Colorado Works to Replenish Unemployment Trust Fund
MSEC has been assisting the Colorado Department of Labor and Employment, Colorado business leaders, and various employer groups, in an effort to draft legislation aimed at restoring solvency to the unemployment trust fund. Due to the length and depth of the last recession, Colorado’s unemployment trust is currently insolvent and $500 million dollars in debt to the federal government. If the trust fund balance remains in its current state, solvency surcharges may be assessed against Colorado employers and federal tax credits can be lost.
The trust fund had built-in adjustment criteria that were designed to keep the fund at or above its “fully funded” level of $450 million. However, the number of employees seeking unemployment benefits over the last couple years has overwhelmed the funding mechanism.
The goal of the proposed legislation is to pay off the debt owed and build an unemployment trust fund balance to withstand future recessionary periods. Based upon federal guidelines, that amount is $1.1 billion in the trust fund.
The proposed legislation would increase the wage base on which employers pay unemployment taxes from $10,000 to $11,000. Also addressed in the proposed legislation is a re-configuring of the tax rate tables. In the end, Colorado employers will be paying more to finance their unemployment tax obligations.
Staff attorney Mark Parcheta says, “The recent recession devastated the unemployment trust fund balance. The employer funding mechanism was not indexed to keep track with rising benefits over the last several years. Initial proposals were to increase the taxable wage base to $22,000. It was felt that such a dramatic increase, at a time that many Colorado employers are struggling, would stifle the job growth necessary to come out of the recession. As a result, the legislation was crafted to present an orderly process to climb out of the hole that was created.”
MSEC will keep you informed as this situation develops and will be holding member roundtables in the near future.