Briefing: Unemployment Insurance
Massachusetts has not substantially raised its unemployment insurance rates since before the 2008 recession, with legislators instead opting to pass a series of one-year freezes.
Earlier this month, House and Senate Republicans filed legislation to freeze a 31-percent rate increase in 2012. The House and Senate approved it last week.
How big would the increase be?
Employers in the state would pay an estimated $2.2 billion in unemployment contributions if the rate is not frozen for this year. That’s about $530 million more than the $1.7 billion companies paid in 2011, according to financial reports from the Executive Office of Labor and Workforce Development (EOWLD), which oversees the state’s unemployment insurance program.
The increase would equate to an average payment of $935 per employee, compared to $715 in 2011, according to a blog post from Sen. Bruce Tarr, R-Gloucester, who co-sponsored the GOP legislation.
How is the state’s unemployment trust fund doing?
The short answer is: Better than the funds in many other states.
Unlike some states, Massachusetts’ unemployment insurance trust fund generated a surplus in 2011, meaning it paid out less in benefits that it collected in revenues.
State employers paid $1.7 billion and paid out about $1.6 billion, leaving a balance of approximately $100 million to start 2012.
What happens if the fund generates a deficit?
Massachusetts, which has enjoyed a lower unemployment rate than many other states since the recession, has not had to do any long-term borrowing to pay unemployment benefits. Other states, such as California and Michigan, have not been so lucky. California, for example, owed more than $300 million in interest on what it borrowed for the fund as of September, according to the Wall Street Journal.
Does everyone pay the same rate?
No. Employers’ unemployment insurance rates can range from just under 2 percent to more than 10 percent of the first $14,000 in wages paid to each employee. The rates are based on a number of factors, including the size of a company’s payroll, the number of employees and the amount of unemployment insurance benefits charged against its account, according to the EOLWD.
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