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Daily News

BOSTON – The Commonwealth of Massachusetts recently released a report from KPMG, LLP summarizing the findings of a reconciliation project that examined the finances of the Unemployment Insurance (UI) Trust Fund.

The Executive Office of Labor and Workforce Development commissioned KPMG to conduct this independent assessment to determine the impact of federal pandemic relief programs and other effects of the COVID-19 pandemic on the financial status of the Commonwealth’s unemployment system and the UI Trust Fund balance for the period from the beginning of the pandemic in March, 2020 through Nov. 30, 2021. 

The report outlines the steps KPMG took to evaluate the balance of the UI Trust Fund and provides an overview of the current status of the fund, including the effects of several outstanding financial obligations on the Trust Fund. These obligations include the necessary repayment of federal advances that ensured the Fund’s solvency in 2020 and currently outstanding employer credits resulting from a mid-2021 downward adjustment in UI rates.  The report also identifies the need for a one-time transfer of approximately $300 million from funds currently held in the UI system to the federal government to reconcile state and federal accounts now that emergency programs implemented under federal authority in 2020 and 2021 have come to a close.  

As of Nov. 30, 2021 the unadjusted UI Trust Fund balance was reported at $2.94 billion. The KPMG analysis concludes that this reported balance needs to be assessed in light of outstanding federal loan obligations, outstanding employer credits, and a future additional reimbursement due to the federal government. When these adjustments are factored in, the KPMG analysis concludes that UI Trust Fund had a $115 million structural deficit at the time of the reporting period. The details of these adjustments are as follows: 

  • Outstanding Federal Loans: Massachusetts owes $2.3 billion in outstanding loan obligations, due in November 2022, to the federal government to repay necessary borrowing during the pandemic. 
  • Outstanding Employer Credits: The reported UI Trust Fund balance includes $415 million in employer credits that were the result of the mid-year reduction in 2021 employer UI rates. Net 2022 Employer contributions will be reduced by application of these 2021 Employer credits.  
  • Future Federal Adjustment: The Commonwealth anticipates it will need to make a future one-time transfer of approximately $300 million to the federal government to reconcile automated bank returns of benefits issued from various state and federally funded UI programs. EOLWD is currently awaiting guidance from USDOL regarding administrative procedures to process this reconciliation. 

 

This report does not include the effects of legislation recently signed by Governor Baker that will invest $500 million to stabilize the UI Trust Fund. The report’s assessment of the UI system’s current financial position underscores the importance of this investment, given the unprecedented impact of the pandemic on the unemployment system and the need to ensure continued solvency to be able to pay claims in the future.  

 

The comprehensive accounting of the UI Trust Fund balance and financial position will also inform the Commonwealth’s efforts to issue bonds that will support the repayment of the federal advances that were authorized in 2020 and begin to restore the UI Trust Fund to a more solvent level.

Daily News

It seems like it came out of nowhere. And, in many respects, it did.

Indeed, the bill has come due on the skyrocketing amounts of unemployment benefits being paid out in this state. And unless something happens, and quickly, small businesses that are already facing innumerable challenges brought on by COVID-19 will be hit with another that might just be too much to take.

We’re talking what’s known as the unemployment insurance (UI) solvency fund assessment, the other, often-overlooked component of the overall assessment handed down to employers to cover the state’s unemployment costs — only, it won’t be overlooked any longer.

That’s because, due to a statutory increase in the formula used to calculate an employers’ experience rating, the annual UI solvency fund assessment rate has jumped from 0.58% to a whopping 9.23% for 2021. This represents a staggering 1,591% increase in just one year, which will cost business owners thousands of dollars in additional expenses at a time when they can certainly least afford it, including those employers who were able to retain their full workforce during the pandemic.

Already, stories are circulating about companies being hit with massive increases in their assessment, hikes that could eventually stifle growth and hiring and perhaps lead to layoffs and other types of cutbacks.

With these types of impacts looming, the local business community is marshaling its forces and lobbying legislative leaders to take needed steps to ward off what could be catastrophic effects from these UI solvency fund assessments.

Letters now being circulated ask the Commonwealth to follow the lead of Maryland and other states by dedicating a portion of the federal COVID-19 relief aid Massachusetts is receiving through the American Rescue Plan Act or other available and relevant federal funds to replenish the Unemployment Insurance Trust Fund. Doing so will remove the financial burden from employers who are already struggling to survive, which in turn will help protect jobs and contribute to a strong post-pandemic economic recovery.

We urge every business owner in this region to join these efforts and make sure a loud, crystal-clear voice is heard on this. And we urge the Legislature to take this step, and any others it can take, to keep the massive unemployment bill now coming due from further devastating the business community — and the state’s economy.

The state’s businesses did not cause this problem. Indeed, a huge number of job losses resulted directly from the state’s shutdown of the economy roughly 13 months ago. At that time, state leaders, and especially the governor, did what they thought was necessary to ward off disaster.

Now, they need to ward off disaster again — in the form of more layoffs, stalled growth, and, very probably, the loss of many more businesses.

The Department of Unemployment Assistance has announced that the quarterly payments that were due April 30, which would include the new rate calculation, have been deferred until June 30. This is a good first step. State leaders now need to use this time to take the steps necessary to dedicate a portion of the federal COVID-19 relief aid Massachusetts is receiving to replenish the UI Trust Fund. They need to do the right thing for the businesses in the state, and those same businesses can help themselves by reminding them of this responsibility.

Every for-profit business in this region has skin in this game — and it’s a game they can’t afford to lose.

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