Senate Study Bill 1189 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WORKFORCE BILL BY CHAIRPERSON DICKEY) 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 2580XC (5) 91 je/js
S.F. _____ 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 For employers in the first 11 through eighth benefit ratio ranks, seventeen percent of the 12 statewide average weekly wage which that was used during the 13 previous calendar year to determine maximum weekly benefit 14 amounts, multiplied by fifty-two and rounded to the next 15 highest multiple of one hundred dollars. 16 b. For employers in the ninth benefit ratio rank, 17 fifty-eight percent of the statewide average weekly wage that 18 was used during the previous calendar year to determine maximum 19 weekly benefit amounts, multiplied by fifty-two and rounded to 20 the next highest multiple of one hundred dollars. 21 b. c. That portion of wages subject to a tax under a 22 federal law imposing a tax against which credit may be taken 23 for contributions required to be paid into a state unemployment 24 compensation fund. 25 Sec. 2. Section 96.7, subsection 2, paragraph c, 26 subparagraphs (1) and (2), Code 2025, are amended to read as 27 follows: 28 (1) A nonconstruction contributory employer newly subject 29 to this chapter shall pay contributions at the rate specified 30 in the twelfth fourth benefit ratio rank but not less than 31 one percent until the end of the calendar year in which the 32 employers account has been chargeable with benefits for 33 twelve consecutive calendar quarters immediately preceding the 34 computation date. 35 -1- LSB 2580XC (5) 91 je/js 1/ 6
S.F. _____ (2) A construction or landscaping contributory employer, 1 as defined under rules adopted by the department pursuant to 2 chapter 17A , which that is newly subject to this chapter shall 3 pay contributions at the rate specified in the twenty-first 4 ninth benefit ratio rank until the end of the calendar year in 5 which the employers account has been chargeable with benefits 6 for twelve consecutive calendar quarters. 7 Sec. 3. Section 96.7, subsection 2, paragraph d, 8 subparagraph (1), Code 2025, is amended to read as follows: 9 (1) The current reserve fund ratio is computed by dividing 10 the total funds available for payment of benefits, on the 11 computation date or on August 15 following the computation 12 date if the total funds available for payment of benefits is a 13 higher amount on August 15, by the total wages paid in covered 14 employment excluding reimbursable employment wages during the 15 first four calendar quarters of the five calendar quarters 16 year immediately preceding the computation date. However, 17 in computing the current reserve fund ratio, beginning July 18 1, 2007, one hundred fifty million dollars shall be added to 19 the total funds available for payment of benefits on each 20 computation date. 21 Sec. 4. Section 96.7, subsection 2, paragraph d, 22 subparagraph (2), subparagraph division (a), Code 2025, is 23 amended by striking the subparagraph division. 24 Sec. 5. Section 96.7, subsection 2, paragraph d, 25 subparagraph (2), subparagraph division (b), Code 2025, is 26 amended by striking the subparagraph division and inserting in 27 lieu thereof the following: 28 (b) If the current reserve fund ratio: 29 Equals or But is The contribution rate 30 exceeds less than table in effect shall be 31 _______________________________________________________________ 32 0.50 A 33 0.50 0.90 B 34 0.90 1.30 C 35 -2- LSB 2580XC (5) 91 je/js 2/ 6
S.F. _____ 1.30 D 1 Sec. 6. Section 96.7, subsection 2, paragraph d, 2 subparagraph (2), subparagraph division (d), Code 2025, is 3 amended by striking the subparagraph division and inserting in 4 lieu thereof the following: 5 (d) Each employer qualified for an experience rating 6 shall be assigned a contribution rate for each rate year 7 that corresponds to the employers benefit ratio rank in the 8 contribution rate table effective for the rate year from the 9 following contribution rate tables. Each employers benefit 10 ratio rank shall be computed by listing all the employers by 11 increasing benefit ratios, from the lowest benefit ratio to the 12 highest benefit ratio and grouping the employers so listed into 13 nine separate ranks containing as nearly as possible fourteen 14 and twenty-nine hundredths percent of the total taxable wages, 15 excluding reimbursable employment wages, in the first six 16 ranks, and four and seventy-six hundredths percent of the total 17 taxable wages, excluding reimbursable employment wages, in 18 ranks seven, eight, and nine, paid in covered employment during 19 the four completed calendar quarters immediately preceding the 20 computation date. If an employers taxable wages qualify the 21 employer for two separate benefit ratio ranks, the employer 22 shall be afforded the benefit ratio rank assigned the lower 23 contribution rate. Employers with identical benefit ratios 24 shall be assigned to the same benefit ratio rank. 25 Approximate Contribution Rate Tables 26 Benefit Cumulative 27 Ratio Taxable 28 Rank Payroll Limit A B C D 29 __________________________________________________________ 30 1 14.29% 0.00 0.00 0.00 0.00 31 2 28.58% 0.40 0.30 0.10 0.10 32 3 42.87% 1.20 0.80 0.40 0.20 33 4 57.16% 2.10 1.40 0.60 0.30 34 5 71.45% 3.60 2.40 1.10 0.50 35 -3- LSB 2580XC (5) 91 je/js 3/ 6
