KY EMPLOYERS COULD FACE MAJOR UNEMPLOYMENT INSURANCE TAX INCREASES

Without significant government intervention, Kentucky employers could soon face major increases to their unemployment insurance tax obligations. Employers in the Greater Louisville region should plan ahead and join GLI in advocating to elected officials to take action on this issue.  

Due to the massive unemployment levels brought on by the COVID-19 pandemic and stay-at-home orders, Kentucky’s unemployment trust fund – the state’s source of funds to pay for unemployment benefits – has bottomed out. The state has already requested loans to continue paying benefits to claimants. 

To return the trust fund to good health, state law will effectively require an increase to the state unemployment insurance (UI) taxes that employers pay for their employees in the Commonwealth. In Kentucky, numerous factors impact employer UI rates, including how long the business has been around and their experience with having to layoff employees. One of the most important factors, however, is the health of the state’s UI trust fund. Since 2019, employers have paid under what’s called Schedule A, the best rate for employers and reflective of the trust fund’s health. Kentucky employers had worked to get to that point, paying rates on Schedule E since the Great Recession in 2009, when the trust fund last hit zero. Schedule E denotes the highest rate schedule. 

• For more on UI rates in Kentucky and how they are calculated, see the Kentucky Career Centers’ UI Employer Guide

With the trust fund at zero once again, employers are facing a return to Schedule E in calendar year 2021 – which means a significant jump in anticipated UI rates for most employers in the state. This rate increase will come at a time of great uncertainty, as the trajectory of both the virus and economic recovery have proven difficult to predict. 

GLI has worked aggressively since the onset of the pandemic to help employers and their employees navigate the ins-and-outs of unemployment insurance and will continue to advocate for businesses through new challenges. We have also long advocated for reforms to Kentucky’s unemployment insurance tax structure, which the Tax Foundation has ranked as one of the worst in the nation. 

Now, we are calling on businesses to join us in reaching out to state and federal elected officials from our region to urge them to prioritize this issue. Click here to utilize GLI’s Action Center to send a message to your representatives in Frankfort and Washington. 

In addition, we want to hear your stories about how a UI tax increase would affect your business. Email us your story with the subject line, “UI Tax Increase.”