Fiscal Note
Fiscal Services Division
HF 2355 – Unemployment Insurance (LSB5336HV.1)
Staff Contact: Eric Richardson (515.281.6767) eric.richardson@legis.iowa.gov
Fiscal Note Version – Final Action
Description
House File 2355 relates to employment security benefits. The Bill:
• Revises the language of Iowa Code section 96.2 concerning guidance for unemployment
insurance (UI).
• Reduces the maximum total amount of benefits payable from 26 weeks to 16 weeks.
• Reduces the maximum benefit payable from 39 weeks to 26 weeks for individuals whose
employers have gone out of business.
• Allows an employer to seek a refund from an overpayment of unemployment benefits even if
an employer fails to respond in a timely manner to the Iowa Workforce Development (IWD)
due to insufficient notification from the IWD.
• Defines “misconduct” for the purposes of unemployment benefit determinations.
• Modifies the percentages of an individual’s average weekly wage for insured work paid to
the individual that is considered suitable for an individual to apply for and accept work in
order to remain eligible for UI. Modifications are shown in Table 1 below:
Table 1 — Percentage of Weekly Wages to Apply/Accept
Suitable Work — HF 2355
Current Percentage HF 2355 Percentage of
Current Weeks HF 2355 Weeks
of Weekly Wages Weekly Wages
0-1 100.0%
0-5 100.0% 2-3 90.0%
4-5 80.0%
6-8 70.0%
6-12 75.0%
13-18 70.0% 9+ 60.0%
19+ 65.0%
• Allows an administrative law judge’s decision to be appealed directly to district court.
• Prevents a shared work plan under the Voluntary Shared Work (VSW) Program from
claiming a reduction of an employee’s work hours based on a workweek exceeding 40
hours.
• Automatically revokes approval of a shared work plan if an employer who entered into the
plan lays off an employee.
• Makes part-time employees eligible for VSW Program benefits.
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Background
The UI Trust Fund, administered by the U.S. Department of Labor, is used to pay UI benefits to
eligible claimants. The balance of the Fund at the end of calendar year (CY) 2016 was
$1.006 billion, rising to $1.252 billion at the end of CY 2019. The Fund balance as of December
31, 2021, was $1.391 billion. Table 2 below shows historical claims paid from the Fund to
Iowans:
Table 2 — UI Benefits Paid (CY 2016-2021)*
Year 2016 2017 2018 2019 2020 2021
Benefits $ 423,511,000 $ 402,625,000 $ 364,713,000 $ 381,789,000 $ 1,254,245,000 $ 414,289,000
*Source: U.S. Department of Labor
The UI Trust Fund is replenished through insurance taxes paid by Iowa employers based on a
formula that includes an employer’s five-year average annual benefit payment and the
employer’s five-year average annual taxable payroll. This formula results in a benefit ratio,
which is compared to every other employer’s benefit ratio in determining the employer tax rate.
The lowest employer benefit ratios receive the lowest tax rates. Table 3 below shows the tax
rates paid by Iowa employers and is set on a scale of 1 (highest tax rate paid) to 8 (lowest tax
rate paid). The Contribution Rate Table is calculated using overall recent benefits paid,
statewide total wages, and the balance of the UI Trust Fund. For 2022, the Contribution Rate
Table is set at 7, with tax rates ranging from 0.00% for those with the lowest benefit ratios to
7.50% for those with the highest benefit ratios. In 2020, $490.0 million was transferred from
federal funds deposited into the Iowa Coronavirus Relief Fund to the UI Trust Fund, while in
2021, $237.5 million was transferred from federal funds deposited into the State and Local
Fiscal Recovery Fund to the UI Trust Fund, both to keep the Contribution Rate at 7.
Table 3 — Unemployment Insurance Taxes Contribution Rates Table
Iowa Code section 96.3 details the current overpayment allowances by the IWD for employers,
who are mandated to respond to the IWD’s request for information in order to receive a credit in
their unemployment benefit accounts after an overpayment to an employee. Employees shall
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be allowed to keep unemployment benefits if employers do not participate in the initial
determination to award benefits.
