In March 2015, the U.S. Department of Labor published the State Unemployment Insurance Trust Fund Solvency Report 2015, detailing each state’s unemployment insurance (UI) trust fund solvency for this year.
The 2007-2009 recession left 36 states and territories with depleted UI trust funds. To continue paying UI benefits, many had to take federal loans. As of January 1, 2015, 10 UI programs have approximately $13 billion in outstanding federal loans.
States are repaying the loans and building up their UI trust funds with fewer FUTA credit reduction states each year. However, the study found that only 17 states have reached what the study considers a minimum level of adequate solvency.
The report lists the potential FUTA credit reduction states and territories for 2015. They are the same as 2014, plus one new state. There are nine total: California, Connecticut, Indiana, Kentucky, New York, North Carolina, Ohio, South Carolina (the new state), and the Virgin Islands.
All of the potential FUTA credit reduction states and territories for 2015 would be subject to a Benefit Cost Ratio (BCR) add-on, except New York. This is an additional tax that varies by state, based on a complex calculation. States can apply for a waiver of the BCR add-on by July 1, 2015.
States can pay off their loans by November 10, 2015, to avoid becoming a credit reduction state in 2015. North Carolina’s labor agency says that it is on track to repay its outstanding loans during the month of April. South Carolina’s labor agency recently made a $75 million early payment to the federal government to pay down its UI trust fund loans. It also anticipates paying all of its outstanding loans this summer.
The IRS will release an official list of 2015 FUTA credit reduction states after the November 10 deadline.
Read PayState Update: Issue 9, Vol. 17 for more details on the potential FUTA credit reduction states for 2015.