Because the recession completely drained Connecticut’s Unemployment Compensation Trust Fund, the state Department of Labor is proposing, through SB 988, to nearly double the fund’s reserve goal to $1.1 billion from its current level of $625 million. 

While arguments can be made for and against this measure which the Labor Committee has approved, one thing that’s certain is that it would result in sustained higher unemployment taxes for the foreseeable future.

Building a bigger reserve might sound like a good idea, but most employers fear that this will have a dramatic negative impact on them and their employees. It would drain desperately needed capital out of the state’s economy during what looks to be an extended period of economic uncertainty. 

What many people don’t realize is that Trust Fund is funded entirely by Connecticut employers who will pay at least $70 million in new unemployment taxes during the next ten months.

First, they will have to pay $40 million in August for an interest payment for borrowing federal funds to keep paying claims. Then when they file their 2011 return in January 2012, employers will be required to pay an additional $30 million in federal unemployment taxes. The additional $30 million will go to pay principal on the loan.

There are several areas of concern when it comes to the spending side of the unemployment equation too. None of these matters, unfortunately, were addressed in the bill that the Department of Labor requested.

Some issues that need to be addressed include collection of unemployment benefits fraudulently, verification of work searches and what constitutes suitable work when a claimant is seeking work. 

Here’s an in-depth look at Connecticut’s unemployment compensation system.

For more information, contact CBIA’s Kia Murrell at 860.244.1931 or