The South Dakota Department of Labor and Regulation has proposed a significant increase in the administrative fee on wages paid by businesses for unemployment tax.
State Labor Secretary Marcia Hultman presented the plan to the South Dakota Reemployment Assistance Council, detailing a move to quadruple the fee from 0.02% to 0.08%.
The proposal, exempting new businesses, is set to be introduced in the state Legislature during the 2025 session.
The rationale behind the increase stems from concerns over the department’s unemployment insurance grant and administration fund, which is projected to face a $1.3 million deficit by fiscal year 2026 and a $3.8 million shortfall by fiscal year 2027.
This is attributed to rising expenses, including cost-of-living adjustments, technology services, and the expiration of federal stimulus grants.
In exchange for the higher administrative fee, businesses would see a $3 million reduction in unemployment tax contributions. The reemployment trust fund remains financially stable, allowing the 2023 reduced tax-rate schedule to remain in effect for another year.
Hultman and the council plan to meet again to review the draft legislation and finalize their stance on the proposal. If enacted, the measure would address funding gaps while maintaining balance in unemployment tax contributions for businesses.