Minnesota officials announced today the lowering of the unemployment tax rate that businesses pay into the trust fund that provides benefits to laid-off workers.
The rate had increased in recent years when so many workers were unemployed during the recession. The fund had gone into deficit, requiring higher rates from employers.
Officials said the new rates will reduce business payments by $346 million over the next two years.
“Given evidence of an improving economy and a healthy trust fund balance, the unemployment insurance tax cut is a smart move that will result in real savings for Minnesota businesses,” Katie Clark Sieben, commissioner of the Minnesota Department of Employment and Economic Development said in a statement. DEED manages the Minnesota Unemployment Insurance Program.
As an example of how businesses will save, officials pointed to Thor Construction Co. of Fridley, which expects to save $500 per worker each year because of the lower tax rate.
Some details from the state:
Currently, Minnesota businesses pay unemployment insurance taxes on the first $29,000 of annual wages per employee. Effective Jan. 1, the base tax rate they pay on that amount will be reduced from 0.5 percent to 0.1 percent. An additional 14 percent assessment that employers paid on their total unemployment insurance tax bill also will be eliminated starting in 2014.
The rate reduction for 2014 was contingent on the trust fund having a balance of more than $800 million as of Sept. 30, 2013. The rate reduction in 2015 is contingent on the trust fund having a balance of more than $900 million as of Sept. 30, 2014.
Projections show that the trust fund level will exceed $1.2 billion over the next two years, well above the level required for reducing the tax rate.