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SF 607 – Unemployment Benefits, Contribution Rates (LSB1022SZ)
Staff Contact: Evan Johnson (515.281.6301) evan.johnson@legis.iowa.gov
Fiscal Note Version – New
Description
Senate File 607 modifies the definition of “taxable wages” for purposes of unemployment
insurance taxes on employers by excluding wages paid by Iowa employers to employees who
work in another state if the other state extends reciprocity to Iowa for employment purposes.
The Bill reduces the taxable wage base used to calculate unemployment insurance taxes for
employers from 66.7% to 33.3% of the annualized statewide average wage.
The Bill modifies employer contribution rates and reduces the number of benefit ratio ranks from
21 to 9 and the number of contribution rate tables from 8 to 4. The benefit ratio rank of new
nonconstruction contributory employers is changed from 12 to 4 and the benefit ratio rank of
new construction or landscaping contributory employers is changed from 21 to 9. The Bill
modifies the computation of the reserve fund ratio and changes how the effective contribution
rate table is determined.
The Bill establishes a surcharge of 10.0% of the unemployment contributions paid by an
employer in a fiscal year if the employer’s average benefit ratios for the previous three fiscal
years equal or exceed 1.25. The surcharge does not include new contributory employers that
have been in operation for fewer than three years. The Bill requires the Department of
Workforce Development to adopt administrative rules prescribing the manner in which the
surcharge will be collected.
Background
Under current law, taxable wages include the wages paid by an Iowa employer to an employee
who works in Iowa and to an employee who works in another state that extends reciprocity to
Iowa for employment purposes. In Iowa, the taxable wage credit applies the wages earned in
another state by an employee to the taxable wage base for that employee in a given year.
Taxable wages are 66.7% of the statewide average weekly wage from the previous year
multiplied by 52 and rounded to the nearest multiple of 100. This results in the current taxable
wage base of $39,500. This is the amount that an employer pays an employee that is eligible
for unemployment insurance taxation. The taxable wage base is estimated to be $19,800 under
the Bill. If the taxable wages under the State definition are lower than the taxable wages under
the federal definition ($7,000), then the federal definition is used.
An employer’s benefit ratio is computed by dividing the average of all benefits charged to an
employer during the five periods of four consecutive calendar quarters immediately preceding
the computation date by the employer’s average annual taxable payroll.
An employer’s contribution rate is a dynamic calculation made each year and is dependent upon
the calculation of the current reserve ratio, the benefit ratio rank, and the contribution rate table
in effect for the rate year. Contribution Rate Table 8 is in effect for calendar year (CY) 2025.
Fiscal Note
Fiscal Services Division 2
According to the U.S. Department of Labor, as of March 1, 2025, the balance of Iowa’s
Unemployment Compensation Trust Fund was $1.887 billion. This does not include the
Unemployment Compensation Reserve Fund. Figure 1 shows the historical revenue,
expenditure, and balance data for the Trust Fund.
Figure 1 — Unemployment Compensation Trust Fund History
(in Millions)
More information about the Unemployment Compensation Trust Fund is available in this Fiscal
Topic.
Assumptions
• The estimates in this Fiscal Note use CY 2024 data.
• Changes to the taxable wage credit, the taxable wage base, and the tax tables will take
effect in CY 2026. The creation of the surcharge will take effect in CY 2027.
• The taxable wage credit is used by 2.5% of Iowa employers.
• The full-time equivalent (FTE) positions associated with the taxable wage credit may be
reassigned to other unemployment insurance activities. There are 3.0 FTE positions at an
annual cost of $195,000 that administer the taxable wage credit and are paid from federal
funds.
• Federal funding related to unemployment insurance programs will not change during the
projection period.
• The interest rate earned on the Unemployment Compensation Trust Fund in future fiscal
years will be 2.2%.
• Contribution Rate Table 8 is currently in effect. Under the Bill, Contribution Rate Table D is
assumed to be in effect during the projection period.
• There will be no one-time federal funds deposited in the Trust Fund during the projection
period.
• Benefits charged to an employer in any given year are assumed to be less than the taxable
wages paid by the employer.
• Employment and unemployment trends will remain constant during the projection period.
• Wages will increase by 3.0% annually.
Combined Total Regular
Revenue Benefits PaidFund Balance
CY 2014 484.1$ 402.6$ 941.7$
CY 2015 403.7 417.6 938.9
CY 2016 492.5 423.5 1,011.5
CY 2017 506.6 402.6 1,106.1
CY 2018 440.7 364.7 1,181.9
CY 2019 444.5 381.8 1,254.0
CY 2020* 934.2 1,254.2 999.5
CY 2021* 688.7 404.7 1,392.9
CY 2022 450.8 253.9 1,610.8
CY 2023 444.6 260.5 1,811.3
CY 2024 474.0 316.4 1,935.8
* Includes one-time federal funds. 3
Fiscal Impact
Senate File 607 is estimated to decrease revenue to the Unemployment Compensation Trust
Fund by the amounts listed under Fiscal Impact in Figure 2. Estimates of benefits paid and the
balance of the Trust Fund are also included in Figure 2.
Figure 2 — Fiscal Impact of SF 607
(in Millions)
Sources
Iowa Workforce Development
U.S. Department of Labor
LSA calculations
/s/ Jennifer Acton
March 25, 2025
Doc ID 1524699
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov Current LawSF 607 Estimated SF 607 Regular Trust Fund
Revenue Revenue Fiscal ImpactBenefits PaidBalance
CY 2026 495.7$ 302.6$ -193.2$ 335.7$ 2,055.3$
CY 2027 512.8 283.3 -229.4 345.7 1,992.9
CY 2028 530.4 289.1 -241.2 356.1 1,925.9
CY 2029 548.5 295.0 -253.5 366.8 1,854.1
CY 2030 567.3 301.0 -266.3 377.8 1,777.4