The state will begin mitigating the increase in federal unemployment taxes for employers starting in January.
During the pandemic, the state depleted roughly $700 million in the Connecticut Unemployment Insurance Trust Fund, as record numbers of unemployed workers filed for payments.
The state Department of Labor borrowed funds from the U.S. Department of Labor to continue paying out benefits.
As of Nov. 30, the state DOL had borrowed $1 billion and had a loan balance of $76 million due to the U.S. Department of Labor.
Connecticut is one of six states that owes money to the federal agency for unemployment loan repayments.
Under federal law, each state that has outstanding federal loans must increase its federal taxes each year until the loans are paid. As a result, Connecticut employers will see their Federal Unemployment Tax Act taxes increase 0.3% for their payrolls from Jan. 1, 2022 to Dec. 31, 2022, up to $21 per full-time employee.Â
Federal tax payments are due and payable in January 2023.
Earlier this year, the state legislature passed Public Act 22-118, which reduces the state unemployment tax rate by 0.2% for calendar year 2023, in an effort to offset the federal tax increase.
The state expects to have an outstanding loan balance through 2025, which means interest will accrue through September 2026. Gov. Ned Lamont has obligated $30 million in federal American Rescue Plan Act funds to pay the interest due from September 2022 through September 2026, eliminating the need to levy a special assessment for pandemic-related loan interest payments, according to the state DOL.
For more information, visit portal.ct.gov/dol.
