Senate File 607 - Introduced SENATE FILE 607 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SF 504) (SUCCESSOR TO SSB 1173) A BILL FOR An Act relating to unemployment insurance taxes on employers. 1 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 2 TLSB 1022SZ (1) 91 je/js
S.F. 607 Section 1. Section 96.1A, subsection 36, Code 2025, is 1 amended to read as follows: 2 36. Taxable wages means an amount of wages upon which 3 an employer is required to contribute based upon wages which 4 that have been paid in this state during a calendar year to 5 an individual by an employer or the employers predecessor , 6 in this state or another state which extends a like comity to 7 this state, with respect to employment , upon which the employer 8 is required to contribute, which equals the greater of the 9 following: 10 a. Sixty-six and two-thirds Thirty-three and one-third 11 percent of the statewide average weekly wage which that was 12 used during the previous calendar year to determine maximum 13 weekly benefit amounts, multiplied by fifty-two and rounded to 14 the next highest multiple of one hundred dollars. 15 b. That portion of wages subject to a tax under a federal 16 law imposing a tax against which credit may be taken for 17 contributions required to be paid into a state unemployment 18 compensation fund. 19 Sec. 2. Section 96.7, subsection 2, paragraph c, 20 subparagraphs (1) and (2), Code 2025, are amended to read as 21 follows: 22 (1) A nonconstruction contributory employer newly subject 23 to this chapter shall pay contributions at the rate specified 24 in the twelfth fourth benefit ratio rank but not less than 25 one percent until the end of the calendar year in which the 26 employers account has been chargeable with benefits for 27 twelve consecutive calendar quarters immediately preceding the 28 computation date. 29 (2) A construction or landscaping contributory employer, 30 as defined under rules adopted by the department pursuant to 31 chapter 17A , which that is newly subject to this chapter shall 32 pay contributions at the rate specified in the twenty-first 33 ninth benefit ratio rank until the end of the calendar year in 34 which the employers account has been chargeable with benefits 35 -1- LSB 1022SZ (1) 91 je/js 1/ 7
S.F. 607 for twelve consecutive calendar quarters. 1 Sec. 3. Section 96.7, subsection 2, paragraph d, 2 subparagraph (1), Code 2025, is amended to read as follows: 3 (1) The current reserve fund ratio is computed by dividing 4 the total funds available for payment of benefits, on the 5 computation date or on August 15 following the computation 6 date if the total funds available for payment of benefits is a 7 higher amount on August 15, by the total wages paid in covered 8 employment excluding reimbursable employment wages during the 9 first four calendar quarters of the five calendar quarters 10 year immediately preceding the computation date. However, 11 in computing the current reserve fund ratio, beginning July 12 1, 2007, one hundred fifty million dollars shall be added to 13 the total funds available for payment of benefits on each 14 computation date. 15 Sec. 4. Section 96.7, subsection 2, paragraph d, 16 subparagraph (2), subparagraph division (a), Code 2025, is 17 amended by striking the subparagraph division. 18 Sec. 5. Section 96.7, subsection 2, paragraph d, 19 subparagraph (2), subparagraph division (b), Code 2025, is 20 amended by striking the subparagraph division and inserting in 21 lieu thereof the following: 22 (b) If the current reserve fund ratio: 23 Equals or But is The contribution rate 24 exceeds less than table in effect shall be 25 _______________________________________________________________ 26 0.50 A 27 0.50 0.90 B 28 0.90 1.30 C 29 1.30 D 30 Sec. 6. Section 96.7, subsection 2, paragraph d, 31 subparagraph (2), subparagraph division (d), Code 2025, is 32 amended by striking the subparagraph division and inserting in 33 lieu thereof the following: 34 (d) Each employer qualified for an experience rating 35 -2- LSB 1022SZ (1) 91 je/js 2/ 7
