New Jersey Gov. Phil Murphy (D) has approved a bill that will reduce the amount of unemployment insurance taxes employers owe and delay an increase in the unemployment trust fund reserve ratio for employers amid the pandemic.
Murphy announced January 4 that he signed A. 4853/S. 3011 into law as P.L. 2020, Chapter 150, an action that drew praise from lawmakers and business groups.
“A similar phase-in payroll tax measure was utilized after the financial crisis of 2007-2009. This legislation will provide predictability and certainty to employers, especially during these challenging economic times due to the pandemic,” Michael Egenton, executive vice president of government relations at the New Jersey State Chamber of Commerce, said in a statement.
“Rather than move businesses into the most expensive of six columns to replenish the unemployment insurance fund, the bill will shift them one column over instead of five this July. Additionally, this bill prevents a rate increase for employers who had to carry out layoffs through no fault of their own,” Egenton added.
Egenton said the chamber commends Murphy; Senate President Stephen Sweeney (D); Assembly Speaker Craig Coughlin (D); and bill sponsors Sen. Fred Madden (D), chair of the Senate Labor Committee, and Assembly Majority Leader Louis Greenwald (D) for their “support in making sure our employers do not experience ‘sticker shock’ as we all work towards replenishing the UI fund.”
New Jersey's UI fund balance was down by about $432.8 million as of December 17, 2020, according to a December 18 report from the Tax Foundation.
The bill, which overwhelmingly passed the Legislature, will exclude the cost of unemployment benefits to employees when calculating an employer’s reserve ratio for determining their contributions to the unemployment trust fund during the public health emergency and the state of emergency declared by the governor March 9, 2020, as a result of the COVID-19 pandemic, and any subsequent extensions.
It also allows nonprofits or government employers that elect to make UI payments in lieu of contributions to reduce their UI benefit payments by 50 percent for the duration of the public health emergency.
The bill is estimated to reduce revenues to the UI fund by at least $660 million in fiscal 2022, $450 million in fiscal 2023, and $230 million in fiscal 2024.
The state is expected to rely on federal loans to be able to pay UI benefits. According to the governor's release, the recently enacted federal stimulus package extends interest-free borrowing of federal loans through March 14.
Starting in fiscal 2025, employer contribution rates will return to their normal levels, where they will remain until the UI fund is replenished and the federal loans have been repaid, according to a synopsis of the bill.