As of April 18, 2011, thirty-two states and the Virgin Islands have borrowed money from the federal government to help keep their unemployment insurance (UI) trust funds solvent. The loans total over $48 billion. The federal government is going to begin charging interest on these loans sometime this year unless legislation is enacted that waives the interest charges. In addition, UI trust funds are also being depleted due to large unemployment benefit payouts. Recently, a number of states have proposed or enacted legislation to improve the solvency of their trust funds. The legislation includes provisions that raise unemployment tax rates, impose tax surcharges, and reduce eligibility for unemployment benefits. The following is a summary of recent developments.
Arizona. Arizona has enacted legislation that imposes a special assessment on employers in 2011 and 2012 to help the State pay the interest on its federal unemployment loans [L. 2011, H2619].
Arkansas. Arkansas has enacted legislation that reduces the maximum unemployment benefit period from 26 weeks to 25 weeks [L. 2011, S593].
Connecticut. The Connecticut Department of Labor (DOL) has announced that, beginning in August, it will be imposing its first annual special assessment on employers to pay the interest due to the federal government on UI loans [DOL Employer Information Notice, December 2010].
Hawaii. Recent legislation increased the 2011 employment and training fund assessment on employers to reimburse Hawaii for interest it must pay on federal loans. Unlike in previous years, employers assigned the minimum (0.0%) or maximum (5.4%) unemployment tax rate are not exempt from this assessment [L. 2011, H1077].
Illinois. Illinois has enacted legislation that increases the maximum cap on the 2012 taxable wage base from $12,960 to $13,560. The legislation also reduces the maximum period to receive unemployment benefits from 26 weeks to 25 weeks, beginning in 2012 [L. 2011, H1030].
Indiana. Recent legislation includes a provision that requires employers to pay a surcharge if Indiana is required to pay interest on federal unemployment loans. The legislation also limits eligibility for unemployment benefits and changes the way that benefits are calculated, beginning in 2012 [L. 2011, H1450].
Massachusetts. The unemployment health insurance contribution tax rate for employers in business for at least five years has increased to 0.36% of wages (previously, 0.24%) [L. 2011, S8].
Michigan. New legislation reduces the maximum period for receiving unemployment benefits from 26 to 20 weeks, effective with new claims filed after Jan. 14, 2012 [L. 2011, H4408].
Missouri. Employers will be subject to an additional assessment to pay for interest on federal loans to the Missouri unemployment trust fund. The Missouri Division of Employment Security (DES) will notify each employer of its share of the interest assessment with the mailing of the 2011 second quarter contribution and wage reports. Missouri has also enacted legislation that reduces the maximum period for receiving unemployment benefits from 26 weeks to 20 weeks [DES website, Unemployment Insurance Tax, Unemployment Trust Fund-Interest Payments on Federal Loan; L. 2011, H163].
New Hampshire. The 1.0% emergency surcharge rate remains in effect for all four quarters in 2011. Negative-rated employers continue to pay a 1.5% inverse rate surcharge for all four quarters in 2011 [New Hampshire Department of Employment Security, Special Notices, 1/3/11].
New Mexico. New legislation, effective July 1, 2011, reduces the number of dependents for whom an individual may claim a $25 dependency unemployment benefit from four to two [L. 2011, H59].
South Carolina. Employers that have been assigned a 5.4% base unemployment tax rate are no longer exempt from the administrative contingency fund tax [L. 2011, H3286].
Proposed Legislation
The following states have introduced legislation that would improve the solvency of their unemployment trust funds.
Florida. The Florida legislature is considering a bill that would reduce the maximum period for receiving unemployment benefits from 26 to 20 weeks, beginning in August. The maximum unemployment benefit period would be further reduced to as low as 12 weeks if the state unemployment rate declines [L. 2011, H7005].
New Jersey. Governor Christie supports a reduction in the maximum weekly unemployment benefit from $600 to $550 [Governor Christie Press Release, 2/25/10].
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