Employers should expect changes to their unemployment insurance bills this year. The Department of Unemployment Assistance (DUA) recently issued a letter detailing several new policies for this year. The letter from DUA contains good news and bad news. 

The Good 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. DUA estimates that the schedule will remain at “A” for 2023 as well.  

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%. 

The Bad News: 

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. 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: 

• 2023 – $915 million 
• 2024 – $365 million 
• 2025 – $349 million 
• 2026 – $335 million 

What AIM has done: 

While employers are undoubtedly upset over this new surcharge, the situation would have been worse absent AIM’s advocacy. Over the last two years AIM’s government affairs team worked to secure $600 million in funding for the state’s unemployment system. This money reduced the system’s overall debt. Without that investment the COVID-19 assessment the assessment would likely have continued for 3 additional years.  

AIM plans to advocate for more spending on the UI trust fund using surplus American Rescue Plan Act dollars. This additional funding will help stabilize the trust fund and hopefully eliminate the need for any future tax increases. 

What Options Do Employers Have: 

If the burden for the new assessment is creating short term budget constraints on your business, AIM recommends deferring a portion of your assessment and spreading out the cost over multiple quarters. Most employers pay the majority of their unemployment insurance bills in the first and second quarter of the year. For more information on this option please see the state’s website.  

However, the new COVID-19 assessment cannot be deferred. The state’s bonding agreement that led to the assessment has strict terms governing the timing on payments from the Commonwealth. The rest of the employer’s bills may still be deferred.