Iowa Code section 96.40 details current laws for the VSW Program. The VSW Program is
Iowa’s version of a Short-Time Compensation (STC) program. Under the VSW Program, work
reductions are shared by reducing employees’ work hours, and UI partially replaces lost
earnings. By avoiding layoffs, employees stay connected to their jobs and employers maintain
their skilled workforce for when business improves. A VSW plan must affect at least five
employees. VSW cannot be used for seasonal work reductions, and employees must be able
and available to work their regular hours of work for the VSW employer.
Assumptions
• 2020 or 2021 UI data was not used as a model due to high claims paid from COVID-19
closures.
• Inflation at 2.5% beginning in FY 2024 was used for benefit savings.
• The number of claimants receiving benefits in 2019 past 16 weeks is 28,087, or 33.0% of all
claimants, per IWD data. For the purpose of this estimate, the number of claimants
receiving benefits between 16 weeks and 26 weeks is 27,218.
• The total amount of benefits affected by the Bill paid to claimants past 16 weeks in 2019 is
$73.8 million, per IWD data, including those covered by the business failure section of the
Bill.
• The population that is covered by the business failure section of the Bill is removed from the
fiscal impact for the reduction of maximum benefits from 26 to 16 weeks.
• Business failure projections going forward are based on FY 2014 to FY 2019 data from the
IWD, as an average of $4.6 million in UI benefits were paid out to 2,741 recipients due to
closings.
Fiscal Impact
• Reducing the maximum allowable benefit from 26 to 16 weeks for most claimants is
estimated to decrease benefits paid from the UI Trust Fund by $69.2 million in FY 2023 and
$70.9 million in FY 2024. The Bill may also create a change order for the IWD’s new
unemployment benefits system, which is currently being developed by a contractor.
• Reducing benefits from 39 to 26 weeks to claimants when employers go out of business will
decrease benefits paid from the UI Trust Fund by approximately $4.6 million in FY 2023 and
$4.7 million in FY 2024.
• The modification of suitable work percentages is expected to reduce benefit payments from
the UI Trust Fund by an amount that cannot be estimated due to lack of data.
• Changes in the definition of “misconduct” will create a negligible fiscal impact to the UI Trust
Fund.
• Employer taxes paid into the UI Trust Fund would be expected to decrease in future years,
absent any other law changes, due to a reduction in benefit payments and a short-term
increase in the UI Trust Fund balance. Tax implications cannot be estimated due to lack of
data.
• Allowing an appeal directly to district court, bypassing the Employment Appeal Board and
decreasing costs to the IWD, would reduce administrative expenditures in an amount that
cannot be estimated due to lack of data.
• Allowing an employer to seek a refund of UI benefits due to insufficient notification by the
IWD and changes to the VSW Program create a negligible fiscal impact to the State, as
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 these sections of the Bill are already performed in practice by the IWD. See Table 4 below
for the overall fiscal impact of the Bill.
Table 4 — Estimated Fiscal Impacts of HF 2355
Section of Bill Category FY 2023 FY 2024 Funding Source
Benefits to
Change in Benefit Weeks $ -69,198,000 $ -70,928,000 UI Trust Fund
Claimants
Benefits to
Business Closings $ -4,600,000 $ -4,715,000 UI Trust Fund
Claimants
TOTAL REDUCTIONS $ -73,798,000 $ -75,643,000
The fiscal impacts of the Bill will continue indefinitely.
Sources
Legislative Services Agency
Iowa Department of Workforce Development
United States Department of Labor
United States Bureau of Labor Statistics
Iowa Department of Management
/s/ Holly M. Lyons
June 24, 2022
Doc ID 1290478
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
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Statutes affected:
Introduced: 96.3, 96.40
Reprinted: 96.2, 96.3, 96.5, 96.6, 96.40
Enrolled: 96.2, 96.3, 96.5, 96.6, 96.40