Special to The Tribune
MONTGOMERY – Following passage of the pandemic relief spending funds by the Alabama Legislature, Alabama Department of Labor Secretary Fitzgerald Washington announced that most Alabama employers will see a 29% tax cut in their 2022 unemployment insurance taxes.
The legislature allocated $79.5 million in American Rescue Plan Act (ARPA) funds to the Alabama Unemployment Insurance Trust Fund to replenish dollars spent during the height of the pandemic. These relief funds, along with CARES Act funds added in 2021, helped to offset the non-chargeable costs incurred during the months of March – October 2020, which in turn lowered the “shared cost*” rate that is distributed equally to all employers.
“We are thankful for the support of Governor Ivey and her administration, and to the Alabama Legislature for allocating these funds to help provide needed relief to Alabama’s employers,” said Washington. “These savings will hopefully allow employers to continue to hire employees and help businesses thrive.”
Had the legislature not acted, employers would have experienced a 3% unemployment insurance tax increase for 2022.
Additionally, because of added ARPA funds and CARES Act funds added last year, Alabama has dropped into a lower tax schedule.
The current Alabama Unemployment Tax Schedule consists of four tax rate schedules: A, B, C, and D. The original intent of the four schedules was to assist in the recovery of benefit costs so that the UI Trust Fund, from which benefits are paid, will neither become depleted nor collect excess revenue. The objective is to maintain an adequate balance so that benefits can be paid when necessary. Therefore, the balance in the trust fund determines which schedule will be in effect for the upcoming calendar year.
“We had expected to drop into a lower tax schedule in 2021, but those plans were derailed by the pandemic,” continued Washington. “The fact that we were able to correct course and drop into a lower bracket this quickly is great news.”
Unemployment Insurance taxes are paid 100% by employers on the first $8,000 of wages earned per employee.