Unemployment Tax Hikes Hit Employers, Despite Law Change
A 2021 bill designed to prevent unemployment tax hikes for Connecticut employers that laid off employees during the pandemic inadvertently resulted in increases for 14,561 businesses.
Public Act 21-5 was passed unanimously by both the state House and Senate after the state lost a historic 292,400 jobs in March and April of 2020.
The legislation was intended to shield employers from the costly impact of pandemic-related layoffs on their unemployment experience rating accounts.
An established business’ experience rate is typically calculated by looking back at the number of times its employees received unemployment compensation over the last three years.
Given that most of the pandemic related high levels of unemployment occurred during 2020 and 2021, the legislation simply dropped the 2020 and 2021 benefit years from that calculation.
The unemployment tax rates for businesses were then calculated using just the 2019 benefit year.
Employers impacted by the change in calculation called for a report to determine the true impact of the 2021 legislation, with the General Assembly commissioning that study (Special Act 22-13) last year.
That report shows 88% of the 117,521 contributing employers saw either a decrease in their unemployment tax rate or no change at all.
However, 12% of businesses saw increases to their tax rates—likely because they saw heavier than average unemployment system usage in 2019.
Experience Rate Increases
Of the employers that saw their experience rates rise:
- 6,828 (6.6%) saw an annual hike of $165 per employee per year
- 4,633 (4.5%) saw annual increases of less than $165 per employee (including 1,833 with an increase of less than $50)
- 1,745 (1.7%) saw annual increases between $166-$300
- 708 (0.7%) saw increases between $301-$400
- 487 (0.5%) saw increases between $401-$500
- 139 (0.1%) saw increases between $501-$600
- 15 (0.01%) saw increases between $601-700
- 6 (0.005%) saw increases of $735
While the report was not released in time for legislation correcting the issue to be raised and given a public hearing, it again highlights that employers are still paying for a pandemic they did not cause.
Connecticut borrowed over $1 billion from the federal government to ensure every claimant received unemployment benefits.
While the state takes the loan, employers are responsible for paying it back.
State lawmakers have appropriated $195 million in federal pandemic funds to help repay a small portion of that loan.
However, absent additional relief, Connecticut businesses will again see federal unemployment tax rates increase from Jan. 1, 2024.
To date, neither the administration nor the General Assembly’s proposed spending and revenue packages call for any additional relief—leaving employers to foot the bill.
EXPLORE BY CATEGORY
Stay Connected with CBIA News Digests
The latest news and information delivered directly to your inbox.