State’s Unemployment Compensation Tax Rate Reduced to Lowest Level in 30 Years

From PA Chamber of Business & Industry

In early January, Gov. Tom Wolf announced that Pennsylvania business owners will see a reduction this year in their Unemployment Compensation taxes, which will save them an estimated $552 million in 2020.

The elimination of the 1.1 percent UC tax rate interest that took effect on Jan. 1 makes the current tax rate the lowest since 1979.  It follows the repayment of the state’s UC bond debt, which was made possible through Act 60 of 2012 (a UC reform law that the PA Chamber championed) and included provisions to refinance the state’s federal UC loans through bond sales.   The 1.1 percent interest factor was put in place from 2013 through 2019 to help repay the bonds.  This refinancing of UC debt saved employers approximately $57 million in interest costs.  In addition, the fund’s solvency percentage as of July 2019 was 181 percent – the highest level since 2001.  The fund is considered solvent when its level reaches two and a half times (or 250 percent) the average annual benefit payout over the last three years.

In a press release issued by the governor’s office, PA Chamber President Gene Barr celebrated the lower rate as a way to help employers pay down some of the highest UC rates in the country and ensure that the UC fund can remain intact as a financial safety net for individuals who lose their job through no fault of their own and are actively searching for work. “The Great Recession put the state’s UC Fund in financial crisis, threatening this important program and forcing us to borrow billions from the federal government,” Barr said. “We were proud to work with a bipartisan coalition of legislators and the Corbett administration to shore up this critical safety net and refinance the federal loan, which employers were still responsible for paying off but under more favorable terms. We are pleased employers can start off the New Year with a lower UC tax rate and thank Governor Wolf for recognizing the need to drive down business costs in PA.”

As part of its member-driven 2020 legislative agenda, the PA Chamber continues to pursue reforms to the state’s UC system that will promote fairness in the law for employers, control costs and further ensure the solvency of the UC Trust Fund.