© 2025 American Payroll Institute, Inc.
February 7, 2025 Volume 33 Issue 2
Three States, Virgin Islands May Face Credit Reduction for 2025
The U.S. Department of Labor (DOL) released its list of
potential FUTA credit reduction states and territories
for 2025 [DOL, Potential 2025 Federal Unemployment Tax Act
(FUTA) Credit Reductions, 1-10-25]. The determination will be
made after November 10, 2025.
As of February 3, three states (California, Connecticut,
and New York) have an outstanding FUA loan balance, along
with the Virgin Islands.
States with outstanding loans
If states have an outstanding Federal Unemployment
Account (FUA) loan on January 1 of at least 2 consecutive
years and on November 10 of the second year, they are
subject to a credit reduction on their Federal Unemployment
Tax rate until the loan has been paid off. Each year a state
has an outstanding loan balance on January 1, the credit
reduction increases by 0.3%. However, states that have
made an effort to keep their balances in check have some
opportunities to avoid the reduction (see The Payroll Source®,
§7.1-6).
Employers in these states/territory may be subject
to an additional FUTA credit reduction for 2025 because
the states began borrowing in 2021 and had outstanding
FUA loan balances on January 1 for 2022, 2023, 2024, and
2025. If these states do not repay the outstanding loans
by November 10 of this year, they will be subject to an
increased credit reduction. The additional FUTA tax would
be due on January 31, 2026.
California, New York face increased credit reduction.
California and New York have a credit reduction of 0.9% for
2024. Both could face a potential credit reduction of 1.2%
for 2025.
Connecticut could face credit reduction. Connecticut
paid off its outstanding loan balance by the November 10,
2024, deadline and was not subject to a credit reduction for
2024. However, Connecticut resumed borrowing and had
an outstanding loan balance on January 1, 2025. Because
it had an outstanding balance on at least four consecutive
January 1s (in 2022, 2023, 2024, and 2025), it is subject to a
potential credit reduction of 1.2%, even though it was not
subject to a credit reduction for 2023 or 2024. If Connecticut
pays off its outstanding loan by November 10, 2025, it will
not be subject to a credit reduction for 2025.
Virgin Islands likely to face reduction again
The Virgin Islands began borrowing in August 2009, has
a current outstanding balance, and was subject to a credit
reduction of 4.2% for 2024 (see PAYROLL CURRENTLY, Issue
12, Vol. 32). It could be subject to a FUTA credit reduction of
4.5% for 2025.
Three States, Virgin Islands May Face Credit Reduction
for 2025.............................................................................................. 1
IRS Issues Proposed Rules to Implement SECURE 2.0
Provisions for Retirement Plan Automatic Enrollments,
Catch-Up Contributions. ..............................................................2
IRS Provides Guidance on §530 Safe Harbor. ..............................3
IRS Releases 2025 Forms W-2, W-3.................................................. 3
U.S. Supreme Court Rules on FLSA Burden of Proof Standard...... 4
DOL Publishes Opinion Letters on Tips, FMLA. ............................5
DOL Announces Annual Adjustments for FLSA, FMLA
Violations.......................................................................................... 5
6th Circuit Rules FMLA Leave Can Be Used to Care for
Siblings. .............................................................................................6
Learn More About Compliance at PAYO’s Capital Summit in
March................................................................................................. 7
DOL Creates PSL Fact Sheet for Federal Contractors. ................7
Payroll Solutions. .................................................................................8
6th Circuit Rules a Trial Is Required to See If FLSA Violations
Were Willful. .....................................................................................9
District Court Rules Home Care Aides Are Employees for
FLSA Purposes.................................................................................. 9
DOL Announces Temporary Policy for Benefits Owed to
Lost Individuals. ............................................................................11
IRS Updates Webpage for Gig Economy Businesses................11
Joint Committee on Taxation Provides List of Expiring Tax
Provisions........................................................................................11
IRS Proposes Rules for $1 Million Pay Cap for Tax Deductions....12
Treasury Ends Payroll Savings Plan. .............................................13
TIGTA Issues Semiannual Report to Congress. ..........................13
IRS Continues to Expand Business Tax Account Features.......13
Wage and Hour Roundup. ..............................................................14
State and Local Highlights...............................................................15
PAYO Supports Proposal to Eliminate Subminimum Wages..... 17
CFPB Rescinds 2020 Advisory Opinion on Earned Wage
Access. ..................................................................................................17
PayrollOrg Supports State Earned Wage Access Bills. ...............17
PayrollOrg Supports Washington Bill on Child Support for
Contractors......................................................................................... 18
PayrollOrg Contacts D.C. Council on Tip Credit Elimination...... 18
February 7, 2025 Volume 33 Issue 2
Three States, Virgin Islands May Face Credit Reduction for 2025
The U.S. Department of Labor (DOL) released its list of
potential FUTA credit reduction states and territories
for 2025 [DOL, Potential 2025 Federal Unemployment Tax Act
(FUTA) Credit Reductions, 1-10-25]. The determination will be
made after November 10, 2025.
