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Posted on January 10, 2023
Question
Can you give me an update as to what’s going on with the unemployment insurance (UI) system? I heard rumors of some changes with UI charges for 2023.
Answer
There are significant financial changes occurring that will impact employers during 2023. It is likely that someone at your company received a four-page letter from the Department of Unemployment Assistance (DUA) explaining the financial changes and their impact.
The letter from DUA contains good news and bad news.
The good news is that the UI employer contribution schedule is shifting all the way down to schedule “A,” the lowest possible schedule on the UI rate table. The reduction to schedule “A” is a result of the bonding done to borrow money for the system last year. The bonding was done to reduce the overall tax UI rate employers had to pay.
Once a schedule is established, a company is assigned a specific rate based on its unemployment experience. The rate determines how much the company will pay in UI tax for the upcoming year.
In 2022 the UI schedule was “E,” a much higher rate than in 2023. With the reduction to schedule “A,” each employer’s “UI Rate” will be considerably lower than in 2022.
The solvency rate, which covers charges that are determined not to be the responsibility of a specific individual employer, will also go down this year. In 2022 the solvency rate was .59%; in 2023 it will be .37%.
But there is bad news as well.
Affirming that it will take time for the UI system to recover fully from the impact of the pandemic, DUA is also issuing a special COVID-19 assessment to cover the costs of the borrowing and the losses the system incurred during the early days of the pandemic when charges were assessed against the solvency account rather than any particular employer’s individual account. The assessment will be 126.4% of each company’s UI rate for 2023. This will be a reoccurring assessment, although 2023 is expected to be the largest.
Based on its current projections, the DUA plans to issue the assessment over the course of the next four years at a rate sufficient to collect the following revenue to cover its debt service costs:
The assessment will be charged against all private contributory employers. A contributory employer is one that pays DUA assessments on a quarterly basis annually as opposed to a reimbursable employer that only pays UI charges when incurred.
AIM members interested in discussing this or any other human-resource question may call the AIM Employer Hotline at 800-470-6277.
