MASSACHUSETTS SENATE PASSES UI SOLVENCY BILL
The Massachusetts State Senate followed the lead of the House of Representatives and passed the bill H3702 addressing some immediate relief to MA UI tax paying employers, all of whom were negatively and substantially affected by the increase in catastrophic Unemployment Insurance solvency assessments, with no warning.
The bill, if signed by Governor Baker, will lower the Solvency Assessment from 9.23 to 1.12 percent. However, MA employers will still have to foot this bill, as it will spread the $7.4 billion bill for COVID unemployment benefits over 20 years through certain types of borrowing. Thereby strapping all employers with two decades of surcharges, rendering us less competitive than neighboring states. As periods of economic expansion and downturn typically run in 10-year cycles, Baystate employers can reasonably expect to pay this surcharge, through two future economic downturns.
Without disclosure from Gov. Baker or Leadership at the State House as to how Federal stimulus funds would be prioritized, legislators saw fit to put the entire Covid Relief benefits cost on businesses — choosing to have employers “go it alone” without Federal relief funds to address UI insolvency. This, despite Federal Stimulus funds having been released to be used for replenishing state Trust Funds among other purposes.
The Massachusetts DUA will recalculate rates for all employers and send out new notices for the new bills. Quarter 1 UI bills will be delayed again until July 31 and employers will pay their Q1 and Q2 bills at the same time. If ultimately approved, payment for first-quarter unemployment insurance bills will be delayed until July 31, at the same time payment for second quarter will also be due and the solvency cost reduced on that date. Employers who already paid their 2021 first-quarter bills will receive a tax credit against future UI assessments.
The DUA will remove $7.4 billion in COVID-19 related unemployment claims from the solvency fund and place that money in a new COVID-19 account which will be paid off by twenty-year bonds and a special COVID-19 assessment on employers for 2021 and 2022. However, the DUA could extend the assessment beyond 2022 depending on how fast the state pays down the debt in the new COVID-19 account. This assessment appears to be annual as the statutory language does not specify whether it will be spread out over 4 quarters or done in one quarter which may give the DUA certain flexibility. We are waiting for clarification on this matter. This is in addition to the Federal Interest Excise tax, most likely to begin Q3.
As mentioned, The COVID-19 assessment is a surcharge which will amount to roughly an 11% increase on the employer’s total bill for the year compared to 2020. This legislation is reducing the solvency assessment by 8%, but the Solvency Assessment was charged against the taxable wage base. As a result, the high solvency rate increased employer’s total UI bills astronomically (i.e. 200%, 300% or more). We certainly hope this new COVID-19 surcharge will only increase employer’s total bills by 11%. And the assurance this bill does NOT represent an 11% tax against the taxable wage base. The relief will be the difference between employer’s original 2021 bill and the new 2021 bill the DUA will issue once rates are recalculated. Depending on a company’s UI experience, some employers might possibly pay less in Q1 2021 than they did in Q1 2020.
Finally, commencing August 1, Massachusetts will begin charging all COVID-19 related layoffs directly to the employer again, meaning the effects of any future layoffs will be seen in the following year’s assessment charges.
UTCA will continue to press on legislators and the administration to advocate for usage of available ARPA funds to lessen this tremendous legacy or repayment being unnecessarily levied on employers. If you have questions, or would like to learn more about how you to make your voice heard on this important topic, please contact emurphy@utcainc.com .