Minnesota Legislature Finally Signs off on UI Tax Relief

May 4, 2022 Last Edit: June 5, 2025

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Minnesota Legislature Finally Signs off on UI Tax Relief

After months of haggling, Minnesota lawmakers finally signed off on a deal to refill the state’s unemployment insurance (UI) system and eliminate UI payroll tax increases. The agreement was finalized late last week and addresses a lingering headache for employers caused by the spike in uninsurance claims during the pandemic. The UI deal was a top priority for NFIB Minnesota this year. Sticking small businesses with a massive UI tax bill after involuntarily shutting many of them down would have added insult to injury, and we’re grateful that state officials – including Sen. Eric Pratt (R-Prior Lake), Sen. Jeremy Miller (R-Winona), Rep. Gene Pelowski (D-Winona), Governor Walz and others – stepped up to the plate. We’re also grateful to NFIB Minnesota members who helped us spread the message and keep pressure on lawmakers. Everyone who responded to our UI Action Alerts held lawmakers’ accountable for their promises to hold businesses harmless for the massive expansion of UI during the pandemic. We owe a special thanks to NFIB Minnesota members Mike Flynn (Whitewater Travel Plaza), David Henrich (Bergerson-Caswell), and Kris Gruhot (D&G Excavating) for testifying and doing media interviews that kept this issue front and center since December. What Employers Need to Know About UI. This agreement avoids a decade or more of higher UI payroll taxes, which is how long it would have taken to pay off the massive $2.7 billion UI debt even at maximum UI tax rates. Even better, it applies retroactively to January 1 so you will receive a credit for any excess paid in the first quarter. Key elements include:

$2.73 billion to pay off debt owed to the federal government and refill UI system reserves
2022 Base Tax Rate reduced from 0.50% to 0.10%
2022 Additional Assessment changed from 14.00% to 0.00%
2022 Special Assessment (Federal Interest Loan Assessment) changed from 1.80% to 0.00%

Below are additional instructions from state officials:

You should still file and pay your first quarter taxes at the “pre-deal” rate (were due April 30, 2022).
You will receive a credit for excess first quarter payments. In 1-2 weeks, the state will recalculate your updated payment amount and apply a credit to your account. The credit can be used toward the next quarter’s UI taxes.
You can request a refund of the excess first quarter payments in lieu of the credit. It will take 2-3 months for the state to issue a refund check.

If you did not pay prior to April 30, the final agreement requires the state to waive any penalties or interest for late first quarter payments if those bills are paid on or before May 31, 2022. You can read more about how this deal impacts you here: Unemployment tax changes: How they affect you / Employers – Unemployment Insurance Minnesota (mn.gov) You can view the final agreement here: SF 2677 Conference Committee Report – 92nd Legislature (2021 – 2022) (mn.gov). If you have any questions about these changes, please feel free to contact Minnesota State Director John Reynolds at john.reynolds@nfib.org or 651-293-1283. Frontline Worker Payments: Since the beginning of the UI repayment debate, House Democrats insisted on pairing any UI repayment with more money for checks to workers in certain “frontline sectors” who stayed in public facing jobs during the pandemic. As part of the final UI deal, lawmakers and Gov. Walz agreed to $500 million for these checks to be split among an estimated 667,000 workers. “Frontline sectors” include the following: long-term care and home care, health care, emergency responders, public health/social service, courts and corrections, childcare, schools, food service, retail/fulfillment/distribution/delivery, temporary shelters/hotels, building services, public transit, ground and air transportation services, manufacturing, and vocational rehabilitation. Frontline workers who are below certain income thresholds, did not receive unemployment benefits during the pandemic, and meet other criteria will be eligible for a one-time payment of up to $750. They can apply via a state website once the application system is developed and launched. This may take several weeks or months. If employees have questions about the frontline worker payments, you can direct them here: Frontline Worker Pay (mn.gov). What Employers Need To Know About Frontline Worker Payments: NFIB MN fought hard to remove an employer notice requirement and $1,000 administrative penalty for noncompliance. We were successful in removing the administrative penalties and enforcement powers from the final agreement, but “frontline sector” employers will still need to provide employees notice of potential eligibility within 15 days of the frontline payment application system launching. The notice can be provided electronically, in writing, or by posting in the same manner as other labor standards. The Minnesota Department of Labor and Industry (DLI) is currently developing the form and will make it available at this page: Frontline Worker Pay (mn.gov). NFIB MN will continue to follow the development of the payment application system and notice form. We will update our members as the timeline becomes clearer.

Topics:

Taxes

State:

Minnesota

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