Governor Ned Lamont and Connecticut Labor Commissioner Danté Bartolomeo today announced that because Connecticut has repaid all 2024 Unemployment Trust Fund borrowing prior to the November 10, 2024, deadline, employers in the state will avoid an increase in federal unemployment taxes in 2025.
This is the second consecutive year that state investments into the Trust Fund spared employers federal unemployment tax increases and the fourth consecutive year that Connecticut employers do not have to pay special assessment fees, which cover interest on the loans. So far in 2024, the state borrowed and repaid $215 million for unemployment benefits payments.
“Stabilizing this fund has been a priority for our administration and has helped employers save millions of dollars in federal unemployment taxes and special assessments,” Governor Lamont said. “Over the last several years and in partnership with the legislature, we’ve worked to build predictability into the system so employers know what’s ahead and can hire and grow.”
In recent years, Governor Lamont, the Connecticut General Assembly, and the business community came together to stabilize the Trust Fund and reduce the pandemic-related financial burdens on employers. This includes the adoption of Public Act 21-200 in 2021 and Public Act 22-67 in 2022, both of which promote long-term Trust Fund solvency, create fiscal predictability for employers, and protect employers from federal tax and fee increases. Additionally, in 2022 Governor Ned Lamont and the legislature allocated $195 million in funding the state received from the American Rescue Plan Act and directed it into both the Unemployment Trust Fund and special assessments – actions that fully mitigated the financial impact of Trust Fund borrowing on employers.
“Reducing the financial burden on the business community is an important part of overall affordability – and makes it clear that Connecticut prioritizes a strong and growing economy,” Commissioner Bartolomeo said. “Governor Lamont and the legislature established laws that are now paying off for employers and the people and companies who do business with them.”
Administered by the Connecticut Department of Labor, all unemployment benefits are paid from the Unemployment Trust Fund, an account that is fully funded by employers. If the Trust Fund is insolvent, states borrow from the federal government to pay unemployment benefits. Borrowing requires employers to repay the original loan through increased taxes, as well as a special assessment on loan interest.
While Connecticut will borrow from the federal government for the Trust Fund over the next couple of years, achieving Trust Fund solvency is underway through a series of reforms proposed by Governor Lamont and unanimously enacted by the legislature in 2021 and 2022. Solvency is currently calculated at $1.6 billion in Connecticut. That figure represents the Trust Fund balance that would prevent the need for borrowing should the state sustain recessionary unemployment levels for one year and receive zero Fund revenue.
Employers pay 2024 payroll taxes beginning in January 2025.
