The current state of the national economy has adversely affected every state’s trust fund balance. When it becomes apparent that the trust fund does not have adequate reserves to pay unemployment benefits, the Governor may request a loan under Title XII of the Social Security Act. If a state has an outstanding loan balance on January 1st of two consecutive years and has not repaid the balance by November 10th of the second year, employers in that state are at risk of losing a portion of their FUTA tax credit. As of April 13th there are 14 states with Title XII loan balances and there are several other states that may need to borrow in the near future. Only employers in the state of MI are at risk of losing a portion of their FUTA tax credit in 2009. However there are at least 4 additional states that are at risk of losing credits in 2010 and significantly more in 2011 and beyond based on today’s outstanding loans. It will be important to stay abreast of this situation in order to budget for these potential tax increases.

Pat Powell