S.F. 607 shall be assigned a contribution rate for each rate year 1 that corresponds to the employers benefit ratio rank in the 2 contribution rate table effective for the rate year from the 3 following contribution rate tables. Each employers benefit 4 ratio rank shall be computed by listing all the employers by 5 increasing benefit ratios, from the lowest benefit ratio to the 6 highest benefit ratio and grouping the employers so listed into 7 nine separate ranks containing as nearly as possible fourteen 8 and twenty-nine hundredths percent of the total taxable wages, 9 excluding reimbursable employment wages, in the first six 10 ranks, and four and seventy-six hundredths percent of the total 11 taxable wages, excluding reimbursable employment wages, in 12 ranks seven, eight, and nine, paid in covered employment during 13 the four completed calendar quarters immediately preceding the 14 computation date. If an employers taxable wages qualify the 15 employer for two separate benefit ratio ranks, the employer 16 shall be afforded the benefit ratio rank assigned the lower 17 contribution rate. Employers with identical benefit ratios 18 shall be assigned to the same benefit ratio rank. 19 Approximate Contribution Rate Tables 20 Benefit Cumulative 21 Ratio Taxable 22 Rank Payroll Limit A B C D 23 __________________________________________________________ 24 1 14.29% 0.00 0.00 0.00 0.00 25 2 28.58% 0.40 0.30 0.10 0.10 26 3 42.87% 1.20 0.80 0.40 0.20 27 4 57.16% 2.10 1.40 0.60 0.30 28 5 71.45% 3.60 2.40 1.10 0.50 29 6 85.74% 5.40 4.10 1.90 0.90 30 7 90.50% 5.40 5.40 4.20 2.00 31 8 95.26% 5.40 5.40 5.40 2.80 32 9 100.00% 5.40 5.40 5.40 5.40 33 Sec. 7. Section 96.7, Code 2025, is amended by adding the 34 following new subsection: 35 -3- LSB 1022SZ (1) 91 je/js 3/ 7
S.F. 607 NEW SUBSECTION . 13. Surcharge for certain average benefit 1 ratios. 2 a. The department shall collect a surcharge from an employer 3 in any fiscal year in which the average of the benefit ratios 4 of the employer for the previous three fiscal years equals or 5 exceeds 1.250000. The surcharge shall be equal to ten percent 6 of the contributions paid by the employer for the fiscal year. 7 b. This subsection applies only to contributory employers 8 and only if such employers are no longer subject to subsection 9 2, paragraph c , subparagraph (1) or (2). 10 c. The department shall adopt rules pursuant to chapter 11 17A prescribing the manner in which the surcharge will be 12 collected. Interest shall accrue on all unpaid surcharges 13 under this subsection at the same rate as on regular 14 contributions and shall be collectible in the same manner. 15 The surcharge shall not affect the computation of regular 16 contributions under this chapter. All contributions collected 17 from the surcharge shall be deposited in the unemployment 18 compensation fund. 19 Sec. 8. EMPLOYER SAVINGS. Any savings an employer receives 20 as a result of this Act should be used for at least one of the 21 following purposes: 22 1. To pay for employee salaries or benefits. 23 2. To use as an alternative to unemployment benefits during 24 periods of seasonal unemployment. 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanations substance by the members of the general assembly. 28 This bill relates to unemployment insurance taxes on 29 employers. 30 The bill modifies the definition of taxable wages by 31 eliminating the wages paid to an employee from another state 32 from the calculation of wages upon which an employer is 33 required to contribute to the unemployment compensation fund 34 (fund) when the other state extends a like comity (reciprocity) 35 -4- LSB 1022SZ (1) 91 je/js 4/ 7
S.F. 607 to Iowa for employment purposes. 1 Under current law, the calculation of taxable wages upon 2 which an employer is required to contribute to the fund is 3 the greater amount of the two amounts calculated pursuant to 4 paragraphs a and b under Code section 96.1A(36). The bill 5 changes the calculation of one these amounts under paragraph 6 a by reducing the percentage of statewide average weekly wage 7 used in the calculation from 66.66 percent to 33.33 percent 8 of the statewide average weekly wage used during the previous 9 calendar year, which is then multiplied by 52 and rounded to 10 the nearest $100 to determine maximum weekly benefit amounts. 