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Employers May See A Rise In Federal UI Tax Rate Due To State Inaction On $21 Billion Debt

California employers are facing a steep increase in their federal unemployment insurance (FUTA) tax rate as the state’s UI Fund debt continues to balloon. The rate, currently 1.5%, could rise to 5.2% in 2026 unless a federal waiver is issued, resulting in increased costs for businesses across the state. While federal law allows partial waivers or reductions based on a state’s fiscal performance, California’s recent audit findings and mounting debt raise doubts about the likelihood of relief. In the event a waiver is not issued, FUTA contributions may increase from $105 per employee per year to $365 per employee per year.