Fiscal Note
Fiscal Services Division
SF 492 – Unemployment Tax (LSB1843SV.1)
Staff Contact: Eric Richardson (515.281.6767) eric.richardson@legis.iowa.gov
Fiscal Note Version – Revised (Wording in the Fiscal Impact)
Description
Senate File 492 relates to unemployment insurance benefits. The Bill:
• Modifies the weekly benefit amount (WBA) that is subject to the maximum percentage of the
statewide average weekly wage for Unemployment Insurance (UI) claimants that is currently
based on the number of dependents. The table below shows the change.
Modifications in Dependent Benefit Structures — SF 492
Current Weekly SF 492 SF 492
Current Maximum
Number of Benefit Amount Number of Weekly Maximum
Percentage of
Dependents (Fraction of High Dependents Benefit Percentage of
Weekly Wage
Quarter Wages) Amount Weekly Wage
0 1/23 53.0% 0 1/23 53.0%
1 1/22 55.0%
2 1/21 57.0%
1 or More 1/22 57.0%
3 1/20 60.0%
4 or More 1/19 65.0%
• For individuals whose employers have gone out of business, removes language requiring
the Director of the Iowa Department of Workforce Development (IWD) to recompute wage
credits from 33.0% to 50.0% for purposes of calculating an individual’s maximum total
amount of unemployment benefits payable during a benefit year. The Bill also eliminates
the ability of these individuals to collect an extra 13 weeks of benefits.
• Reinstates a one-week waiting period for those eligible to collect UI during the individual’s
benefit year.
• Modifies the percentages of the 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:
Percentage of Weekly Wages to Apply/Accept Suitable Work — SF 492
Current Current Percentage SF 492 SF 492 Percentage of
Weeks of Weekly Wages Weeks Weekly Wages
0-5 100.0% 0-4 80.0%
6-12 75.0% 5-8 70.0%
13-18 70.0%
9+ 60.0%
19+ 65.0%
• Removes language making findings binding only on parties to proceedings and not on other
proceedings or actions involving the same facts brought by the same or related parties
before IWD’s Division of Labor Services, Division of Workers’ Compensation, other state
agencies, arbitrators, courts, or judges of Iowa or the United States.
1
• The Bill is effective July 1, 2022.
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 February
10, 2021, was $949.6 million. The table below shows historical claims paid from the Fund to
Iowans:
UI Benefits Paid — Calendar Year (CY) 2016-2020*
Year 2016 2017 2018 2019 2020
Benefits $ 423,511,364 $ 402,624,842 $ 364,712,930 $ 381,788,782 $ 1,254,245,440
*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. The Contribution Rate Table
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). For 2021, 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 to keep the Contribution Rate at 7.
Unemployment Insurance Taxes Contribution Rates Table
Many states currently impose a one-week waiting period for payment of UI benefits because
federal funds are not available for the first week after a claim is filed. Iowa does not have a
waiting week. The Coronavirus, Aid, Relief, and Economic Security (CARES) Act provided
100.0% federal reimbursement to states for the first week of UI for the time period March 29,
2
2020, through December 16, 2020. The Consolidated Appropriations Act, 2021, provides a
50.0% reimbursement for the first week of all claims paid from December 27, 2020, through
March 13, 2021. As of December 2020, $105.5 million was paid to Iowa through the program.
Assumptions
• 2020 UI data was not used as a model due to high claims paid from COVID-19 closures.
• Two percent inflation beginning in FY 2023 was used for salary and benefit savings.
• Projections starting in FY 2023 for claimants with dependents are based on FY 2019 IWD
dependent and UI beneficiary data. As many as 8,231 beneficiaries had more than two
dependents in FY 2019. Using 2019 data, there would have been a $2.2 million reduction in
UI benefits due to the Bill.
• 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.
• Reinstating an initial waiting week would reduce withdrawals to cover UI benefits by 5.5%
annually. The annual average in first week benefit payments from FY 2015 to FY 2019 to
62,000 recipients who would no longer receive them was $23.3 million, according to the
IWD.
Fiscal Impact
• The Bill would reduce benefits paid from the UI Trust Fund due to modifying the WBA for
those with more than one dependent by an estimated $2.2 million annually beginning in
FY 2023.
• The Bill will eliminate the need for 3.0 full-time equivalent (FTE) Workforce Advisor positions
within IWD due to elimination of the benefit to claimants when employers go out of business,
reducing federal UI administrative expenses by an estimated $251,000 beginning in
FY 2023, and increasing via inflation every year thereafter. This provision will also reduce
payments from the UI Trust Fund by approximately $4.6 million annually beginning in
FY 2023.
• Reinstating the one-week waiting period for payment of UI benefits would reduce
withdrawals from the UI Trust Fund by an estimated $23.3 million annually beginning in
FY 2023. See chart below for the overall fiscal impact of the Bill.
• The modification of suitable work percentages is expected to reduce benefit payments by an
amount that cannot be estimated due to a lack of data.
• Employer taxes paid into the UI Trust Fund would be expected to decrease in later years,
absent any other law changes, due to a reduction in benefit payments. These cannot be
estimated due to lack of data.
Estimated Fiscal Impacts from SF 492
Section of Bill FTE Category FY 2022 FY 2023 Funding Source
Change in Dependents Benefits to Claimants $ 0 $ -2,200,000 UI Trust Fund
IWD Employee Salary and Federal UI
Business Closings - -3.0 $ 0 $ -251,000
Benefits Administrative Funding
Wage Credits
Benefits to Claimants 0 -4,600,000 UI Trust Fund
Reinstate Waiting Week Benefits to Claimants $ 0 $ -23,300,000 UI Trust Fund
TOTAL REDUCTIONS -3.0 $ 0 $ -30,351,000
3
Sources
Legislative Services Agency
Iowa Department of Workforce Development
United States Department of Labor
Iowa Department of Management
/s/ Holly M. Lyons
March 12, 2021
Doc ID 1217031
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
4


Statutes affected:
Introduced: 96.1A, 96.3, 422.12, 96.4, 96.5