Going into the COVID-19 pandemic, Michigan’s 100 percent employer-financed Unemployment Trust Fund (Trust Fund) had a healthy balance of over $4.66 billion. But with over a quarter of Michigan’s workers now drawing unemployment insurance (UI) benefits, how long before the Trust Fund runs dry?
The State’s Department of Licensing and Economic Opportunity said in a briefing Tuesday this largely depends on “how many more people file and how long will the duration of these layoffs continue to be”. Their “middle ground” estimate is that the state will expend half of the $4.66 billion balance by the end of July.
Others, though, are looking at worst-case scenarios. The Upjohn Institute, based in Kalamazoo, has started to do some initial forecasting and have suggested that, after using reserves and current employer contributions to the Trust Fund, the UI debt from the pandemic could approach $15 billion. However, they too recognize there is a high degree of uncertainty over the duration of the work stoppage or re-stoppage so the actual value could differ significantly from this estimate. Further details regarding their work is covered in this article.
The Michigan Chamber will continue to closely monitor this situation, as the amount of claims filed and the duration of those claims could significantly impact employer tax rates in the long-term. This is a key area of concern.
Finally, we are continuing to work with the Whitmer Administration to extend the Unemployment Executive Order (2020-10) specifying the non-charging of UI benefits filed due to COVID-19 to employer accounts. The net impact of the Order is that, for claims filed between March 15, 2020 and April 25, 2020, an employer or employing unit will not be charged for unemployment benefits paid to employees if they are COVID-19 related. Instead, these claims are charged to the Nonchargeable Benefit Account (NBA). While the state portion of UI claims due to COVID-19 are still employer-financed, they are socialized amongst all employers instead of being charged to employers’ individual accounts, thus an employer’s tax rate will not be impacted by COVID-19 claims.
Without an extension of the Order, or legislative action, the non-charging will end on April 25. The Michigan Chamber is actively working with the Administration and the Legislature to get the Order extended.
Please contact Wendy Block with any questions at wblock@michamber.com.