S.F. _____ 6 85.74% 5.40 4.10 1.90 0.90 1 7 90.50% 5.40 5.40 4.20 2.00 2 8 95.26% 5.40 5.40 5.40 2.80 3 9 100.00% 7.00 7.00 7.00 7.00 4 Sec. 7. EMPLOYER SAVINGS. Any savings an employer receives 5 as a result of this Act should be used for at least one of the 6 following purposes: 7 1. To pay for employee salaries or benefits. 8 2. To use as an alternative to unemployment benefits during 9 periods of seasonal unemployment. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanations substance by the members of the general assembly. 13 This bill relates to unemployment insurance taxes on 14 employers. 15 The calculation of the unemployment contribution rate each 16 year is a dynamic calculation dependent upon the calculation 17 of the current reserve ratio, the benefit ratio rank, and 18 the contribution rate table in effect for the rate year. 19 The bill changes the current reserve ratio calculation, the 20 number of benefit ratio ranks, the contribution rates, and the 21 contribution rate table. 22 The current reserve ratio (calculation of available benefit 23 amount in fund) determines the contribution rate table in 24 effect for the rate year following the computation date. The 25 bill changes the computation of the current reserve fund 26 ratio in Code section 96.7(2)(d)(1) by basing the calculation 27 of the ratio on the preceding year rather than the previous 28 five calendar quarters, and strikes the requirement that $150 29 million be added on the reserve ratio computation date to the 30 total funds available for benefits. The bill also strikes the 31 computation of the highest cost-benefit ratio and removes the 32 ratio from the computation of the current reserve ratio. 33 The bill modifies the contribution rate table by reducing 34 the number of possible rate tables that could be in effect 35 -4- LSB 2580XC (5) 91 je/js 4/ 6
S.F. _____ for the rate year from eight contribution rate tables to four 1 contribution rate tables. Under the bill and current law, only 2 one contribution rate table may be in effect per rate year. In 3 reducing the number of possible contribution rate tables from 4 eight to four, the bill also changes the numbered contribution 5 rate designations to lettered contribution rate designations. 6 Under current law, there are 21 benefit ratio ranks in the 7 contribution rate tables. The benefit ratio is a calculation 8 based upon the average number of unemployment benefits charged 9 to an employer over previous calendar quarters. The higher the 10 benefits charged to an employer, the higher the benefit ratio 11 rank the employer receives. The bill reduces the number of 12 benefit ratio ranks from 21 to 9. 13 Under current law, each of the ratio ranks constitutes 4.76 14 percent of total taxable wages. The bill groups the benefit 15 ratio ranks differently by separating each of the first six 16 benefit ratio ranks by 14.29 percent of total taxable wages, 17 and separates the last three benefit ratio ranks by 4.76 18 percent of total taxable wages. 19 Under current law, the highest contribution rate that 20 corresponds with the highest benefit ratio rank is 9.0 percent. 21 Under the bill, the highest contribution rate that corresponds 22 with the highest benefit ratio rank is 7.0 percent. 23 As a result of the bill, each employer will be assigned one 24 of the nine new benefit ratio ranks that corresponds with one 25 of the four new lettered contribution rate designations in 26 effect for the rate year to determine the contribution rate for 27 the year. 28 The bill modifies the definition of taxable wages by 29 eliminating the wages paid to an employee from another state 30 from the calculation of wages upon which an employer is 31 required to contribute to the unemployment compensation fund 32 (fund) when the other state extends a like comity (reciprocity) 33 to Iowa for employment purposes. 34 Under current law, the calculation of taxable wages upon 35 -5- LSB 2580XC (5) 91 je/js 5/ 6
S.F. _____ which an employer is required to contribute to the fund is 1 the greater amount of the two amounts calculated pursuant to 2 paragraphs a and b under Code section 96.1A(36). The bill 3 changes the calculation of one of these amounts under paragraph 4 a. Under current law, the amount is calculated based on 5 66.66 percent of the statewide average weekly wage used during 6 the previous calendar year. The resulting figure is then 7 multiplied by 52 and rounded to the nearest $100 to determine 8 maximum weekly benefit amounts. The bill provides that for 9 employers in the first through eighth benefit ratio ranks, the 10 percentage is 17 percent of the statewide average weekly wage 11 used during the previous calendar year. The bill provides that 12 for employers in the ninth benefit ratio rank, the percentage 13 is 58 percent. 14 The amount in paragraph a as calculated under the bill 15 would be the amount used to calculate taxable wages upon which 16 an employer is required to contribute to the fund if that 17 amount exceeds the amount in paragraph b under Code section 18 96.1A(36). 19 The bill provides that any savings an employer receives 20 as a result of the bill should be used for at least one of 21 the purposes specified in the bill. The specified purposes 22 are to pay for employee salaries or benefits or to use as an 23 alternative to unemployment benefits during periods of seasonal 24 unemployment. 25 -6- LSB 2580XC (5) 91 je/js 6/ 6