Unemployment Costs to Connecticut Employers
March 24, 2009
Page 2
Unemployment Costs to Connecticut Employers
March 24, 2009
To:CCPA Members
From:Kirk Springsted
Re: Unemployment Costs to Connecticut Employers
Connecticut Employers Paying State Unemployment Insurance (SUI)
Increased SUI Tax Rates Effective January 1, 2009
On January 1, 2009 the State of Connecticut increased the fund balance unemployment tax rates for employers paying into the State’s Unemployment Insurance fund (SUI). The minimum taxable rate went from 1.4% up to 1.9%. The maximum rate went from 6.3% up to 6.8%
The state adds the fund balance unemployment tax rate to the employer’s experience rate to determine the total unemployment rate charged (page 2). The Department of Labor calculates the unemployment tax rates on the first $15,000 of each employee’s wages.
Unemployment Payment Periods
Employees found to be eligible for unemployment benefits in Connecticut may receive benefits for up to twenty-six weeks (26).
The Feds extended the twenty-six week eligibility period an additional thirty-three (33) weeks to address unemployment during the current fiscal downturn.
The Federal Stimulus Plan adds a $25 per week supplemental unemployment benefit.
The first twenty-six week benefit is paid by the state and charged back to employers through increases to the employer’s unemployment tax rate up to the maximum rate. The Federal Government pays the extended thirty-three week benefits. The Federal government also funds the $25 supplemental benefit.
Status of Connecticut’s Unemployment Fund
With the increased level of unemployment across the nation, many states are depleting their unemployment funds faster than they can replenish them with current tax rates. Thirteen states have exercised their option to apply for a federal loan to supplement their unemployment fund.
According to the U.S. Department of Labor actuarial standard statistic (AHCM) which measures state Unemployment Insurance fund solvency, Connecticut’s AHCM of .54 in CY2008 is below the standard of 1.0 which indicates an adequately solvent fund. If unemployment remains high, this may mean that Connecticut will soon join other states in seeking a federal loan to fund its unemployment fund.
States that seek Federal loans for their unemployment funds or those whose funds are depleted by the amount of benefits paid have historically been forced to raise employers’ taxable rates to raise the dollars necessary to repay the loan or replenish the unemployment fund. This will mean further hikes to the taxable rate, regardless of the employers’ unemployment experience. Those with increased unemployment experience will see even higher costs.
Connecticut Employers Paying Unemployment as a Self-Reimburser
Impact of January 1, 2009 Tax Rate Increase on Self-Reimbursers
Under federal law, 501c (3)organizations can opt out of the state unemployment insurance (SUI) tax system and directly reimburse the state for any unemployment benefits paid. This is an attractive cost-saving measure for many CCPA provider organizations because the state’s taxable rate often exceeds the experience of unemployment in the provider sector. Providers that choose this option may fund their unemployment directly, while others seeking claims management support and a broader safety net choose to join an unemployment trust (CCPA has endorsed the 501(c) Unemployment Trust since 2000 (
Since self-reimbursing organizations do not pay into the unemployment fund, they do not experience unemployment tax rate hikes. Self-reimbursing organizations that manage unemployment claims effectively can realize significant cost savings by remaining outside the state unemployment fund.
Unemployment Payment Periods for the Self-Reimbursing Organization
Employees found to be eligible for unemployment benefits in Connecticut may receive benefits for up to twenty-six weeks (26). This twenty-six week benefit is paid by the self-reimbursing organization.
The Feds extended thirty-three (33) week unemployment period is paid by the federal government as is the $25 per week supplement provided by the Stimulus Plan.
Reducing Unemployment Risk
If an organization is forced to consider labor reductions as part of a budget reduction strategy there are several key considerations they should make in doing so. One consideration is to understand the true cost of reducing the workforce, making sure that they have factored in their increased unemployment costs. Other considerations are noted in the article “Reducing Unemployment Risk.”