Note: For this textbook edition the rate 0.6% was used for the FUTA tax rate for employers Example 5-9 To illustrate the tax saving that may be realized as a result of making voluntary contributions, consider the following case of Krane Company, which is subject to the unemployment compensation law of a state that uses the reserve-ratio formula to determine experience ratings. The following contribution rate schedule applies for 2018: Reserve Ratio 0% to less than 1% 1% to less than 1.4% 1.4% to less than 1.8% 1.8% to less than 2.2% Rate 6.2% 5.6% 5.0% 4.4% 3.8% 3.2% 2.6% 2% to less than 2.6% 2.6% to less than 3.0% 3.0% and over For the three 12-month periods ending on June 30, 2017, the company had an average annual taxable payroll of $330,000. This is the base that the state uses as the average payroll. As of June 30, 2017, the credits to the employer's account exceeded the benefits paid by $6,800. Thus, the 2017 reserve ratio is 2.06 percent ($6,800 $330,000), which would result in the assignment of a 4.4 percent tax rate, as shown in the preceding table. If the employer's 2018 total taxable payroll were $390,000, the SUTA contribution would amount to $17,160 If Krane Company makes a voluntary contribution into the state fund within the time period specified by the state law, the tax for 2018 will be less. For example, if the company contributes $460, the reserve ratio will be 2.2 percent ($7,260 330,000). As a result, the tax rate will be reduced to 3.8 percent, with the following savings realized in 2018