Slow recovery continues for Unemployment Insurance Trust Fund

Aug 26, 2021
Written by wpengine

Last Fall, state forecasts predicted that Washington’s Unemployment Insurance Trust Fund (UITF), which provides unemployment insurance benefits to unemployed workers, would become insolvent in 2021 due to the unprecedented number of unemployment insurance claims caused by the COVID-19 pandemic. Funded entirely by employer’s unemployment insurance taxes, projections showed the UITF would require a federal loan in addition to massive increases in employer taxes to continue paying benefits to unemployed workers as we entered the 2021 legislative session.

Projections showed the fund would go insolvent without the injection of federal funds and employer taxes. The Legislature, however, felt that significant increases in UI taxes would impede economic recovery. They took action to 1) reduce the rate of increase of UI taxes and 2) directed targeted relief to sectors most impacted by COVID-19 closures. Most believed that a federal loan would still be necessary to avert insolvency.

However, as pandemic-related restrictions eased last Fall, employment rebounded much more rapidly than had been forecasted. Indeed, the UITF began stabilizing in December 2020 and, in recent months, began replenishing. Moreover, the UITF has not required a federal loan. If this trend continues, there may be other opportunities in 2022 to pursue additional relief for employers from COVID-19 related unemployment insurance benefit costs.

Significant changes in unemployment insurance benefits coming soon

Enhanced federal unemployment insurance benefits incorporated into the American Rescue Plan will sunset in the next few weeks. The week ending September 4 is the last week a person can claim federal unemployment insurance benefits for extra weeks of compensation when their state claim expires. It is also the last week for claiming the $300 per week of additional federal benefits. Additionally, claimants will again have to serve an unpaid waiting week before collecting benefits.

According to Washington’s Employment Security Department, it is “anticipated that 205,000 individuals will most likely run out of state and federal unemployment insurance after September 4.”*

Nearly all sectors of business, including Retail, are experiencing challenges with filling vacant positions. It will be interesting to see if the reinstatement of job search requirements for UI claimants, the elimination of federal benefits, and the re-opening of schools will help ease the current shortage of workers.

*(Quote from ESD’s 8/11/2021 presentation to the Unemployment Insurance Advisory Committee.)