State Unemployment Tax Act (SUTA) dumping is a premium-payment avoidance method used by some employers to reduce their unemployment insurance rate. More specifically, SUTA dumping is a practice of employers to create new business entities and transfer employees. In some cases, a part of the organization, trade, or business is transferred to deliberately avoid an increase in the unemployment insurance rate caused by unemployment benefit payments attributable to an existing company. The practice of avoiding the proper payment of unemployment premiums places an undue burden on all employers who are paying premiums correctly according to the requirements established in CESA 8-76-102.5 and CESA 8-76-104.
Employers who engage in SUTA dumping are jeopardizing the solvency of Colorado's Unemployment Insurance Trust Fund. The trust fund is a pool of money from which unemployment benefits are paid. When some employers avoid contributing the correct amount of premiums to the unemployment insurance trust fund, all employers are burdened with higher rates in future years. Employers' rates are adjusted each year according to the rate schedule defined in the CESA 8-76-102.5 to ensure the trust fund remains solvent.
SUTA Dumping Compliance Insurance Rate was enacted by the 2005 Colorado General Assembly. This legislation closed loopholes that existed previously and allowed the Colorado Department of Labor and Employment to impose civil and criminal penalties on individuals who knowingly violate or attempt to violate the provisions in CESA 8-76-104.
The Audits unit actively identifies and pursues employers engaged in premium-payment avoidance activities. As stated in CESA 8-72-108, the department has the authority to subpoena records and individuals in its investigations.
Employers can help protect the integrity of the Unemployment Insurance Trust Fund and minimize the negative impact that SUTA dumping has on unemployment rates by informing us about this activity. Information may be reported to the Chief of Unemployment Insurance Employer Services at 303-318-9006. The source of the information is kept confidential.