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.