Sen. John R. Gordner (R- Montour County) recently applauded the elimination of the interest factor that employers pay toward the state’s unemployment compensation (UC) tax rate.
The state authorized a state bond issuance nearly a decade ago to pay off more than $3 billion in federal loans that were used to cover unemployment benefits during the recession.
Businesses were assessed a 1.1 percent UC tax rate interest in addition to their required payments to pay off the bonds.
The bonds were paid off Jan.1, and the interest rate eliminated. This will save Pennsylvania businesses approximately $552 million this year, Gordner said.
“I introduced legislation in late 2011 to try to implement a long-term solution to the solvency of the UC system in Pennsylvania,” Gordner said. “The end result was the bipartisan passage of Act 60 of 2012, which eliminated our debt to the federal Unemployment Trust Fund, saving millions in interest payments for businesses, and provided important systematic changes that help to ensure the continued financial health of the system.”
The state’s UC Trust Fund reached 181 percent solvency in July 2019.
Businesses were able to save approximately $57 million by paying off federal loans because the bond rate was lower than the federal interest rate.