29 March 2016 Connecticut employers may be relieved of debt-related unemployment insurance costs in 2016 When states borrow money in order to pay unemployment insurance benefits, its employers can wind up carrying the burden of that debt. Connecticut is a noteworthy example of this fact. In 2009, Connecticut began borrowing funds from the federal government resulting in a reduction of the federal unemployment insurance (FUTA) credit starting in 2011 and thereby increasing the FUTA tax the state's employers pay. In order to cover the interest on the federal loan balance, the state also implemented an employer interest surcharge. Now, after six years of debt-inflated unemployment insurance costs, Connecticut employers may see relief. On March 26, 2016, the US Department of Labor reported that the state's loan balance stood at zero. If the state is able to retain that balance through November 10, 2016, there will be no FUTA credit reduction for 2016. (US Department of Labor Trust Fund Loans, March 26, 2016) Additionally, a Connecticut Department of Labor official stated that it expects to have sufficient funds to cover this year's federal interest due on the state's unemployment insurance (UI) trust fund loan and that there will be no need for a special interest assessment billing to employers in August 2016. (Email response to inquiry, UC assistant director of accounts, March 18, 2016.)
Connecticut employers paid at a higher FUTA rate than other borrowing states for calendar years 2014 and 2015 because Connecticut did not request a waiver of the additional Benefit Cost Rate (BCR) that begins to apply in the fifth borrowing year, in the hopes of more quickly repaying the federal UI loan. For 2014, the FUTA rate for Connecticut employers was 2.3%, while employers in the other states that like Connecticut began borrowed in calendar year 2009 paid at 1.8%. For 2015, Connecticut employers paid FUTA at a rate of 2.7%, rather than 2.1%. Earlier this year, Department officials said the state planned to repay its federal loan by September 2016, two to three years earlier than would have been possible had the BCR not applied, returning the net FUTA tax rate to 0.6% for calendar year 2016. Should the state not repay the loan by November 10, 2016, the US Department of Labor is estimating that the FUTA rate for calendar year 2016 would be 2.5% (including the BCR add-on). The 2015 special interest assessment, mailed to employers on August 1, 2015 and due by August 31, 2015, decreased to a rate of 0.02%, or $3 per employee, down from a rate of 0.05%, or $7.50 per employee, for 2014. Because circumstances may change between now and later in the year, employers should conservatively estimate their 2016 Connecticut state and federal unemployment insurance tax by assuming a federal loan balance will remain on November 10 and the special interest assessment will continue to apply.
Document ID: 2016-0582 | ||||||||||||||||||||||||||||||
