Senate Study Bill 3182 - Introduced
SENATE FILE _____
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON DAWSON)
A BILL FOR
1 An Act relating to unemployment insurance taxes on employers.
2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 Section 1. Section 96.1A, subsection 36, Code 2024, is
2 amended to read as follows:
3 36. “Taxable wages” means an amount of wages upon which
4 an employer is required to contribute based upon wages which
5 that have been paid in this state during a calendar year to
6 an individual by an employer or the employer’s predecessor,
7 in this state or another state which extends a like comity to
8 this state, with respect to employment, upon which the employer
9 is required to contribute, which equals the greater of the
10 following:
11 a. Sixty-six and two-thirds Thirty-three and one-third
12 percent of the statewide average weekly wage which that was
13 used during the previous calendar year to determine maximum
14 weekly benefit amounts, multiplied by fifty-two and rounded to
15 the next highest multiple of one hundred dollars.
16 b. That portion of wages subject to a tax under a federal
17 law imposing a tax against which credit may be taken for
18 contributions required to be paid into a state unemployment
19 compensation fund.
20 Sec. 2. Section 96.7, subsection 2, paragraph c,
21 subparagraphs (1) and (2), Code 2024, are amended to read as
22 follows:
23 (1) A nonconstruction contributory employer that is newly
24 subject to this chapter shall pay contributions at the rate
25 specified in the twelfth fourth benefit ratio rank but not less
26 than one percent until the end of the calendar year in which
27 the employer’s account has been chargeable with benefits for
28 twelve consecutive calendar quarters immediately preceding the
29 computation date.
30 (2) A construction or landscaping contributory employer,
31 as defined under rules adopted by the department pursuant to
32 chapter 17A, which that is newly subject to this chapter shall
33 pay contributions at the rate specified in the twenty-first
34 ninth benefit ratio rank until the end of the calendar year in
35 which the employer’s account has been chargeable with benefits
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1 for twelve consecutive calendar quarters.
2 Sec. 3. Section 96.7, subsection 2, paragraph d,
3 subparagraph (1), Code 2024, is amended to read as follows:
4 (1) The current reserve fund ratio is computed by dividing
5 the total funds available for payment of benefits, on the
6 computation date or on August 15 following the computation
7 date if the total funds available for payment of benefits is a
8 higher amount on August 15, by the total wages paid in covered
9 employment excluding reimbursable employment wages during the
10 first four calendar quarters of the five calendar quarters
11 year immediately preceding the computation date. However,
12 in computing the current reserve fund ratio, beginning July
13 1, 2007, one hundred fifty million dollars shall be added to
14 the total funds available for payment of benefits on each
15 computation date.
16 Sec. 4. Section 96.7, subsection 2, paragraph d,
17 subparagraph (2), subparagraph division (a), Code 2024, is
18 amended by striking the subparagraph division.
19 Sec. 5. Section 96.7, subsection 2, paragraph d,
20 subparagraph (2), subparagraph division (b), Code 2024, is
21 amended by striking the subparagraph division and inserting in
22 lieu thereof the following:
23 (b) If the current reserve fund ratio:
24 Equals or But is The contribution rate
25 exceeds less than table in effect shall be
26 _______________________________________________________________
27 —— 0.50 A
28 0.50 0.90 B
29 0.90 1.30 C
30 1.30 —— D
31 Sec. 6. Section 96.7, subsection 2, paragraph d,
32 subparagraph (2), subparagraph division (d), Code 2024, is
33 amended by striking the subparagraph division and inserting in
34 lieu thereof the following:
35 (d) Each employer qualified for an experience rating
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1 shall be assigned a contribution rate for each rate year
2 that corresponds to the employer’s benefit ratio rank in the
3 contribution rate table effective for the rate year from the
4 following contribution rate tables. Each employer’s benefit
5 ratio rank shall be computed by listing all the employers by
6 increasing benefit ratios, from the lowest benefit ratio to the
7 highest benefit ratio and grouping the employers so listed into
8 nine separate ranks containing as nearly as possible fourteen
9 and twenty-nine hundredths percent of the total taxable wages,
10 excluding reimbursable employment wages, in the first six
11 ranks, and four and seventy-six hundredths percent of the total
12 taxable wages, excluding reimbursable employment wages, in
13 ranks seven, eight, and nine, paid in covered employment during
14 the four completed calendar quarters immediately preceding the
15 computation date. If an employer’s taxable wages qualify the
16 employer for two separate benefit ratio ranks, the employer
17 shall be afforded the benefit ratio rank assigned the lower
18 contribution rate. Employers with identical benefit ratios
19 shall be assigned to the same benefit ratio rank.
