Employers in Several States to Soon Pay Interest Surcharges

As of June 30, 2011, 29 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 $41 billion. The federal government will charge interest on these loans unless legislation is enacted that waives the interest charges. Many states are passing the interest charges on to employers. Some employers will be paying additional interest assessments in the next few months. Here is a summary of the assessments:

Alabama. All employers, except reimbursing employers, should soon be receiving a bill from the Alabama Department of Industrial Relations to help the State pay the interest due on its federal UI loans.

Arizona. Employers will pay a special assessment in 2011 and 2012 to help Arizona pay the interest on its federal unemployment insurance loans. The rate may not exceed 0.4% of taxable wages in 2011. The assessment for the first three quarters of 2011 will be paid with the third quarter unemployment tax return due on Oct. 31, 2011. The assessment for the fourth quarter of 2011 and all four quarters in 2012 will be paid with the unemployment tax return for that quarter [L. 2011, H2619].

Arkansas. Employers must pay a 0.2% advance interest tax, beginning in the second quarter of 2011. The tax is computed on taxable wages. It is paid with the quarterly unemployment tax report. (The second quarter return must be filed by August 1.) All employers, except reimbursing employers, must pay this assessment.

Colorado. Employers received (or should soon be receiving) a bill from the Colorado Department of Labor and Employment (DL&E) called “Unemployment Insurance Notice of Trust Fund Assessment” to help the State pay the interest due on its outstanding federal unemployment insurance loans. Employers must pay the assessment within 30 days of the billing date. The first payment will cover interest due to the federal government from January 2011 through April 2011 [DL&E website, Federal Interest Repayment].

Connecticut. The first annual special assessment will be mailed to employers on Aug. 1, 2011. The assessment must be paid by Aug. 31, 2011. The estimated average cost per employee is $35 [DOL Employer Information Notice, June 2011].

Hawaii. In the 2011 tax year, all employers, other than those selecting an alternative method of financing for unemployment benefits, must pay the employment and training fund assessment. The employment and training fund assessment rate is 0.02% of taxable wages in 2011. This rate includes a 0.01% surtax on employers to reimburse Hawaii for interest it must pay on federal loans to the State's unemployment trust fund [L. 2011, H1077].

Indiana. Experienced employers are paying a 13% surcharge in 2011 to help Indiana pay the interest on its federal unemployment insurance loans [Ind. Code §22-4-10-4.5].

Michigan. Negative-balanced employers are required to pay a solvency tax (maximum rate of 0.75% for 2011) in 2011 to help Michigan pay the interest on its federal unemployment insurance loans [Michigan UIA Solvency Tax Fact Sheet #121, October 2010].

Minnesota. Employers, except reimbursing employers, are paying a 2% federal loan interest assessment in the 2011 tax year to help Minnesota pay the interest on its federal unemployment insurance loans.

Missouri. Employers will pay an additional assessment with their second quarter 2011 unemployment tax return to help Missouri pay the interest due on its federal unemployment insurance loans. The Missouri Department of Labor has stated that the amount due will be 0.0931895% of an employer's taxable wages for calendar year 2010. Employers will pay $12.11 (i.e., 0.0931895% × $13,000 = $12.11) on each employee who earned wages equal to or greater than the 2010 taxable wage base of $13,000.

New Jersey. The New Jersey Department of Labor (DOL) has mailed (or should soon be mailing) the “Federal Loan Interest Assessment” (FLINT) to employers. New Jersey employers (except governmental entities and nonprofit organizations) will be paying this assessment to help the State pay the interest on its outstanding federal unemployment insurance loans. Employers must pay the assessment by Aug. 14, 2011. The assessment will be equal to 2.786% of an employer's 2010 unemployment insurance contributions, or $5, whichever is higher [New Jersey DOL website, Employer Information, Federal Loan Interest (FLINT) Assessment].

New York. All employers (except reimbursing employers) must pay an additional assessment to help New York State pay the interest due on its federal loans. The assessment is computed on 0.25% of taxable wages from the fourth quarter of 2009 through the third quarter of 2010. The payment is due on Aug. 15, 2011.

Pennsylvania. All employers (except reimbursing and new employers) must pay an additional assessment for interest due on federal loans. The interest factor tax is a variable rate, not to exceed 1%. The interest factor tax is 0.44% in the 2011 tax year.

Rhode Island. The job development assessment fee has been increased by 0.3% to help Rhode Island pay the interest on its federal unemployment insurance loans.

South Carolina. All employers, except reimbursing employers, must pay an interest surcharge in 2011 to help South Carolina pay the interest on its federal unemployment insurance loans.

Wisconsin. Employers recently received a letter from the Wisconsin Department of Workforce Development (DWD) that notified them of a “Special Assessment for Interest” that will be billed in early August 2011 and will be due in September 2011. The assessment will be approximately 0.2% of taxable payroll (0.15% for reimbursing employers). Employers will pay the assessment if their taxable payroll for calendar year 2010 was greater than $25,000 [DWD website, Special Message to Employers: Information on Special Assessment for Interest].