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New Plan Protects Virginia Employers From Paying Higher Unemployment Insurance Taxes

Governor Ralph Northam recently announced that the commonwealth will commit $935.6 million in federal American Rescue Plan funding to replenish the Unemployment Insurance Trust Fund and accelerate critical upgrades to the Virginia Employment Commission.

The governor’s plan will put $862 million back into Virginia’s unemployment insurance trust fund, preventing tax increases on businesses and ensuring employers are not penalized for layoffs during the covid-19 pandemic.

Virginia will also invest $73.6 million to fast-track ongoing modernization efforts at the Virginia Employment Commission, including $37.4 million to boost call center capacity, $29.8 million to upgrade technology, nearly $4.6 million to hire additional adjudication officers, and $1.8 million for personnel support.

Virginia, like other states, pays unemployment benefits from its Unemployment Insurance Trust Fund, which is financed through payroll taxes paid by employers. When higher numbers of workers are laid off and apply for unemployment insurance, taxes on businesses increase based on a formula to help replenish the trust fund. Because the taxes are based, in part, on a company’s history of laying off or reducing staff, the businesses most impacted by pandemic-related workforce reductions face the most significant increases in future unemployment insurance taxes.

“The commonwealth’s unemployment insurance system has served as a critical lifeline to thousands of out-of-work Virginian’s over the last year,“ said Secretary of Labor Megan Healy. “This continued investment will ensure the long-term visibility of the trust fund and allow Virginian businesses to put their limited resources toward hiring workers rather than paying taxes.”

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