Things you might want to know

2005 Unemployment Compensation Rate Schedule Announced
By Phyllis Kennedy, director, Alabama Department of Labor

For several years business associations have been aware of the impending threat of “Schedule D,” a significantly higher unemployment compensation rate.

Schedule D has now arrived. As result of the balance in the Alabama State Unemployment Compensation Trust Fund on June 30 of this year, employers will move from “Schedule C” to “Schedule D” on January 1, 2005. The first payments under the highest rate schedule will be due at the end of the first quarter of 2005.

The ascending rate schedules were established, along with the revisions in the Unemployment Compensation law, in the 1989 Regular Session of the Alabama Legislature.

The construction of the law allowed employers to enjoy four years in Schedule A, a very low rate schedule that actually paid less into the system than was paid out in benefits. For the next three years, employers paid in Schedule B. In 2001, employers moved into Schedule C which is a “break even” rate for the system. Implementation of Schedule D is now necessary to build the Trust Fund back up.

Each year on June 30 the determination of the next year’s rate is made based on the actual balance in the Trust Fund as compared to a factor called “Desired Level of the Fund,” as established by actuaries. When the actuarial tables were set by the 1989 legislation, no one knew to anticipate the strong economy that prevailed throughout the 90s, allowing businesses to pay at the minimum rates for an extended period.

Now many businesses will experience significant increases that might be considered “pay back” for the years when Alabama’s rates were the lowest in the southeast. A typical rate increase will be approximately 16 percent, although a few businesses might experience no increase at all, and others will experience a significantly higher percentage increase, depending on each employer’s experience with layoffs.

In order to help businesses plan for payroll costs in 2005, the Alabama Department of Labor hopes to mail rate notices by mid-December, well ahead of the late January notification that has previously been required by law.

Alabama’s maximum weekly unemployment compensation benefit is $220 as of July 1, 2004, the 3 rd lowest benefit in the country.

Governor Bob Riley has appointed a Committee to study our current Unemployment Insurance law and consider whether changes to the law are in order. Members of the Committee include: Tom Barthel, Donny Bevis, Stewart Burkhalter, William Canary, Russell Davis, Rosemary Elebash, Connie Entrekin, Al Henley, Alice McKinney, Gayle Meacham, Allen Owen, Lenora Pate, Joseph Perkins, and Lamon Till.

For further information on the Alabama Unemployment Compensation System and the rate schedule, please feel free to the Unemployment Compensation Tax Section at (334) 242-8467.