Unemployment tax rates for Oregon employers will decline significantly January 1, 2014. Employers that pay into the system will move from Schedule 8 to Schedule 6, saving the average Oregon employer about $85 per employee annually. The change will save Oregon businesses over $100 million dollars in 2014.
Tax Schedule 6 includes an average rate of 2.76% for the first $35,000 paid to each employee. The specific rate each employer will pay under the new schedule depends on how much they have used the unemployment insurance system.
Oregon law requires the Employment Department to use a statutory formula to determine employer payroll tax rates for the upcoming year. Employers had been assessed at the highest tax rate schedule for the past three years allowing the unemployment trust fund to rebuild from the deep recession. At its lowest point, the trust fund had a balance of $700 million but as of August 31, 2013, the balance stood at $1.76 billion. OED economists used that balance to make the tax rate calculations for 2014 as required by law. As of November 8th 2013, the trust fund balance is $1.88 billion.
Movement between the eight schedules of tax rates is one of the self-balancing aspects of Oregon’s Unemployment Insurance Trust Fund law. Each September a formula contained in statute determines how much should be collected during the next year to maintain a solvent fund. Each schedule has a range of tax rates based on an employer’s previous unemployment insurance experience. Employers with more unemployment insurance claims have a higher tax rate than those with fewer claims.
During the recession, 36 states depleted their trust funds to the point of needing to borrow money from the federal government to cover unemployment insurance benefit payments. Since 2008 these loans have exceeded $121 billion. Many states still have outstanding loans that were used to pay unemployment insurance benefits during the recession. Businesses in many of those states face tax surcharges or reductions in federal tax credits. Due to Oregon’s self-balancing formula, the state’s trust fund has maintained an adequate level despite record unemployment insurance payments.