Liable employers under the Kansas Employment Security Law fall into one of three main categories – contributing, reimbursing or rated governmental – depending upon the method of financing the employer uses to satisfy the unemployment compensation tax liability.
While the majority of liable employers in Kansas are required to be contributing employers, provisions of the law specify that nonprofit organizations exempt under 501(c)(3) of the Internal Revenue Code and governmental entities may elect an alternative method to finance their tax liability.
All employers in Kansas are required to pay contributions by the contributing method except governmental entities and 501(c)3 nonprofit organizations. However, these entities may select the contributing method of payment. A contributing employer is required to report total wages paid each employee during a calendar quarter, but pays taxes based upon the taxable wage base as defined in the law. The taxable wage base is: 2014 - $8,000.00, 2015 - $12,000.00 and 2016 - $14,000.00. An employer selecting to use the contributing method may do so when filing the Status Report K-CNS 010.
This alternative payment method is available only to governmental entities, Indian Tribes or nonprofit organizations that are exempt under the Internal Revenue Code, Section 501(a) and specifically described in Section 501(c)(3). With this option, the employer reports total wages paid each employee each quarter, but pays no tax at the time. Instead, this option requires the employer to reimburse the fund 100 percent for any benefits paid to their former employees. If there were no benefits paid, nothing will be due. Also, this option does not have a noncharge provision for benefits, as do the other two options. ("Noncharge" is a common benefits term meaning that the wages paid by the employer are used in the calculation of benefits for the claimant but the employer's account will not be charged for the benefits.)
Election of the reimbursing payment option must be for a minimum of four complete calendar years. Once the minimum period has been satisfied, the employer may change its payment option by filing a written request with the Secretary of Labor not later than 30 days prior to the beginning of the calendar year for which the change is to become effective.
A 501(c)(3), governmental employer or Indian Tribe electing the reimbursing option will be required to obtain a surety bond or post a surety deposit with the department or to purchase and deliver to an escrow agent a certificate of deposit in the amount of 5.4 percent of the organization's taxable wages (or estimated amount of taxable wages) paid during the one–year period immediately preceding the date of election.
Within the reimbursing method, extended benefits for all entities selecting it are charged 100 percent to the employer's account. Extended benefits for a 501(c)(3) organization are charged 50 percent to the employer and 50 percent to FUTA.
Rated Government Method
This alternative payment method is only available to a governmental entity. The employer reports total wages paid each employee each quarter and pays tax on total wages.
Most governmental entities operate on a fiscal year and require a much earlier notification of their future tax liability for budget purposes. The rated governmental payment method meets this special need with a computation date of March 31 and permits notification of an employer’s benefit cost rate in June of each year. The following points should be noted:
- Rated governmental employers are eligible to participate in the noncharge provisions of the law.
- The computed benefit cost rate for eligible employers will be based upon an employer's own experience and an adjustment factor which is used to recover the cost of noncharged benefits paid to former employees.
- The rates will vary among employers, but no rate can be less than 0.1 percent.
Election of the rated governmental payment option must be for a minimum of four complete calendar years. Once the minimum period has been satisfied, the employer may change its payment option by filing a written request with the Secretary of Labor not later than 30 days prior to the beginning of the calendar year for which the change is requested.
A new rated governmental employer is assigned a rate until it becomes eligible for a computed rate. The assigned rate is based upon the benefit cost experience of all rated governmental employers during the previous fiscal year ending March 31. Generally, after three years the employer becomes eligible for a computed benefit cost rate.