Roughly 73,000 employers in the state received bills last week for interest owed on $810 million the state borrowed in federal funds to pay unemployment insurance benefits.
The employers owe the federal government $30 million in interest for 2011, which the state’s Department of Labor tax unit has begun collection through a special assessment.
The special assessment established by the DOL equates to $1.70 for everyone $1,000 in taxable payroll with a maximum of $25.50 an employee.
“In these tough economic times, the amount of unemployment insurance benefits the state has provided to unemployed workers has greatly exceeded the tax revenues the Labor Department has been collecting from Connecticut’s employers,” said state Labor Commissioner Glenn Marshall in a statement. “In order to continue paying unemployment insurance benefits as required by law, Connecticut began borrowing funds from the federal Department of Labor in 2009.”
Marshall added the state was fortunate that the federal stimulus legislation waved interest payments through 2010, but now the state must begin to pay interest.
The special assessment collections will stay in place for several years to pay back the $130 million in total interest, according to Marshall. Assessments will go out to employers with at least one full year of taxable payroll; self-insured employers, including municipalities, and certain non-profits do not receive assessments.
“The number of Connecticut workers filing for unemployment insurance benefits have increased significantly as a result of the recession that in Connecticut, officially began in March of 2008,” Marshall said in a statement. “Currently, the agency issues about 120,000 in unemployment payments totaling more than $36 million each week to claimants who have lost their jobs and are depending upon this assistance while looking for new employment.”
While these employers have paid into the state’s unemployment fund, federal law does not allow those funds to pay interest so the state law provides separate billing for collecting the funds needed to pay interest. Employers have 30 days from the bill’s Aug. 1 date to make payments in order to avoid an interest charge, those who do not pay within 60 days face a penalty.
Currently, Connecticut is one of at least 30 other states that borrowed money from the federal government to pay unemployment benefits, and the U.S. Department of Labor estimates interest payments will total $1.22 billion in 2011.