Need to know: the current situation with Colorado’s Unemployment Insurance Trust Fund
The following is important for every employer, no matter size or industry, and also impacts nonprofits and local government entities.
Colorado’s Unemployment Insurance Trust Fund – the pool of money the state uses to pay out unemployment benefits – was depleted in 2020. Colorado took out a federal loan to help cover unemployment costs.
- Colorado owes just over $1 billion as of Jan. 11, 2022.
- The Governor’s proposed 2023 state budget includes a $600 million allocation to the fund from the state’s general budget – specifically federal aid dollars that won’t take away from other programs – to help repay the loan and offset rising premiums to employers.
- In addition, state lawmakers have proposed a bill that would pay off the debt entirely.
- The Common Sense Institute, a nonpartisan think tank, recently released a report estimating the impacts of what will / will not happen based on if the state moves forward with the $600 million allocation to the fund.
Why and how it impacts your business:
- If the loan isn’t repaid by Nov. 10, 2022, the state will begin accruing 2.3% annual interest, which all Colorado employers will have to finance through incrementally higher federal unemployment insurance premiums over the next five years. The CSI report shares a snapshot of the potential premium increases to your business.
- In Colorado, employers pay payroll taxes to the Unemployment Insurance Trust Fund based on a rate schedule in state law. Each employer’s base premium rate is determined by two factors:
- Your former employees’ utilization of unemployment: higher usage = higher rates.
- The solvency of the fund: when the state’s balance is low, the state charges higher rates to build up funds. When the fund is depleted, like it currently is, the state also adds a solvency surcharge.
- Every employer will have to pay increased payroll tax to repay the loan if the state does not act, including nonprofits and local government entities.
We’re advocating for you – and we’ll soon ask for your help
- Colorado’s legislative members will take up this issue during the current legislative session. They can approve, amend, or deny the allocation, or propose a different solution altogether, such as the bill to pay it off entirely.
- We support state leaders in working to identify a solution, including the proposed measure to repay it entirely, as well as the Governor’s proposed allocation to lower the burden. We will advocate for solutions on your behalf during this legislative session.
- We encourage you to keep an eye out for action alerts and updates on this issue in the coming weeks.