A measure that would relieve Michigan businesses from paying the unemployment insurance “solvency tax” was passed unanimously in the House Thursday.
According to analyses, the legislation would save businesses $35 million for interest owed by the state to the federal government for the advances on the Unemployment Insurance Trust Fund. The federal stimulus package included a provision allowing Michigan to receive a waiver from the federal government on the interest it owes for taking out $1.3 billion in loans to cover unemployment benefits in the state.
House Bill 4239 waives the interest the state would charge to companies known as "negative balance employers". Negative balance employers are businesses whose former workers are drawing more unemployment benefits than the company has paid into the system.
MITA sent out a bulletin in November on the “solvency tax” issue after a number of MITA members received letters from the MI Unemployment Insurance Agency notifying them that a “solvency tax” would be added to their 2009 unemployment tax .
Employers, who have paid into the Trust Fund less than the Unemployment Insurance Agency has paid out to their former employees were likely one of over 40,000 Michigan businesses that received this letter. In that letter companies were notified of their corporate negative balance to the Trust Fund and were given the option to pay that negative balance amount or a solvency tax of approximately $67.50 per unemployed worker beginning in the 2009 tax year.
A disproportionate amount of increased unemployment cost falls on seasonal construction companies because of their heavy use of the Trust Fund.
The solvency tax is in addition to an employer’s calculated tax rate and is displayed as a separate line item on Form UIA 1771, Tax Rate Determination for Calendar Year 2009 (if you are a negative balance employer).
MITA members may not be required to pay the solvency tax amounts previously billed to their companies. Stay tuned to the MITA web site for more information.