A widely-circulated report from the Arkansas State Chamber of Commerce suggests Arkansas employers may have to pay a minimum of $45 more per employee into an unemployment insurance fund in 2012 to repay a growing debt to the federal government.
What’s more, Arkansas’ debt to the federal government could take up to eight years to pay off.
The problem is that Arkansas’ unemployment compensation fund is broke, with the loan balance potentially growing from the current balance of $330.8 million to as much as $449.7 million by the end of 2013.
There are many state and federal programs to help the unemployed, yet the primary program is a federal-state system — created in 1935 — that temporarily pays a portion of wages based on how much a person earned in the 52 weeks prior to losing a job. The typical program pays the benefit for up to 26 weeks, although some states and federal programs provide a 13-week extension in areas of deep economic distress.
Arkansas employers pay an average of 2.4% on the first $10,000 of taxable wages per employee (The rate can vary from 0.1% to 10% based on the employment history of the business.). Also, the FUTA (federal unemployment tax act) requires all U.S. employers to pay 6.2% of the first $7,000 in taxable wages per employee, although an “offset credit” of 5.4% reduces the obligation to 0.8% — roughly $56 per employee per year — for most employers.
According to the Arkansas State Chamber of Commerce, the outstanding loan balances are accruing interest at a rate of 4.09 percent for 2011. The federal stimulus program waived interest charges in 2010. Also, 32 states with an unemployment insurance trust fund have an outstanding debt to the federal government.
The chamber report noted: “Unless the Arkansas debt is paid off by November of 2011, which is not likely, Arkansas businesses’ will see their FUTA tax rate increase from 0.8 percent to 1.1 percent payable in 2012. This rate is applied to the federal wage base of $7,000, which means employers will pay an additional $21 per employee in 2012. Again, the FUTA tax will continue to increase by 0.3 percent each year until the federal loan is paid off, which could take six to eight years.”
Chamber information also provided the following schedule of per employee increases — for debt and interest only — after 2012: $66 in 2013; $87 in 2014; $108 in 2015; $129 in 2016; $150 in 2017; $161 in 2018 and $213 in 2019.
In addition to the increases in the FUTA tax, the chamber predicts a 0.2% increase in the state unemployment insurance tax. This increase would be applied to the Arkansas wage base that is currently $12,000, which will cost employers $24 per employee. All of the revenue from this increase is required to be spent on interest charges, the chamber noted in its report.
Latest posts by Talk Business (see all)
- Stovall To Become Executive Director of Two-year College Group - May 29, 2013
- Metropolitan National Bank Posts Q3 Loss Of $1.24 Million - October 26, 2012
- Acxiom's Earnings Jump 21% In First Quarter Despite Revenue Slide - July 30, 2012