NFIB Works to Stop Unemployment Insurance Tax Hike

Date: December 14, 2020

Lame Duck legislation could cost Michigan small business millions

Michigan Lame duck session legislation to extend unemployment benefits without federal relief act could cost employers hundreds of millions of dollars.

Monday, December 14, 2020: In October of this year, the legislature passed and Governor Whitmer signed legislation to extend unemployment benefits from 20 weeks to 26 weeks through December 31, 2020. This extension was necessary to codify the governor’s executive orders (that were declared unconstitutional) and avoid federal unemployment insurance penalties against employers.

However, lame duck session legislation to renew this extension past the end of this year without coordination with another federal relief act would put Michigan employers on the hook for hundreds of millions of dollars in extended benefits without any federal assistance to offset this cost. Conservative estimates show adding six weeks of state benefit duration would equate to a payroll tax increase on employers of over $220 million. If Congress fails to fully fund these extended benefits, that number could double or triple.  

NFIB and other business groups are working in the lame duck session to add three key amendments to the legislation:

The first, that Michigan only triggers “on” to 26 weeks if the federal government covers 100% of the cost of extended benefits.  (Note: This is important because if Michigan moves from 20 to 26 weeks of benefits, we automatically become eligible for additional weeks of federal benefits.  If not 100% federally funded, we are responsible for 50% of the cost of these added weeks.) The second amendment is that the legislature appropriates $250 million from the “Rainy Day Fund”, or some other source, to the UI Trust Fund to cover the cost of the extra six weeks, thereby holding employers harmless. The third, that the legislation would sunset (end) on March 31 of 2021 so that the next legislature could make further changes if necessary.

The legislation would also continue to hold individual employer Unemployment Insurance accounts harmless from experience rating payroll tax increases due to COVID related employee lay-offs.

The changes to include these employer protections from rate hikes due to the benefit extensions were passed in the state senate and should see action in the house this week.

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