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In a press release dated July 27, 2021, Governor Ralph Northam announced the Commonwealth will commit $935.6 million in federal American Rescue Plan funding to help shore up the depleted Unemployment Insurance Trust Fund and to accelerate upgrades to the Virginia Employment Commission’s system.  The plan is to invest $862 million into the trust fund, which should prevent unemployment tax increases for businesses.  The COVID-19 pandemic decimated the trust fund balance, and this infusion of money will rebuild it so that employers will not face drastic rate increases, which would likely have occurred for the next several years.

The plan will also invest over $73 million to fast-track ongoing modernization efforts at the Virginia Employment Commission.  The total amount will be used in several areas such as boosting call center capacity, upgrading technology, hiring additional adjudication officers, and also personnel support.  Governor Northam is quoted in the press release as saying, “Shoring up the Commonwealth’s unemployment insurance trust fund is a smart investment that will prevent Virginia businesses from paying higher taxes and allow our economy to continue surging.”

Due to the effects of the pandemic on all states’ unemployment trust fund balances, many have borrowed from the federal government through a Title XII Loan.  The loan enables them to stay afloat and continue to pay unemployment benefits to out-of-work individuals.  However, since it is a loan, it must be repaid.  If it is not paid within the designated time frame in a given state, employers pay additional taxes when filing their annual federal returns until the loan is paid in full.  Based on information from Treasury Direct Virginia has an advance balance in the amount of $40 million with the federal government, meaning it has been approved to borrow up to that amount should it have the need.  However, this move by Governor Northam may prevent them from having to borrow.

Virginia employers should breathe a sigh of relief due to the governor’s actions.  The unemployment tax rates for 2022 should be mailed to employers by the end of 2021 if they follow when they have historically mailed the notices.  If you have questions about this communication or about any of your tax accounts, please contact your CCC Tax Analyst.


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