Unemployment Compensation Solvency Fee

Many municipalities have experienced lay-offs because of COVID-19. The League has been working to help ensure municipalities receive fee reimbursement for claims made during the pandemic.

The Issue: Payment of the annual “solvency fee” to the PA Department of Labor and Industry and acceptance of these late payments for “good cause.”

The federal CARES Act and Pennsylvania’s Act 9 of 2020 provide the opportunity for those municipal employers of reimbursable status with the Department of Labor and Industry to receive reimbursement for unemployment compensation claims related to COVID-19. Under the CARES Act, reimbursable employers can receive 50% reimbursement for their unemployment costs. Act 9 authorizes automatic payment of 100% of costs if the employer has paid the annual solvency fee to the PA Department of Labor and Industry. This fee is not required, but if paid, is typically due by the beginning of December for the following year and is calculated by multiplying .0018 times the previous year’s gross payroll.

Under the PA Unemployment Compensation Law, the Secretary of Labor and Industry can accept late payment of the solvency fee for “good cause” which is not defined in the Law. The League has been making the argument for many weeks that the current pandemic meets the “good cause” standard. If late solvency fees are accepted by the Department, each municipality will need to run its calculations and decide if paying the fee makes financial sense. 

You can read an article explaining this issue in greater detail here.

The Governor has the power to issue an order to identify the pandemic as “good cause.” Unfortunately, he has refused to act on this important issue; therefore, a legislative solution is necessary.

The Ask:  Representative David Delloso introduced House Bill 2708 which would allow for late payment of solvency fees to the Department of Labor and Industry, and employers would have a window of 30 days to make the payment. Senator Timothy Kearney is also expected to introduce a bill in the near future.

Please contact your State House and Senate members and encourage them to support legislation authorizing payment of the late solvency fee. This is one small way the commonwealth can assist municipalities facing unforeseen costs.

Click here to access your legislator’s contact information.