Industries Government

Va. unemployment insurance to decrease next year

  •  | 
Print this page

Virginia employers next year will pay lower unemployment insurance (UI) taxes as the commonwealth’s economy improves.

The new tax rates, which were announced Tuesday by Gov. Terry McAuliffe, include the elimination of a tax that was added in 2010 to return Virginia’s unemployment insurance fund to solvency and the lowering of other rates.

Taken together, Virginia employers will save more than $74 million, or an average of $324 per individual employer in 2016, according to the governor’s office.

Employers will no longer be required to pay a “fund-builder tax” next year because Virginia’s unemployment trust fund has surpassed 50 percent solvency. 

The fund, which is used to pay unemployment benefits, is considered solvent if it can pay benefits, based on averages from the last 20 years, for 16.5 months with no revenue. In 2015, that would be $1.45 billion, and in 2015 the trust fund balance was about $852.2 million, or a solvency of 57 percent.

The fund-builder tax was 0.2 percent of an employee’s wages up to $8,000, meaning employers paid about $16 per employee who earned more than that each year.

The tax became effective in 2010 after the Great Recession when Virginia’s unemployment insurance trust fund became insolvent, and it was forced to borrow from the federal trust fund to pay unemployment claims.

In addition, the “pool tax” will be lowered from 0.14 percent to 0.07 percent. The pool tax, which is designed to recover benefit costs that cannot be assigned to an employer, rose after the Great Recession from 0.08 percent to 0.28 percent.

The pool tax, which also is based on an employee’s wages up to $8,000, is being lowered in 2015 from 0.14 percent to 0.07 percent. That will drop employers’ per-employee tax from about $11 to less than $6 per employee.

The state also is lowering the base rate, which is determined by an employer’s experience over the past four state fiscal years. An employer's "experience" is based on benefit charges to the fund and an employer’s taxable wages. The average base rate will decline from 1.44 percent in 2015 to 1.36 percent in 2016.




Reader Comments

comments powered by Disqus


showhide shortcuts