Employers across New York have been given short notice to pay more in unemployment insurance taxes to cover the state”™s $95-million interest payment on federal stimulus funds borrowed during two years of high unemployment.
The maximum additional amount that most employers will pay is $21.25 per employee, state Labor Department officials said in a mid-July notice to employers. Employers have until Aug. 15 to pay the interest assessment surcharge.
The surcharge amounts to one-fourth of 1 percent of an employer”™s total taxable wages in the most recently completed payroll year, Oct. 1, 2009 through Sept. 30, 2010.
The state will use that revenue to meet its Sept. 30 deadline to pay approximately $95 million in interest due on more than $3 billion that New York has borrowed from the federal Unemployment Insurance Trust Fund since 2009. The American Recovery and Reinvestment Act made the loans interest-free in 2009 and 2010 for New York and other states whose unemployment funds were drained to insolvency in the recession.
Congress, however, has not extended the interest-free loan provisions into 2011. Interest due this year on outstanding federal loans to 31 states and the Virgin Islands is expected to total $1.4 billion, according to the National Law Employment Project in Manhattan.
In New York, quarterly unemployment insurance payments from employers normally are sufficient for the state to repay the federal loans in the same calendar year and so avoid interest charges. Since the recession, though, those employer contributions have not been enough to repay the loans and avoid the interest assessment.
The temporary interest surcharge is required by state law. Labor Department officials said employers also were charged the added fee in 2003, 2004 and 2005.
State officials said they waited to levy the surcharge to see if Congress would pass any of several bills that extended the interest waiver to 2011. If Congress does authorize an extension, the state will either credit an employer”™s account or refund the money paid.
State officials on the Labor Department website warned that if New York”™s $95-million interest charge is not paid, the state unemployment insurance program could lose its federal certification. That would leave employers ineligible for a credit of up to 5.4 percent against their federal unemployment tax and cause “a very large and sudden spike in employer payroll taxes.”
State officials said the federal government also could withhold administrative funds needed to operate the state unemployment benefits program.
Employers will not be given extensions on their Aug. 15 payment deadline, the Labor Department said.
For New York employers recently notified of the tax, “I think that it”™s been a bit of a non-event,” Gregory J. Chartier, a human resources consultant in Maryknoll to small and mid-sized businesses who chairs the human resources council of The Business Council of Westchester, said in an email. “There are lots of distractions right now and, ultimately, it”™s just another New York state tax that we have to deal with. Most of my clients are expecting the unemployment system to jack up the tax rate, anyway, so this is just part of that process.”
Nonprofit employers who self-insure for the unemployment insurance program are not liable for the interest surcharge.
