AIM – Massachusetts legislative leaders today announced an agreement that will avert a 60 percent Unemployment Insurance rate increase while guaranteeing paid leave to employees who are unable to work because they get infected with the coronavirus, are ordered to quarantine, or need to take time off to get the vaccine.
The agreement will freeze increases in the UI rate schedule for 2021 and 2022 and allow for state borrowing, secured by a temporary employer assessment, to ensure the solvency of the UI trust fund. The measure will also exclude forgiven Paycheck Protection Program (PPP) loans from gross income for small businesses organized as pass-through entities.
The accord was announced by Senate President Karen Spilka, House Speaker Ronald Mariano, Senate Ways and Means Chair Michael Rodrigues and House Ways and Means Chair Aaron Michlewicz. AIM continues to review details of the legislation.
“The Senate and House have reached agreement on a bill to help workers and employers jumpstart our nascent recovery as we begin to slowly emerge from the COVID-19 pandemic,” the legislators said in a statement.
“This agreement strikes a balance to ensure that businesses can continue to move forward while protecting those working hard to keep the economy going.”
AIM and Governor Charlie Baker have for months called for legislative action to avert a potentially catastrophic hike in UI rates at a time when many companies continue to struggle with the COVID pandemic. Lawmakers sought to address the issue before first-quarter Unemployment Insurance bills go out this month.
The Massachusetts Unemployment Insurance trust fund, primarily financed by direct and reimbursing employer contributions, is projected to be in the red by $5 billion at the end of 2022 and remain insolvent by several billion dollars at the end of 2024. These initial numbers left unchecked would trigger an increase from the current 2020 employer tax rate of Schedule E, or $539 per employee, to Schedule G, about $866 per employee, reflecting an almost 60 percent increase.
The agreement announced yesterday would freeze the employer tax rate at Schedule E for the next two years, slowing annual employer contribution growth to about $635 in 2021 and $665 in 2022.
“AIM applauds the Legislature for reaching an agreement on language that will help both employers and workers get back on their feet and working, ensuring that the economic recovery Massachusetts desperately needs can occur. AIM has supported H 55, which will prevent cost increases for employers from Unemployment Insurance, providing employers with needed stability and relief, to reopen, rehire and expand operations as the Commonwealth continues to recover,” said Brooke Thomson, Executive Vice President of Government Affairs at AIM.
“AIM also supports the PPP relief the agreement will allow for, helping our small businesses and employers who received PPP loans from suffering tax burdens as a result of loans they took to stay afloat and keep employees working. Likewise, AIM has been involved in conversations with the House and Senate around COVID leave language; and we understand and support what the Legislature is trying to accomplish by keeping sick workers out of the workforce.”
The change in tax treatment of forgiven PPP loans will benefit many of the 120,000 Massachusetts small businesses that received more than $14 billion through the federal pandemic lending program. Absent the change, state law would have imposed state tax on businesses that pass income through to their owners.
COVID-19 has put our Commonwealth at an unanticipated crossroads; but AIM is excited to see the Legislature working aggressively to steer our economic recovery in the right direction.