20 Approximate Contribution Rate Tables
21 Benefit Cumulative
22 Ratio Taxable
23 Rank Payroll Limit A B C D
24 __________________________________________________________
25 1 14.29% 0.00 0.00 0.00 0.00
26 2 28.58% 0.40 0.30 0.10 0.10
27 3 42.87% 1.20 0.80 0.40 0.20
28 4 57.16% 2.10 1.40 0.60 0.30
29 5 71.45% 3.60 2.40 1.10 0.50
30 6 85.74% 5.40 4.10 1.90 0.90
31 7 90.50% 5.40 5.40 4.20 2.00
32 8 95.26% 5.40 5.40 5.40 2.80
33 9 100.00% 5.40 5.40 5.40 5.40
34 EXPLANATION
35 The inclusion of this explanation does not constitute agreement with
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1 the explanation’s substance by the members of the general assembly.
2 This bill modifies the definition of “taxable wages” for
3 purposes of unemployment insurance taxes on employers by
4 eliminating the wages paid to an employee from another state
5 from the calculation of wages upon which an employer is
6 required to contribute to the unemployment compensation fund
7 (fund) when the other state extends a like comity (reciprocity)
8 to Iowa for employment purposes.
9 Under current law, the calculation of taxable wages upon
10 which an employer is required to contribute to the fund is
11 the greater amount of the two amounts calculated pursuant to
12 paragraphs “a” and “b” under Code section 96.1A(36). The bill
13 changes the calculation of one these amounts under paragraph
14 “a” by reducing the percentage of statewide average weekly wage
15 used in the calculation from 66.66 percent to 33.33 percent
16 of the statewide average weekly wage used during the previous
17 calendar year which is then multiplied by 52 and rounded to the
18 nearest $100 to determine maximum weekly benefit amounts.
19 The amount in paragraph “a” as calculated under the bill
20 would be the amount used to calculate taxable wages upon which
21 an employer is required to contribute to the fund if that
22 amount exceeds the amount in paragraph “b” under Code section
23 96.1A(36).
24 The calculation of the unemployment contribution rate each
25 year is a dynamic calculation dependent upon the calculation
26 of the current reserve ratio, the benefit ratio rank, and
27 the contribution rate table in effect for the rate year.
28 The bill changes the current reserve ratio calculation, the
29 number of benefit ratio ranks, the contribution rates, and the
30 contribution rate table.
31 The current reserve ratio (calculation of available benefit
32 amount in fund) determines the contribution rate table in
33 effect for the rate year following the computation date. The
34 bill changes the computation of the current reserve fund
35 ratio in Code section 96.7(2)(d)(1) by basing the calculation
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1 of the ratio on the preceding year rather than the previous
2 five calendar quarters, and strikes the requirement that $150
3 million be added on the reserve ratio computation date to the
4 total funds available for benefits. The bill also strikes the
5 computation of the highest cost-benefit ratio and removes the
6 ratio from the computation of the current reserve ratio.
7 The bill modifies the contribution rate table by reducing
8 the number of possible rate tables that could be in effect
9 for the rate year from eight contribution rate tables to four
10 contribution rate tables. Under the bill and current law, only
11 one contribution rate table may be in effect per rate year. In
12 reducing the number of possible contribution rates tables from
13 eight to four, the bill also changes the numbered contribution
14 rate designations to lettered contribution rate designations.
15 Under current law, there are 21 benefit ratio ranks in the
16 contribution table. The benefit ratio is a calculation based
17 upon the average number of unemployment benefits charged to
18 an employer over previous calendar quarters. The higher the
19 benefits charged to an employer, the higher the benefit ratio
20 rank the employer receives. The bill reduces the number of
21 benefit ratio ranks from 21 to 9.
22 Under current law, each of the 21 benefit ratio rank
23 constitutes 4.76 percent of total taxable wages. The bill
24 groups the benefit ratio ranks differently by separating each
25 of the first six benefit ratio ranks by 14.29 percent of total
26 taxable wages, and separates the last three benefit ratio ranks
27 by 4.76 percent of total taxable wages.
28 Under current law, the highest contribution rate that
29 corresponds with the highest benefit ratio rank is 9.0 percent.
30 Under the bill, the highest contribution rate that corresponds
31 with the highest benefit ratio rank is 5.40 percent.
32 As a result of the bill, each employer will be assigned one
33 of the nine new benefit ratio ranks that corresponds with one
34 of the four new lettered contribution rate designations in
35 effect for the rate year to determine the contribution rate for
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1 the year.
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Statutes affected:
Introduced: 96.1A, 96.7