UITF Was Financially Weak from 2008 Recession
The Colorado Unemployment Insurance Trust Fund (UITF) was destabilized by the 2008 recession. The UITF owed more than $600,000,000 to the federal government in April 2011 and was still projected to owe more than $100,000,000 at the end of June 2012.
Bond Proceeds Used to Stabilize UITF
By using the bond proceeds to stabilize the UITF, the governor asserts the following up-front savings to Colorado employers:
- Saves most Colorado businesses between $20-$120 per employee in 2013-2014
- “Turns off” the solvency surcharge to businesses for calendar year 2013 for the first time since 2004
- Moves the rates for employers based on a positive fund balance by June 30
- Allows bond assessments to count toward businesses’ experience ratings
- Creates potential for future lower rates as the UITF reaches financial health more quickly
The bond issuance also provides financial health to the UITF to benefit the fund for the long term through the following methods:
- Triggers solvency measures of HB11-1288, which will help prevent federal borrowing in future economic downturns
- Decreases interest cost associated with negative balance by half (from 3% to 1.4%), and stabilizes payments to make them more predictable
- Provides the UITF fund with a greater buffer that will promote quicker growth of UITF balance to protect employers from higher rates during future economic downturns
Bond Assessments Will Affect Unemployment insurance Premiums
According to the governor, principal and interest will be repaid as follows:
Bond Principal Repayments (Billing notices will begin in November 2012):
- Annual bond repayments will be streamlined with the regular billing process to minimize confusion and avoid additional bills sent to employers.
- Statements will denote what percentage will be used for bond payment, currently estimated at about 18-25%.
Bond Interest Repayments (Billing notices will begin in September 2012):
- Interest payments will mirror the billing process in prior years for Federal interest payments associated with the UITF’s negative Federal balance.
- Similar to Federal interest payments, this will be collected through a separate assessment billed in September.
- Bond interest will be charged only to businesses that have an experience rating of less than +7.
Contact Vision Payroll for Further Information
Contact Vision Payroll for further information on the Colorado UITF.