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ESD actuary flags 2027 solvency tax as trust fund months dip below 7
Summary
An Employment Security Department actuary reported the UI trust fund's months-of-benefit projection fell to about 6.9 months for 2026 due to a higher taxable wage base, prompting a projected solvency tax in 2027; the department said updated modeling reduces variance and will be monitored closely.
An Employment Security Department presenter reported Dec. 10 that updated projections put the state's unemployment insurance trust fund at about 6.9 months of benefits for 2026, a level that would trigger a solvency tax in 2027 if conditions do not improve.
The managing actuary, who introduced themself during the meeting as Yif Sheng after being introduced as Eve Chang, told the UI Advisory Committee the department incorporated three additional months of wage and claims data and is now projecting a higher taxable wage base of about $278 billion, which lowers the months-of-benefit calculation. "Given the same trust fund balance, a higher wage base shortens the period the fund can cover during a recession," the presenter said.
The change reduced the months-of-benefit projection from prior estimates around 7.1 months to about 6.9 months for 2026. The presenter said the updated model also shows more variability in the trust fund trajectory, with a dip in 2026 before projected recovery to roughly seven months by 2029.
Why it matters: A months-of-benefit measure below seven typically triggers a solvency tax on employers; the presenter said the department expects such a tax for 2027 based on current projections. The actuary also reported the October trust fund balance at about $3.8 billion and a year-end projection near $3.7 billion.
Details and methodology: The presenter explained the months-of-benefit metric is the ratio of the trust fund balance to the taxable wage base benchmarked against recession scenarios. Employer contribution and benefit-payment projections were discussed; projected employer contributions were lower in 2026 (about $1.8 billion) while benefit payments were projected near $2.3 billion, reflecting different model assumptions.
Committee reaction and next steps: Committee members asked about model volatility and the lead time available to notify employers. Josie Cummings asked how the department can give employers more notice and expressed concern about slim margins between 6.9 and 7. The presenter said the updated model has reduced variance by roughly 40% compared with the old model and pledged continued monitoring and timely communication with stakeholders.
The committee did not take formal action beyond discussion. The department said it will continue to refine the model and provide further updates to the committee.
