Unemployment trust fund: Where your taxes go

Unemployment insurance (or unemployment benefits) is a federal-state partnership. Program rules come from both federal and state laws and guidance.

Every state has an unemployment trust fund

States deposit employer tax dollars in individual unemployment trust funds for paying future benefits.

  • ESD produces Washington's unemployment trust fund forecast report three times per year.
  • Find current and archived reports on ESD's labor market's unemployment trust fund page.

Employers pay state and federal taxes

All employers pay two types of taxes: state (SUTA) and federal (FUTA)

SUTA taxes fund benefit payments for claimants. They're deposited in the state's unemployment trust fund.

FUTA taxes are administered at the federal level. They're used for oversight of state unemployment programs. During times of high unemployment, states may borrow from FUTA funds, helping provide benefits to locally unemployed people.

SUTA

An employee's wages are taxable up to an amount called the taxable wage base, authorized in RCW 50.24.010. This taxable wage base for 2024 is $68,500, increasing from $67,600 in 2023.

Experience tax currently capped at 5.4% (RCW 50.29.025(1)(a)(ii))

  • Annual tax calculation based on the ratio of benefit claims of former employees charged to the employer and taxable wages reported by the employer over the preceding four fiscal years.
  • Employers are placed in one of 40 rate classes based on former employees' use of UI program.

Flat social tax currently capped at 0.85% (RCW 50.29.025)

  • Shared-cost tax, based on costs from the previous year for benefit payments that can't be attributed to specific employers.
  • State law instructs ESD to adjust the flat social tax rate based on the employer's rate class.
  • The flat social tax was capped at 0.50% for 2021, 0.50% for 2022 and 0.75% for 2023. It's capped at 0.85% for 2024 and 0.90% for 2025. In all other years, the flat social tax is capped at 1.22%.

The total of the experience tax and the social tax can't exceed 6%.

Solvency tax currently capped is waived (RCW 50.29.041)

  • For taxes paid for 2021 through 2025, the solvency surcharge is currently waived.
  • For all other years, state statute requires ESD to assess a solvency surcharge when the UI trust fund has less than seven months of benefits as of Sept. 30.
  • The solvency surcharge will be the lowest possible rate needed to get the UI trust fund back up to nine months of benefits. ESD assesses the solvency tax for the following calendar year.

FUTA

Because Washington's unemployment program conforms to federal law, state employers pay a FUTA tax of 0.6% on the first $7,000 of each employee's wages.