Virginia businesses were in for a shock when the Virginia Employment Commission mailed rate notices for the 2010 tax year. Established businesses with no claims against them in recent history saw their rate more than triple, increasing from .18% to .58% of their employees' first $8,000 of income. Most employers understand that unemployment claims related to employees they have terminated without cause will increase their rates, but what's driving the change for businesses without claims? And, how long will it last?
When Virginia's pool of funds to pay unemployment benefits falls below 50% of the balance it's required to maintain by law, a "fund building charge" is assessed. That added .2% to the base rate for 2010.
Each year, to the base rate of .1%, the VEC adds a "pool charge" which is "added to compensate for unemployment benefits paid that cannot be assigned to any specific employer." Bankrupt and out-of-business employers would fit that bill. In 2009, the pool charge was .08%. In 2010, it increased to .28%.
Two factors contributed to the depletion of the unemployment compensation funds in Virginia. First was simply the prolonged recession and its attendant business failures and unemployment. Secondly, Virginia accepted Federal stimulus funds, the terms of which dictated expanded unemployment benefits. Eligible recipients are now receiving larger benefits for longer periods of time. Another dictate of accepting stimulus funds was that these enhancements become permanent. So these higher rates may stay with us for a very long time!