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By December 3, 2018Blog

Governor-elect Ned Lamont is set to begin leading Connecticut in January 2019. Among some of the challenges the new governor will be facing as he takes office is Connecticut’s insolvent state unemployment insurance trust fund.

According to documents obtained by the Associated Press, Lamont has received a transition memo from the Department of Labor warning that the state’s unemployment insurance compensation fund will not survive an economic downturn.

“The UI Trust Fund, out of which the UI Benefits are paid, is not solvent. The current system of imbalanced Unemployment Insurance tax benefit payouts is not sustainable,” reads the document, obtained by The Associated Press through a public-records request.

Unemployment insurance is a federally mandated benefit that is administered by the states. States tax wages paid by employers and pool those taxes in a state trust fund. Those funds are then dispersed to workers after they lose their jobs through no fault of their own. As one can imagine, some states manage their trust funds better than others.

There is currently $609 million in the Connecticut trust fund. However, the Department of Labor has recommended that the state have at least $1.7 billion on hand to handle an economic downturn. (Only about half of states meet the DOL’s recommended trust fund balance.)

Connecticut will now have to determine how to beef up their trust fund which is typically done through a combination of tax increases and benefit cuts. During the last recession, states whose trust funds failed where forced to borrow money from the federal government. Those loans were paid back by increased taxes passed to employers.

Additional Coverage

Nonprofits Have Other Options

The above applies to most Connecticut employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes – high or low. Regardless of tax rates, many organizations are overpaying their unemployment liability. Recent analysis of 501(c)(3) employers reveals that 86% are overpaying into their state unemployment insurance program.

You can calculate your organization’s unemployment insurance overpayment at

Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.

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