Unemployment Insurance benefits are financed by employers through the payment of taxes. Because of the severe economic recession, unemployment has risen to a current level of 9.1% nationally. In October of 2009, Connecticut’s Unemployment Trust Fund became insolvent and in order to continue to pay claims the state has had to borrow from the United States Department of Labor. These borrowings have been interest free through 2010 due to the American Recovery and Reinvestment Act of 2009, which waived the interest on unemployment loans. This benefit was not extended with the most recent legislation passed by Congress; therefore all states who have borrowed funds must begin paying back interest as of 2011.
Connecticut has projected that the total interest costs will be approximately $100 million dollars. In order to collect the interest due, a law was passed by the CT General Statutes Section 31-225a requiring each employer to pay a special assessment beginning in 2011 and running through 2013. The first annual assessment will be levied against Connecticut’s employers on August 1, 2011 with payment due August 31, 2011. Based on preliminary projections, which may change based on several variables; the average cost to the employer will be $40 per employee. For example, a business that employs 15 workers can expect a Special Assessment bill of $600.
The 2011 Special Assessment figures are estimates and subject to change. More current data will available and included in upcoming Quarterly Employer notices.
ACTION ITEM: Connecticut employers should budget for the unemployment assessment they will be receiving.
Thomas F. Scanlon, CPA, CFP®