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Zack Hutchins
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January 9, 1998

Business Council engineers a $420 million cut in your 1998 unemployment insurance taxes

2,506 employers join in 'Operation UI Pre-Pay,' triggering across-the-board rate reduction to save most companies $63 per employee

Working with hundreds of member companies, Chambers of Commerce, trade associations and other allies across the state, The Business Council has engineered a $420 million cut in this year's unemployment insurance taxes in New York.

The tax cut was triggered by a voluntary pre-payment effort in which more than 2,500 employers submitted their first-quarter 1998 unemployment taxes before the end of December 1997. Participants in the effort ranged from Fortune 500 companies, to barbers and bakery shops.

These $171 million in pre-payments pushed the year-end balance in the unemployment insurance fund well above $930 million - a level which, under law, automatically triggered a reduction in 1998 UI tax rates.

The tax rate reduction will save all private-sector employers 0.7 percentage points on their 1998 tax rates; most will save 0.9 percentage points. Applied to the $7,000 taxable wage base, that means a savings of $63 per employee. The savings apply to all taxable employers - whether or not they participated in the pre-payment effort.

Governor Pataki formally announced the success of the pre-payment effort, and the adoption of the tax rate reduction, on December 23. He praised The Council for its "ingenuity," and congratulated the participating businesses for their "confidence in our economic future."

The pre-payment effort was the brainchild of Richard S. Schwarz, who has been monitoring the UI trust fund for several years, watching for an opportunity to trigger a rate decrease.

The Council formally launched the "Operation UI Pre-Pay" on Nov. 24, after receiving a letter from Acting Labor Commissioner John Dillon confirming that pre-payments could trigger the rate cut. Figures from the Labor Department indicated that about $130 million in pre-payments would be enough to ensure a tax reduction for 1998.

After Business Council President Daniel. B. Walsh briefed the Board of Directors on the program on Dec. 1, The Council threw its entire staff into the effort on a more-than-fulltime basis, to promote the pre-payment idea to members and non-members across the state.

Council staff prepared and sent out over 12,000 broadcast faxes promoting participation in the plan and informing companies of its progress.

The staff also made hundreds of "cold calls" to human resources officers and other executives in member and non-member companies, asking them to participate. The Business Council's headquarters and insurance offices fielded more than 5,000 inquiries and questions from potential participants. Schwarz and other staff gave briefings to accountants, UI consultants, payroll specialists and others who could help spread the word about the initiative.

Crucial help was provided by many trade associations and by Chambers of Commerce around the state, where staff also devoted long hours to the effort to recruit participants. In the end more than half the participants were non-members of The Business Council, recruited to the effort by their local chamber, a trade association, or their tax or benefit consultant.

The Labor Department also played a vital role, setting up a special office and special procedures to ensure that the pre-payments were properly accounted as such and thus were duly credited to the overall trust fund balance needed to trigger the rate reduction. Even many individual members of the state Legislature in both parties got involved, personally seeking out businesses in their districts to participate.

Click here for the Governor's news release on the rate cut.

Operation UI Pre-Pay at-a-glance:
What happened; what it means for your business