Alabama allocates American Rescue Plan Act funds to replenish unemployment trust fund

The Alabama Legislature passed a plan for spending American Rescue Plan Act (ARPA) funds on Jan. 27, 2022, directing $79.5 million of the state’s $2.1 billion ARPA allocation to replenish the state’s unemployment trust fund. Following the bill’s passage, Alabama Department of Labor Secretary Fitzgerald Washington announced the state dropped to a lower tax schedule and estimated employers’ state unemployment insurance tax burden would decrease 29%.

Alabama’s unemployment taxes vary depending on the solvency of the state unemployment trust fund. Due to the increase in unemployment claims during the COVID-19 pandemic, the fund was depleted. Without the $79.5 million allocation, unemployment taxes would have increased by about 3% in 2022.

Employers in Alabama have to pay state unemployment insurance taxes on the first $8,000 every employee earns each year.

Unemployment insurance refers to a joint federal and state program that provides temporary monetary benefits to eligible laid-off workers who are actively seeking new employment. Qualifying individuals receive unemployment compensation as a percentage of their lost wages in the form of weekly cash benefits while they search for new employment.

The federal government oversees the general administration of state unemployment insurance programs. The states control the specific features of their unemployment insurance programs, such as eligibility requirements and length of benefits.

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