Record unemployment levels in the recent recession will result in a increased unemployment insurance compensation contribution rate for employers beginning Jan. 1.

Iowa Workforce Development announced the move on Thursday, Sept. 2, saying it was necessary to keep the Unemployment Insurance Trust Fund, which pays unemployment claims, at adequate levels.

The recession and record unemployment claims over the last two and a half years were primary factors in the decision, the agency said.

Unemployment insurance contributions provide for the benefits paid to workers who lose their job through no fault of their own.

All unemployment contributions are deposited into the Trust Fund to pay future benefits. The Trust Fund has a balance of $507 million; however 2010 is still expected to pay out the second largest amount of benefits in history. The payments do not include the extended benefits paid for by the federal government.

The increase wil generate $88 million more, which is needed to cover extra stress and demand on trust fund and to maintain required surplus.

Employers will get their specific rate increase in November and will begin paying higher rate in when first quarter payments are due in April or May.

Iowa Workforce Development also raised rates in 2010, generating a little more than $700 million overall. The new 2011 rate will generate $616 million.

“Iowa Workforce Development is committed to maintaining the solvency of the Trust Fund while minimizing the effects felt by Iowa employers,” Iowa Workforce Development Director Elisabeth Buck said in prepared remarks.

Unemployment compensation trust funds in 35 states have gone bankrupt during the recession, causing massive borrowing from the federal government to cover benefits, according to Iowa Workforce Development. As a result, all of the businesses in these states will pay significantly higher federal unemployment taxes for years to come.

Iowa has traditionally had some of the lowest unemployment insurance rates of any state, the agency said.

In the early 1980s, the trust fund ran a deficit of $166 million as payments to workers exceeded contributions paid by employers. Iowa borrowed from the federal government to make up the difference.

Since that time, business and labor have worked with Iowa Workforce Development to ensure that the Trust Fund remains solvent, avoiding the need to borrow money.