The extraordinary involuntary layoffs mandated to protect against the spread of COVID-19 have strained Washington’s Unemployment Insurance Trust Fund (UITF). The UITF pays benefits to unemployed workers and is funded entirely through taxes on employers. At the outset of the pandemic, the UITC had more than $5 billion available; however, by the end of 2020, it was projected to become insolvent in early 2021.
Due to automatic tax triggers in current law, most employers received first quarter tax notices reflecting hikes in unemployment insurance taxes of 300% to 600%. Every employer’s tax rates are unique because they are based on the employer’s individual experience rate and taxable wage base.
In response, the Governor, and the Legislature, with assistance from business and labor, quickly passed, and signed into law SB 5061. The bill reduces the rate of increase in UI taxes for 2021-2025. The bill also provides additional benefits for workers in the lowest wage scales.
Employers will be receiving new tax statements for the first quarter of 2021 that reflect the lower tax rates. The bill:
- Reduces the increase in social tax rates from 500% in the lower rate classes, to no more than 100%.
- Suspends the 0.2% solvency tax through 2025 – solvency tax is triggered when the trust fund drops below a certain threshold.
- Relieves employers of benefits paid to employees whose layoffs or furloughs were between March 28 through May 30.
- Relieves employers of benefits paid during the 1-week waiting period that was waived during the pandemic.
Because of the cap in overall UI tax rates, employers with a history of stable employment will have higher increases in UI taxes than employers with a history of layoffs.
The UI issue is not “done.” Washington Retail continues to advocate for additional state funds to be injected into the UITF to drive tax rates lower. Additionally, as further changes are debated, WR continues to be guided by four principles:
- An employer’s experience rate should not be impacted by mandated COVID-19 related layoffs.
- Employers should not be responsible to repay funds lost to organized theft from the UI Trust Fund.
- State or federal funds should be injected into the UI Trust Fund to avoid increases in employer taxes.
- Washington should avoid taking a federal loan to replenish the UI Trust Fund.
For additional questions, please feel free to contact me at [email protected] or 360-200-6452.