President Obama is expected next week to propose a plan to help states—such as Connecticut--that have borrowed more than $42.4 billion from the federal government to pay unemployment benefits after exhausting their reserves.

Although details of the President’s proposal will not be fully publicized until next week, here is what we know so far.

The president wants to provide immediate relief from unemployment tax increases for employers in 2011 and 2012. Thereafter, he wants to help states better prepare for and respond to times of high joblessness. Specifically, the proposal includes:

  • In 2011, employers in over 20 states are facing increased federal UC taxes as a result of state UC systems’ indebtedness.  For 2011-2012, the interest owed by states that have taken federal loans would be eliminated.  At the same time, the 30 states with indebted UC systems would be relieved of their interest payments to the Federal government—which many states pay through an automatic surtax on employers. In Connecticut employers would be spared a $40 million interest payment in 2011. 
  • The federal taxable wage base would be increased from $7,000 to $15,000 in 2014. This change will ultimately increase federal UC taxes for employers. 

This week, the legislature’s Labor Committee held a public hearing to educate lawmakers about the state of Connecticut’s trust fund and how it will impact taxes on businesses.

Businesses are the sole source of funds for the unemployment compensation system and they have been hard-hit by taxes to keep it afloat. Connecticut’s unemployment rate is stuck at 9% percent, and economists believe the road to recovery will be slow.

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

Filed Under: Employment Law

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