Increased Unemployment Taxes Probable for Employers
In addition to the many employer mandates enacted by the American Recovery and Reinvestment Act of 2009 (ARRA), new efforts to assist the nation's unemployed have been introduced, potentially causing an increase in state-mandated unemployment taxes for employers. Because employers are seemingly no longer responsible for former workers, many employers may not have realized the affect of this initiative on their respective companies.
The ARRA continues the Emergency Unemployment Compensation (EUC) program, which extends the number of weeks from 20 to 33 that an unemployed individual may collect unemployment benefits. In addition, unemployment benefits during that time period will increase by $25 per week, while federal income tax payments will temporarily be suspended for those receiving the benefits. The final aspect of the initiative offers the opportunity for states to receive a portion of the allotted $7 billion in modernization grants if they agree to comply with specific reforms. Such reforms include qualifying an individual for unemployment benefits if the individual quit work for a "compelling family reason" including the illness or disability of a member of the individual's immediate family (as defined by the Department of Labor), the need to accompany one's spouse who has to relocate for his/her job, or specific verifiable situations of domestic violence.
Some states have refused to accept the grant for fear that implementing these new qualifiers will dramatically increase the number of unemployment compensation recipients, leading to a faster depletion of the state's unemployment reserves. As reserves are depleted, states will ultimately be forced to increase the unemployment taxes charged to employers to keep the fund afloat. In addition, the amount of unemployment taxes paid by each employer is calculated based on the number of existing unemployment claims brought forth and awarded against the company, which will also increase taxes for employers as more individuals qualify for the benefit.
Additional information on unemployment insurance is available from the DOL's Employment & Training Administration.
For key directives issued to states from the Department of Labor (DOL), see the DOL's Q&A document for state workforce agencies. To find out if your state has accepted a modernization grant, contact your state's unemployment insurance program.
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