Special Assessment for Connecticut Unemployment Insurance

We've received a few inquiries this month about the Special Assesment for 2011, which occurred in August. While payment was due on August 31, we at NPD want to better inform our clients and other business owners in Connecticut about what they paid into.

The Connecticut Unemployment Trust Fund became insolvent on October 13, 2009. In layman's terms this means the fund is no longer able to pay out to the state's unemployed. The reason behind the fund's insolvency is an increase in workers filing for unemployment insurance benefits. There were about 40,000 filings in 2007, which has since grown to 130,000. The trend continued this year, and unemployment insurance payouts will greatly exceed tax revenue.


Paying out unemployment benefits is a legal requirement for the state of Connecticut and to keep in compliance with the law the state is borrowing funds from the U.S. Department of Labor. Connecticut has borrowed about $810 million and it is projected that in the next 2 to 3 years that number could reach $1 billion.

This loan is structured in a different manner than most federal loans. The American Recovery and Reinvestment Act of 2009 includes a provision that waives interest on unemployment insurance loans through 2010. However, interest will need to be paid in 2011 and moving forward (as well as repayment of the outstanding balance).

State law allows for annual Special Assessments to be collected from employers to make interest payments. This law excludes entities that reimburse the state for unemployment costs to former employees dollar-for-dollar.

Employers are already aware that the assessment was sent out on August 1st with a payment date of August 31st. The total for the 2011 Special Assessment is around $30 million. The average amount due from each employer varied based on amounts borrowed and total active employees as of August 2011.

Connecticut is one of 33 states to borrow money from the federal government for unemployment insurance payments, the total amount borrowed will near $4 billion  in the next two years. Additionally, states with outstanding loans for two consecutive years must make additional payments into the Federal Unemployment Tax Act system. The FUTA rate for 2011, due January 2012, will increase from 0.8% to 1.1%. Paying into FUTA pays down the loan principal, and the increase in tax rate is approximately $21 an employee. These payments will be applied to the loan balance, reducing the loan principal.

We hope this explanation was useful to you, as it affects all businesses in the state of Connecticut. If you have any other questions regarding the Special Assessment or the FUTA tax rate increase please contact NPD Payroll and we'll gladly help out.

Further Reading:
CT Dept. of Labor "Special Assessment At-A-Glance"