclusion option, Form UC-336, “Election by Family-Owned Corporation to be Excluded from Coverage Under Section 383-7(20), Hawaii Revised Statutes should be submitted online at https://huiclaims3.hawaii.gov. This exclusion, if approved, shall be effective the first day of the calendar quarter in which the application and all supporting documents requested by the department are filed. A corporation having one employee who owns one hundred percent (100%) of the shares is not a “family-owned corporation” and therefore ineligible for this exclusion.

Employers should consider the following before for the exclusion:

• The non-revocable exclusion is for a minimum of 5 years unless the conditions of the exclusion change prior to the 5 years (a non-owner employee is hired).
• Wages paid to the two employees by this corporation during the period of the election cannot be used to establish a claim for unemployment benefits.
• Federal Unemployment Taxes (FUTA) tax liability as an excluded corporation may be greater than the combined State UI and FUTA tax liability of a covered corporation. An excluded corporation no longer qualifies for a 5.4% FUTA tax credit afforded to employers covered under the Hawaii Employment Security Law. As a result, the excluded corporation’s FUTA rate will be 6.0% as opposed to the covered corporate rate of .8%, the first $7,000 for each of the 2 employees.

Upon request, employers are required to furnish the department a copy of Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” filed with the Internal Revenue Service. Report any change that affects the corporation’s eligibility for exclusion from coverage within 5 working days from the date of the change. Family-owned corporation exclusion is revoked on the date of any one of the following changes:

• The excluded corporation hired an employee in addition to the 50% shareholder-employees.
• One of the shareholder-employees owns less than 50% of the issued shares.
• Any owner is not a family related by blood, marriage, or legal adoption.

Yes, effective on the date of the revocation you must request that your State unemployment insurance account number be “re-activated” by completing Form BB-l with updated information. All forms and notices will be mailed to your current address.

Yes. Notify the department by completing Form BB-1 online. A determination will be made based on your current information.

A non-profit organization (religious, charitable, or educational) qualifying for income tax exemption under Section 501(c)(3) of the Internal Revenue Code may elect a self-financed status under provisions of Chapter 383-62(d) of the Hawaii Employment Security Law.

1. Complete Form UC-175, Application for Self-Financing–Non-Profit Organization with the Department.
2. Liability for a self-financed reimbursable plan for a Non-Profit Organization would be an amount equal to the amount of regular benefits and of one-half of the extended benefits paid, that is attributable to service in the employ of such non-profit organization to individuals for weeks of unemployment which begin during the effective period of such election. You will be billed monthly for the benefits paid and payment must be made within 30 days of the billing date. No part of the required unemployment payments is to be deducted from the employee’s wages.
3. An account under the self-financed status must continue for a period of at least two (2) calendar years from the effective date.
4. A notice of termination of election must be made within 30 days prior to the beginning of the calendar year for which such termination shall be effective.
5. Upon notification of approval of Form UC-175, Application for Self-Financing—Non-Profit Organization, you will be requested to complete and return the following form: (1) UC-177, “Security Deposit Determination”, with a security deposit of .2 percent of the organization’s total wages projected for a full calendar year. The Department may, at any time, review the adequacy of the deposit made by any organization. If, as a result of such review, the Department determines that an adjustment is necessary, it shall require an additional deposit within 30 days of written notice. The deposit shall be retained by the Department in an escrow account until liability under the election is terminated, at which time it shall be returned to the organization, less any deductions.

Please see the instructions below:

How Does a Union Report Members that are in Good Standing?

Yes. Employers must report new hires directly to the Hawaii Child Support Enforcement Agency (CSEA) by faxing or mailing a copy of the employer’s IRS Form W-4. There is a penalty for failure to file a timely or accurate report of a new hire. Mail or fax completed Form W-4 to the CSEA at:

Mail: Child Support Enforcement Agency

New Hire Reporting

Kakuhihewa Building

601 Kamokila Blvd., Suite 251

Kapolei, HI 96707

Fax: (808) 692-7001

Phone: (808) 692-7029

UI and the CSEA periodically cross-match data to detect situations where unemployment benefits are paid to claimants who return to work without notifying UI. Employers save tax dollars by reporting new hires correctly and promptly.

Employers are required to submit a zero wage or “NO PAYROLL” report on or before the due date or become subject to the maximum contribution tax rate for the following calendar year.

Quarterly reports are filed online at: https://huiclaims3.hawaii.gov.

WARNING!  Employer accounts showing consecutive “No Payroll” quarterly contribution reports since inception of the business may be cancelled. In addition, FUTA certification cross match with unemployment insurance records are done to verify total wages reported and contributions paid.

Yes. Complete and submit your quarterly report online at: https://huiclaims3.hawaii.gov.

Employers have no claim or right to the contributions credited to their account (HRS Section 383-64 (b)). As in any insurance policy, the premiums paid are not returned but remain in a pooled fund to pay workers who become unemployed through no fault of their own and meet all eligibility conditions.

To be eligible for experience rating, the employer must be chargeable with benefits throughout the year preceding the year of the computation and must have filed all reports. Employers not chargeable with benefits throughout the year preceding the year of the computation will receive the new employer rate. Employers who fail to file their contribution report and/or quarterly wage detail report, however, are subject to receive the maximum tax rate for the entire year.

An employer’s contribution rate is determined on the effective rate schedule as well as the ratio of the employer’s reserve account balance at the end of the year to the employer’s average annual taxable payroll for the past three years. The ratio decreases as the reserve balance decreases or the average annual taxable payroll increases, which may result in a higher contribution rate. As such, employers can minimize their contribution rate by keeping or increasing their reserve balance, or decreasing the average annual taxable payroll.

TIPS:

• File contribution and quarterly wage reports timely, together with contributions due.
• Work with employees to avoid layoffs and voluntary quits. Every separation has the potential to increase an employer’s contribution rate.
• Keep good records. Give and document warnings prior to discharging the employee. Provide these records upon request by UI personnel without delay.
• Conduct exit interviews to help determine why an employee is leaving. This may result in changes in the company’s procedures that may assist in retaining employees.
• Answer claim notices promptly, accurately, and in detail. Respond immediately to requests for job separation details on Form UC-BP-35, :Request for Separation Information, wage data for part time workers on Form UC-52(a) Weekly Report of Low Earnings, and weekly earnings information for multi-weeks on Form UC-BP-60, Report of Earnings or any other requested form critical to determine eligibility and payment processes.
• Failure to promptly respond as directed may result in incorrect benefit payments, increased employer’s contribution rates, and penalty assessments.

Please see the instructions below:

How Do I Report Someone Who Refuses to Accept Work?

Please see instructions below:

How to Report Fraud

Please see the instructions below:

View instructions on submitting Form UC-348