I acquired an existing Hawaii business with employees. Is it possible for my company to obtain the predecessor’s favorable unemployment insurance tax rate?

September 13, 2021
|By wpadmin
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I acquired an existing Hawaii business with employees. Is it possible for my company to obtain the predecessor’s favorable unemployment insurance tax rate?

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.