WASHINGTON – Maryland employers should begin receiving notice next month of a 1.1 percent unemployment insurance surcharge beginning next year that will likely continue, at a slightly higher rate, for 2005 and 2006, according to state officials.
Tom Wendell, assistant secretary for unemployment insurance, told the state’s Unemployment Insurance Task Force last week that the surcharge is needed to bring Maryland’s unemployment insurance trust fund up to its state-mandated level of $822.5 million.
The 1.1 percent increase will be levied beginning in January, and will cost businesses an additional $93.50 per employee per year, Wendell said. He said the surcharge will likely rise to 1.2 percent for 2005 and 2006.
“Right now, the estimate for 2005 is 1.2, but it also will depend on what benefits are paid out, also, in that time period,” said Susan Bass, head of policy and planning in the Office of Unemployment Insurance.
The increase comes after an annual assessment of the trust fund found that, as of Sept. 30, it had fallen to $646.1 million, Wendell said. Under Maryland law, a surcharge on employers for the following year is triggered anytime the fund falls under $822.5 million.
“Most businesses don’t know it’s coming yet,” said Ronald Adler, the Maryland Chamber of Commerce representative on the state unemployment task force. “We knew something was going to happen, we just didn’t know how much.”
Unemployment taxes are levied on a scale that takes into account how much an employer’s laid-off workers have drawn from the fund, and the amount of taxable wages the employer pays.
While the additional $93.50 does not sound like a lot, it can add up, said Adler, who is also president of a human resources consulting firm, Laurdan Associates Inc.
“If you start saying, ‘I have 100 employees, and it’s now 100 times $100, and if someone leaves and I have to a hire a new person,’ then it’s an additional person,” that the company has to pay for, he said.
Adler, who chairs the chamber’s unemployment insurance task force, said the state and chamber task forces are looking for a balance between protecting individuals who have lost their jobs, and employers who are trying to make a living.
“We’re now in a situation where there’s structural unemployment. Jobs and employers just aren’t there anymore. And the way to get out of it is to create new jobs — not just rehire,” Adler said. “Like other taxes, (the unemployment insurance tax) reduces profits and that’s what drives job creation. So, it’s a balancing act.”
The unemployment insurance surcharge has been levied several times in the last three decades. Bass said it was in place from 1991 through 1996, for four years in the 1980s and for most of the 1970s. It has been as high as 2.2 percent.
The state was able to avoid the surcharge last year by putting $142.9 million in special federal unemployment money into the state’s trust fund, keeping the fund above the level that would have triggered the extra charge.
But since then, the state paid out $518.6 million in benefits while taking in only $260.1 million in unemployment taxes, helping to push the fund below the mandated level.