As of February 3, three states (California, Connecticut,
and New York) have an outstanding FUA loan balance, along
with the Virgin Islands.
States with outstanding loans
If states have an outstanding Federal Unemployment
Account (FUA) loan on January 1 of at least 2 consecutive
years and on November 10 of the second year, they are
subject to a credit reduction on their Federal Unemployment
Tax rate until the loan has been paid off. Each year a state
has an outstanding loan balance on January 1, the credit
reduction increases by 0.3%. However, states that have
made an effort to keep their balances in check have some
opportunities to avoid the reduction (see The Payroll Source®,
§7.1-6).
Employers in these states/territory may be subject
to an additional FUTA credit reduction for 2025 because
the states began borrowing in 2021 and had outstanding
FUA loan balances on January 1 for 2022, 2023, 2024, and
2025. If these states do not repay the outstanding loans
by November 10 of this year, they will be subject to an
increased credit reduction. The additional FUTA tax would
be due on January 31, 2026.
California, New York face increased credit reduction.
California and New York have a credit reduction of 0.9% for
2024. Both could face a potential credit reduction of 1.2%
for 2025.
Connecticut could face credit reduction. Connecticut
paid off its outstanding loan balance by the November 10,
2024, deadline and was not subject to a credit reduction for
2024. However, Connecticut resumed borrowing and had
an outstanding loan balance on January 1, 2025. Because
it had an outstanding balance on at least four consecutive
January 1s (in 2022, 2023, 2024, and 2025), it is subject to a
potential credit reduction of 1.2%, even though it was not
subject to a credit reduction for 2023 or 2024. If Connecticut
pays off its outstanding loan by November 10, 2025, it will
not be subject to a credit reduction for 2025.
Virgin Islands likely to face reduction again
The Virgin Islands began borrowing in August 2009, has
a current outstanding balance, and was subject to a credit
reduction of 4.2% for 2024 (see PAYROLL CURRENTLY, Issue
12, Vol. 32). It could be subject to a FUTA credit reduction of
4.5% for 2025.
Three States, Virgin Islands May Face Credit Reduction
for 2025.............................................................................................. 1
IRS Issues Proposed Rules to Implement SECURE 2.0
Provisions for Retirement Plan Automatic Enrollments,
Catch-Up Contributions. ..............................................................2
IRS Provides Guidance on §530 Safe Harbor. ..............................3
IRS Releases 2025 Forms W-2, W-3.................................................. 3
U.S. Supreme Court Rules on FLSA Burden of Proof Standard...... 4
DOL Publishes Opinion Letters on Tips, FMLA. ............................5
DOL Announces Annual Adjustments for FLSA, FMLA
Violations.......................................................................................... 5
6th Circuit Rules FMLA Leave Can Be Used to Care for
Siblings. .............................................................................................6
Learn More About Compliance at PAYO’s Capital Summit in
March................................................................................................. 7
DOL Creates PSL Fact Sheet for Federal Contractors. ................7
Payroll Solutions. .................................................................................8
6th Circuit Rules a Trial Is Required to See If FLSA Violations
Were Willful. .....................................................................................9
District Court Rules Home Care Aides Are Employees for
FLSA Purposes.................................................................................. 9
DOL Announces Temporary Policy for Benefits Owed to
Lost Individuals. ............................................................................11
IRS Updates Webpage for Gig Economy Businesses................11
Joint Committee on Taxation Provides List of Expiring Tax
Provisions........................................................................................11
IRS Proposes Rules for $1 Million Pay Cap for Tax Deductions....12
Treasury Ends Payroll Savings Plan. .............................................13
TIGTA Issues Semiannual Report to Congress. ..........................13
IRS Continues to Expand Business Tax Account Features.......13
Wage and Hour Roundup. ..............................................................14
State and Local Highlights...............................................................15
PAYO Supports Proposal to Eliminate Subminimum Wages..... 17
CFPB Rescinds 2020 Advisory Opinion on Earned Wage
Access. ..................................................................................................17
PayrollOrg Supports State Earned Wage Access Bills. ...............17
PayrollOrg Supports Washington Bill on Child Support for
Contractors......................................................................................... 18
PayrollOrg Contacts D.C. Council on Tip Credit Elimination...... 18
