CLIENT ALERT: Ohio Pays Remaining Recession-Era Debt
Earlier this week, Ohio paid the remaining $271 million owed on the state’s recession-era debt to the federal government. As a result, employers will now save hundreds of millions in tax penalties in January!
The loan was initially taken to cover benefits to jobless workers. Without sufficient reserves when the recession hit in December 2007, Ohio and many other states were forced to borrow from a federal loan fund to continue paying unemployment compensation.
Ohio businesses have been paying higher federal unemployment taxes since 2012 under a mandatory repayment system. These funds have been used to pay down the loan’s principal while the state has paid interest on the loan. The debt reached $3.4 billion at one point.
Businesses will repay the state through a one-time surcharge of about $50 per employee in 2017. That’s $76 less than the $126 per employee maximum in federal tax penalties they faced if the loan had not been repaid.
We hope this information has been helpful to you. If you think this change could affect you or you have any further questions, please contact your Whalen & Company representative.