The GigReporter

New York Fully Pays Off UI Trust Fund Debt

As of the Fiscal Year 2026 enacted budget (approved in May 2025), Governor Hochul wisely sought feedback from business leaders and decided to finally repay the nearly $7 billion federal UI Trust Fund loan, restoring the fund to solvency for the first time since the pandemic (2020-21).1 “The burden of the debt since the pandemic has been carried by businesses through increased taxes and has led to unemployment payments being cut until the debt is paid off.”1 Tragically, New York was one of two states that still had COVID-related federal unemployment insurance debt after the state failed to use $25 billion in federal stimulus aid for unemployment tax relief.1 The UI Trust Fund held a surplus of about $2.5 billion in early 2020, but pandemic-era unemployment demands caused it to spiral into a $10.4 billion deficit by March 2021.2 Employers will no longer receive invoices for the Interest Assessment Surcharge (IAS) tied to the UI debt.3 Additionally, effective 2025 and beyond, those fees are lifted. By repaying the loan before November 10, 2025, businesses avoid additional FUTA (Federal Unemployment Tax Act) penalties totaling roughly $161 per employee.4

Heather Mulligan (NYS Business Council) called the move “massive relief” for employers struggling with the burden of past payments. Small business groups emphasize that this repayment encourages reinvestment and economic recovery.5 While the repayment restores solvency and benefits, it doesn’t address structural flaws in New York’s UI funding—such as regressive employer contributions and a low taxable wage base. This suggests the risk of future insolvency remains unless reform measures are implemented.5 Finally, as a backdrop to this belated UI debt payoff, New York State continues to see the largest exodus of residents and businesses from the pandemic and state government must continue to make better fiscal and business friendly policy decisions to avoid further state decline. 6 SCI and ADAPT Payroll are your trusted TPA’s for all your payment processing and back-office administrative solutions.
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