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“Although employers will see the increase in their federal tax bills, the state is responsible for it,” said Lavielle. “The other seven states with loans outstanding for more than five years all applied for, and obtained, waivers from the federal government.
"The Connecituct Department of Labor (DOL) chose not to apply in order to help the state pay the loan off more quickly. It’s unfortunate that the DOL did not consult with or inform the legislature or the business community before making the decision."
The additional tax is designed to help the state pay off the more than $1 billion it borrowed from the federal government in 2009 to keep its unemployment compensation trust fund solvent, but Connecticut is the only state that is passing the tax onto employers.
The loan was interest-free until 2011. In that year, Connecticut began billing businesses for an annual assessment to pay off the loan. The average annual cost to businesses, which has varied due to interest rate fluctuations, has been in the range of $15 to $25 per full-time employee.
In 2015, however, Connecticut will become subject to an additional federal “Benefit Cost Ratio” (BCR) tax, because its loan will have been outstanding for more than five years. This will lead to an increase of approximately $35 in per employee costs for employers.
“I hope that the DOL will be willing to work together with the General Assembly to find a better solution,” Lavielle said in a statement. "Our state’s businesses, which have had to cope with both large tax increases and an economic recovery that has lagged behind the rest of the country, have not had an easy time in recent years.”
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