Bill > SF504

Introduced Session

This bill relates to unemployment insurance taxes on employers. The bill modifies the definition of “taxable wages” by eliminating the wages paid to an employee from another state from the calculation of wages upon which an employer is required to contribute to the unemployment compensation fund (fund) when the other state extends a like comity (reciprocity) to Iowa for employment purposes. Under current law, the calculation of taxable wages upon which an employer is required to contribute to the fund is the greater amount of the two amounts calculated pursuant to paragraphs “a” and “b” under Code section 96.1A(36). The bill changes the calculation of one these amounts under paragraph “a” by reducing the percentage of statewide average weekly wage used in the calculation from 66.66 percent to 33.33 percent of the statewide average weekly wage used during the previous calendar year, which is then multiplied by 52 and rounded to the nearest $100 to determine maximum weekly benefit amounts. The amount in paragraph “a” as calculated under the bill would be the amount used to calculate taxable wages upon which an employer is required to contribute to the fund if that amount exceeds the amount in paragraph “b” under Code section 96.1A(36). The calculation of the unemployment contribution rate each year is a dynamic calculation dependent upon the calculation of the current reserve ratio, the benefit ratio rank, and the contribution rate table in effect for the rate year. The bill changes the current reserve ratio calculation, the number of benefit ratio ranks, the contribution rates, and the contribution rate table. The current reserve ratio (calculation of available benefit amount in fund) determines the contribution rate table in effect for the rate year following the computation date. The bill changes the computation of the current reserve fund ratio in Code section 96.7(2)(d)(1) by basing the calculation of the ratio on the preceding year rather than the previous five calendar quarters, and strikes the requirement that $150 million be added on the reserve ratio computation date to the total funds available for benefits. The bill also strikes the computation of the highest cost-benefit ratio and removes the ratio from the computation of the current reserve ratio. The bill modifies the contribution rate table by reducing the number of possible rate tables that could be in effect for the rate year from eight contribution rate tables to four contribution rate tables. Under the bill and current law, only one contribution rate table may be in effect per rate year. In reducing the number of possible contribution rate tables from eight to four, the bill also changes the numbered contribution rate designations to lettered contribution rate designations. Under current law, there are 21 benefit ratio ranks in the contribution rate tables. The benefit ratio is a calculation based upon the average number of unemployment benefits charged to an employer over previous calendar quarters. The higher the benefits charged to an employer, the higher the benefit ratio rank the employer receives. The bill reduces the number of benefit ratio ranks from 21 to 9. Under current law, each of the ratio ranks constitutes 4.76 percent of total taxable wages. The bill groups the benefit ratio ranks differently by separating each of the first six benefit ratio ranks by 14.29 percent of total taxable wages, and separates the last three benefit ratio ranks by 4.76 percent of total taxable wages. Under current law, the highest contribution rate that corresponds with the highest benefit ratio rank is 9.0 percent. Under the bill, the highest contribution rate that corresponds with the highest benefit ratio rank is 5.40 percent. As a result of the bill, each employer will be assigned one of the nine new benefit ratio ranks that corresponds with one of the four new lettered contribution rate designations in effect for the rate year to determine the contribution rate for the year. The bill requires the department of workforce development to collect from an employer a surcharge for deposit in the unemployment compensation fund in any fiscal year in which the average of the benefit ratios of the employer for the previous three fiscal years equals or exceeds 1.25. The surcharge shall be equal to 10 percent of the contributions paid by the employer for the fiscal year. The surcharge only applies to contributory employers and only to such employers who are no longer assigned to benefit ratio ranks based on being newly subject to Code chapter 96. The bill provides that any savings an employer receives as a result of the bill should be used for at least one of the purposes specified in the bill. The specified purposes are to pay for employee salaries or benefits or to use as an alternative to unemployment benefits during periods of seasonal unemployment.

AI Summary

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Other Sponsors (1)

Committee report approving bill, renumbered as SF 607. S.J. 508. (on 03/12/2025)

Official Document