Nearly 47,000 Nevada businesses will see a major reduction in what they have to pay into the Unemployment Insurance Trust Fund next year.
That break will come in December when the Employment Security Division pays off the last of the $592 million raised by selling bonds to pay off the federal loans Nevada had to take to get through the recession. Once those bonds are paid off, the overall rate Nevada businesses must pay for unemployment insurance will drop 63-hundredths of a percent.
While that doesn’t sound like much, economist Alex Capello said it will save businessmen an average of $192 per employee over the course of the year.
Nevada sold bonds to pay back the federal government because the interest rate on those bonds was just a fraction of what the U.S. Treasury would’ve charged the state.
Because of high unemployment through the recession, the state’s trust fund went from more than $700 million to negative $600 million.
The Employment Security Council on Monday recommended this year’s UI tax rate remain the same through 2018. But with elimination of the bond payment rate, the overall rate for unemployment insurance will drop from 2.63 percent of payroll to an average of 2 percent.
Council member Paul Barton recommended lowering the 2017 rates another 0.05 percent saying they can now afford it.
But member Fred Suwe said they need to stay with the current rate in 2018 to get the Unemployment Insurance Trust Fund up to the $1.3 billion state experts say it should have to survive another recession.
“The employer is still going to realize a reduction in the tax,” he said.
Employment Security Administrator Renee Olson said the other good news is with the recovery of the economy, the Employment Security Trust Fund that covers the cost of unemployment checks has rebounded. She said there’s nearly $1 billion in that fund now and, by the end of 2018, it should reach the $1.34 billion economists say the state should have on hand to survive a new recession.
That rate consists of the 1.95 percent state unemployment tax plus the 0.05 percent education assessment for a total 2 percent levy.
But employers don’t all pay that amount.
They are rated in 18 different categories according to the employee turnover they experience and pay rates ranging from 5.4 percent to just a quarter percent.
Overall, that will raise an estimated $647 million in 2018. Capello’s forecast predicts Employment Security will pay out just $293 million of that total, adding about $354 million to the Trust Fund.
Olson will formally implement the council’s recommendation for 2018 on Dec. 7.