Governor Ivey Announces $300 Million in CARES Act Funds to be Allocated to the Unemployment Insurance Trust Fund to Prevent Business Closures and Layoffs

Governor Ivey Announces $300 Million in CARES Act Funds to be Allocated to the Unemployment Insurance Trust Fund to Prevent Business Closures and Layoffs

MONTGOMERY – Governor Kay Ivey on Thursday announced that Alabama will be re-allocating $300 million in CARES Act funds to Alabama’s Unemployment Insurance Trust Fund. The funds will be used to offset “shared costs,” which are costs that are equally distributed to all tax-paying employers and can significantly increase employers’ unemployment insurance tax rates.

“Since the $1.9 billion in CARES Act funds were allocated to Alabama, I have worked to get those funds into the hands of those Alabamians who need it,” Governor Ivey said. “My Administration anticipated shifting in the allocation of this money, and we will continue evaluating our options as we move forward. As we are nearing a place where we must devote these funds to ensure that we protect our businesses, especially our small businesses, we acted on this so as to not create a burden for our employers that could result in business closures and layoffs of hard-working Alabamians.”

“I agree with Governor Ivey that this is a necessary allocation of CARES Act funds in order to mitigate the impact of increased taxes on Alabama’s businesses,” said Alabama Department of Labor Secretary Fitzgerald Washington. “Without this infusion, employers could be facing an unemployment insurance tax increase of more than 500%, which could very well force many businesses to close their doors forever, resulting in even more job losses in Alabama.”

Based on preliminary calculations, without the transfer of the money, unemployment insurance tax rates for employers would increase by 508%, representing a rise in the “shared costs” tax rate from 0.65% to 3.95%. By adding the $300 million, this increase will be reduced to 200%, representing a new tax rate of 1.95%.

“Small businesses are the lifeblood of our state,” Business Council of Alabama President Katie Boyd Britt said. “The reallocation of these critical funds is vital in keeping unemployment taxes low, allowing Alabama businesses every opportunity to remain open as they return to business as usual. I commend Governor Ivey for looking out for our state’s small businesses and for taking this important step to ensure our employers are in place to overcome this pandemic and be successful down the road.”

Additionally, beginning October 1, 2020, the Alabama Department of Labor will reinstate  temporarily waived employer costs associated with COVID-19 related claims.

“Alabama, like nearly every other state in the nation, waived employer costs associated with COVID-19 related claims at the beginning of the pandemic,” said Washington. “This was a needed adjustment in order to ease the burden on employers facing unexpected mass layoffs and industry shutdowns. Now, as employment is rising, and nearly all businesses are open, we will no longer waive those costs.”

The waiting week, which refers to the holding of the first compensable week of unemployment benefits, and the job search requirement, will continue to be waived through the end of the year.

Table for CARES Act Funding UI Trust Fund