Businesses in all industries across Massachusetts were caught off guard recently by a dramatic spike in one portion of the unemployment bill, called the solvency assessment. The dramatic changes caused the solvency portion of employers’ bills to rise from .58% in 2020 to 9.23% retro to January 1st, 2021. This increase is specific to the solvency fund and is applied to the first $15,000 that each worker earns. A hike this massive will cost Massachusetts employers dearly. As President of the Massachusetts Staffing Association (MSA), our founder Daphne Phalon, joined several other business owners, advocates and associations to jump in to escalate concerns and seek relief.
Though it was clear that finding relief for employers is a top priority for the Baker administration, the first step came Thursday afternoon when a delay in the contribution due date was issued by the Department of Unemployment Assistance (DUA). This delay is intended to give the Baker administration and state lawmakers time to explore potential relief options. Without this delay, the cash implications to many businesses across the Commonwealth could have been catastrophic.
For a backdrop, the solvency surcharge is used to fund benefits not covered by the main unemployment insurance charges that are typically tied to a company’s history or experience. In 2020, Federal law pushed COVID-19-related unemployment costs from layoffs to the solvency assessment. Conceptually, the idea was to spread the weight and cost of pandemic layoffs so employers that didn’t cut jobs last year could help those that were forced to do so. As it stands now, that unemployment debt is estimated a close to $4 billion.
Reactions to the rate increase was strong. Phalon was among many business owners and industry and trade association representatives who raised a wide spectrum of concerns including the sentiment that employers should not be required to cover the entire costs of the state’s unemployment debt, since many layoffs occurred because of government-imposed restrictions and shutdowns. Additional, arguments include that relief should come from the $1.9 trillion federal stimulus bill; that the cost could be spread out over several years; that employers have the option to defer payment to later quarters, etc.
- If you have automatic contributions set up to come from your accounts, you should be sure your contributions are not pulled and hold off payment to allow resolution efforts to continue.
- Employment and wage detail reports are still due by 3 p.m. on or before April 30, 2021
- Payments submitted after the 3 p.m. on June 1, 2021 may be considered received the next business day
- Late filings may incur a penalty and/or interest charges, as provided under Massachusetts General Laws Chapter 151A, Section 14P. Employers are encouraged to file in advance of the deadline.
- 1st Quarter 2021, Deferral Option: If you are eligible for a deferral, you must file the employment and wages detail report by April 30, 2021. The deferral payment due date will be extended to June 1, 2021. The deferral option will not be available after this date.
In summary, the problem is complicated and there is a lot to be considered. The solution is not as simple as diverting federal money to offset the state expense. The US Treasury is due to issue guidelines about how Federal money can be spent in May and lawmakers are working to explore a viable solution for all industries. For now, it is important for business owners to stay engaged and informed. More to come!
(Paraphased from Daphne Phalon’s Message to members of Massachsuetts Staffing Association 4/16/2021)