Unemployment Insurance

Special Message to Employers: Information on Special Assessment for Interest

Like more than 30 other states, Wisconsin's unemployment insurance reserve fund had to rely on federal loans to help fund benefits to the record number of claimants during and since the recent recession. Although the federal government waived interest on its loans in 2009 and 2010, it began charging interest in 2011. Because employer unemployment taxes are restricted by the federal government to only paying benefits, Wisconsin's unemployment insurance program (UI) issued a special assessment on employers to raise the necessary funds to pay the federal loan's interest expense as prescribed by statute. The UI reserve fund paid the first interest payment of $42.3 million on September 30, 2011.

Until the federal loan is fully paid, UI will pay interest on the outstanding balance. UI currently estimates that the loan will be paid off by the end of 2014. Consequently, employers can expect an annual special assessment for interest for three more years: 2012, 2013, and 2014.

Frequently Asked Questions

Q1. What is the Special Assessment for Interest?
Due to the recent national recession, many states including Wisconsin exhausted their state funds to pay Unemployment Insurance (UI) benefits to record numbers of UI claimants. As a result, states such as Wisconsin were required to borrow from the federal government to pay all of its claims. Currently, Wisconsin is one of 29 states with outstanding federal loan balances. The federal government began charging states interest on these borrowed funds effective January 1, 2011, and the Special Assessment for Interest is the mechanism Wisconsin has in statute to raise funds to pay this interest payment.
Q2. Who is being assessed this interest?
In accordance with Wisconsin statute, the only employers who are affected are those who are subject under unemployment law as of the date the rate is established and whose taxable payrolls for the previous calendar year were greater than $25,000. The rate per the statute for reimbursable employer is set at 75% of the rate of taxable employers.
Q3. Why are reimbursable employers being assessed?
While reimbursable employers, by definition, reimburse us for all benefits paid to claimants on their behalf, they are not paying for the administration of the unemployment program, which is funded by Federal Unemployment Taxes (FUTA) paid by taxable employers only. Additionally, the program pays benefits on behalf of the reimbursable employers and is not reimbursed for 30 - 60 days, during which time, the employer has the benefit of the "float". For these reasons, reimbursable employers are assessed the interest, but at a rate, as prescribed in the statute, which is 75% of the rate assessed for taxable employers.
Q4. What is the final Special Assessment tax rate?
The estimated rate for 2012 forl taxable employers is .218% and .135% for all reimbursable employers with taxable wages exceeding $25,000. Per Wisconsin Statute the rate for reimbursable employers is 75% of the taxable employer rate. Subsequent annual updates will provide information for planning 2013 and 2014 budgets.
Q5. How will my interest bill be calculated?
The bill for 2012 will be calculated as a fixed rate multiplied by an employer’s 2011 calendar year taxable payroll. For example, a taxable employer with total taxable payroll of $500,000 in calendar year 2011, at the rate of .18% the calculation would be as follows:

$500,000 x .0018 = $900.00

• Note that in 2012, the taxable wages per an employee are capped at the wage base of $13,000.
Q6. Are other states implementing a Special Assessment for Interest?
Currently, there are 29 states with outstanding loan balances with the federal government that will need to raise money to pay interest. Failure to pay the interest by September 30, 2012, will expose the state to loss of federal grant funding to administer the UI program, as well as the loss of federal unemployment tax credits for employers, which are currently 5.4%. Unless a state is willing to use revenue from another source, other states will utilize some sort of a new charge on employers to generate funds to pay interest costs.
Q7. How long has the Fund been negative, and why have we not had to pay interest prior to this?
The Trust Fund for Wisconsin was depleted in February 2009, during what was the worst national recession since the Great Depression.  Wisconsin was one of many states that relied on federal loans from the U.S. Treasury to help pay benefits to a record number of UI claimants.  The current Reserve Fund loan balance is $1.2 billion.
Q8. When is interest due?
The American Recovery and Reinvestment Act of 2009 waived interest due from February 17, 2009 through December 31, 2010. Interest began to accrue on January 1, 2011. As previously noted, the first interest payment of $42.3 million was paid on September 30, 2011. Additional annual interest payments are due to the federal government on September 30 of each succeeding year until the loan is paid off.
Q9. When will I receive my bill and when will my payment be due?
We anticipate mailing 2012 bills in early August of 2012, with a due date early in September to make the payment to the federal government by September 30, 2012.
Q10. What if the payment is not made on the due date?
If your payment is not received by the due date specified on the Special Assessment for Interest statement, interest at a rate of 1% per month will begin to accrue on your outstanding balance.
Q11. How can I pay the Special Assessment for Interest?
The Special Assessment for Interest can be paid electronically using our online internet reporting and payment system, ACH Credit, or by check. If paying by check, no penalty will be assessed if required to pay electronically. If paying by ACH Credit, enter 110909 in the tax period end date field of the addenda record.
Q12. I have a positive Reserve Fund balance. Why am I being assessed?
The Special Assessment for Interest is a flat assessment, as required by current statute, for all employers subject to unemployment tax whose taxable payroll for the preceding calendar year was greater than $25,000. The Special Assessment for Interest is not experience rated.

An employer's reserve fund balance is used for experience rating purposes only, in the calculation of an employer's reserve percentage (the ratio of their reserve fund to their taxable payroll). With experience rating, employers with higher reserve percentages have a lower tax rate, while employers with a lower or negative reserve percentage pay a higher tax. Employers are experience rated for purposes of their unemployment insurance basic contribution taxes only.