11 The amount in paragraph a as calculated under the bill 12 would be the amount used to calculate taxable wages upon which 13 an employer is required to contribute to the fund if that 14 amount exceeds the amount in paragraph b under Code section 15 96.1A(36). 16 The calculation of the unemployment contribution rate each 17 year is a dynamic calculation dependent upon the calculation 18 of the current reserve ratio, the benefit ratio rank, and 19 the contribution rate table in effect for the rate year. 20 The bill changes the current reserve ratio calculation, the 21 number of benefit ratio ranks, the contribution rates, and the 22 contribution rate table. 23 The current reserve ratio (calculation of available benefit 24 amount in fund) determines the contribution rate table in 25 effect for the rate year following the computation date. The 26 bill changes the computation of the current reserve fund 27 ratio in Code section 96.7(2)(d)(1) by basing the calculation 28 of the ratio on the preceding year rather than the previous 29 five calendar quarters, and strikes the requirement that $150 30 million be added on the reserve ratio computation date to the 31 total funds available for benefits. The bill also strikes the 32 computation of the highest cost-benefit ratio and removes the 33 ratio from the computation of the current reserve ratio. 34 The bill modifies the contribution rate table by reducing 35 -5- LSB 1022SZ (1) 91 je/js 5/ 7
S.F. 607 the number of possible rate tables that could be in effect 1 for the rate year from eight contribution rate tables to four 2 contribution rate tables. Under the bill and current law, only 3 one contribution rate table may be in effect per rate year. In 4 reducing the number of possible contribution rate tables from 5 eight to four, the bill also changes the numbered contribution 6 rate designations to lettered contribution rate designations. 7 Under current law, there are 21 benefit ratio ranks in the 8 contribution rate tables. The benefit ratio is a calculation 9 based upon the average number of unemployment benefits charged 10 to an employer over previous calendar quarters. The higher the 11 benefits charged to an employer, the higher the benefit ratio 12 rank the employer receives. The bill reduces the number of 13 benefit ratio ranks from 21 to 9. 14 Under current law, each of the ratio ranks constitutes 4.76 15 percent of total taxable wages. The bill groups the benefit 16 ratio ranks differently by separating each of the first six 17 benefit ratio ranks by 14.29 percent of total taxable wages, 18 and separates the last three benefit ratio ranks by 4.76 19 percent of total taxable wages. 20 Under current law, the highest contribution rate that 21 corresponds with the highest benefit ratio rank is 9.0 percent. 22 Under the bill, the highest contribution rate that corresponds 23 with the highest benefit ratio rank is 5.40 percent. 24 As a result of the bill, each employer will be assigned one 25 of the nine new benefit ratio ranks that corresponds with one 26 of the four new lettered contribution rate designations in 27 effect for the rate year to determine the contribution rate for 28 the year. 29 The bill requires the department of workforce development 30 to collect from an employer a surcharge for deposit in the 31 unemployment compensation fund in any fiscal year in which the 32 average of the benefit ratios of the employer for the previous 33 three fiscal years equals or exceeds 1.25. The surcharge 34 shall be equal to 10 percent of the contributions paid by the 35 -6- LSB 1022SZ (1) 91 je/js 6/ 7
S.F. 607 employer for the fiscal year. The surcharge only applies to 1 contributory employers and only to such employers who are no 2 longer assigned to benefit ratio ranks based on being newly 3 subject to Code chapter 96. 4 The bill provides that any savings an employer receives 5 as a result of the bill should be used for at least one of 6 the purposes specified in the bill. The specified purposes 7 are to pay for employee salaries or benefits or to use as an 8 alternative to unemployment benefits during periods of seasonal 9 unemployment. 10 -7- LSB 1022SZ (1) 91 je/js 7/ 7