Unemployment Insurance Update: New Loan Balances and Solvency Proposals
Under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5), both interest payments and the accrual of interest on federal loans made to states to pay unemployment compensation (UC) benefits were temporarily suspended until December 31, 2011. However, these loans from the Federal Unemployment Account (FUA) resumed accruing interest on January 1, 2011, and states must make interest payments by September 30, 2011. Employers operating in states that fail to make interest payments or pay off the outstanding balance of their loans within the designated timeframe will face an effective federal tax increase.
FFIS previously released Issue Brief 11-05 which detailed states’ outstanding loan balances as of January 18, 2011, estimates of interest due, and background on the loan repayment and penalty provisions associated with the federal-state unemployment insurance (UI) program. Despite legislative proposals and pressure from some states, Congress has not enacted legislation that would further halt the accrual of interest on loans from the FUA. This Issue Brief provides updated state loan balances and outlines the current proposals to address Unemployment Trust Fund (UTF) solvency issues.