Alaska unemployment tax rates to rise

Posted: Friday, December 03, 2010

Alaska workers will soon see more money coming out of their paychecks as both workers and employers will have to begin contributing more to fund the state's unemployment insurance program.

Alaska is unusual in that workers, not just employers, are required to pay into the Unemployment Insurance fund.

The increase will raise the unemployment insurance tax rate from the current 1.31 percent to 1.87 percent in 2011, Click Bishop, Commissioner of Labor and Industries announced this week.

Bishop said despite heavy demand for benefits during the recent recession, the 2011 tax rate will still be the fifth lowest in the last 31 years and provides two separate benefits the state.

The increase is needed to keep the UI trust fund from dropping too low, he said.

"Alaska's UI tax serves a dual purpose for Alaska's economy: Providing UI benefits that partially replace wages to workers during temporary periods of unemployment and stabilizing the economies of communities during economic downturns," Bishop said in a statement announcing the increase.

In 2011 the amount of the tax paid by workers will go up from 0.5 percent this year to 0.58 percent. The remainder will be paid by employers.

The amounts to be collected for the trust fund are established by state law. A formula that factors in the amount in the trust fund, the amount paid in wages and the amount in benefit payments determined that the increase was necessary, labor officials said.

During the past three years, the unemployment rate in Alaska rose, increasing the payout amount and cutting into the fund.

Bishop said Alaska remains in good shape compared to other states, however, with $256 million in its trust fund. In many other states the trust funds are insolvent, and those states are having to borrow from the federal government in order to continue to pay benefits.

Annual UI tax rate notices to employers are mailed in the first part of December.

• Contact reporter Pat Forgey at 523-2250 or

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