Fiscal Note
Fiscal Services Division
SF 617 – Unemployment Trust Fund (LSB2826SV.1)
Staff Contact: Eric Richardson (515.281.6767) eric.richardson@legis.iowa.gov
Fiscal Note Version – REVISED (Fiscal Impact – removed text, table was correct)
Description
Senate File 617 relates to unemployment insurance benefits. The Bill:
• 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. This section of the
Bill takes effect on July 1, 2022.
• Allows the IWD to establish by rule a process to waive or alter work search requirements for
individuals who will be returning to employment and are attached to a regular job or industry
or a member in good standing of a union. The section applies to temporary layoffs of 16
weeks or less due to seasonal weather conditions for highway construction, repair, or
maintenance workers. This section of the Bill takes effect on enactment.
• Reinstates a one-week waiting period for those eligible to collect unemployment insurance
during the individual’s benefit year. This section of the Bill takes effect on 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 April 2,
2021, was $856.2 million. The table below shows historical claims paid from the Fund to
Iowans:
UI Benefits Paid — 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.
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 Unemployment Insurance Taxes Contribution Rates Table
Iowa Code Section 96.1A(37) defines temporary unemployment for a period lasting up to four
consecutive weeks when the individual is unemployed due to a plant shutdown, vacation,
inventory, lack of work, or emergency from the individual’s regular job. After four weeks, under
current law, work search requirements apply to these temporarily unemployed workers.
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,
2020, through December 16, 2020, saving Iowa $105.5 million. The Consolidated
Appropriations Act, 2021, provided a 50.0% reimbursement for the first week of all claims paid
from December 27, 2020, through March 13, 2021, while the American Rescue Plan Act of 2021
retroactively provided a 100.0% reimbursement for the first week of all claims paid from
December 31, 2020, through September 6, 2021.
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 projected costs of salary and
benefits.
• 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.
• Waiving of work search requirements to those with a temporary layoff for 16 weeks instead
of 4 weeks will impact 5,000 highway construction workers statewide, according to IWD
data.
• The IWD would need to spend $60,000 in FY 2022 for information technology costs to
administer the changes to work search requirements.
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• Reinstating an initial waiting week would reduce withdrawals to cover UI benefits by 5.5%
annually. According to the IWD, 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.
Fiscal Impact
• 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.
• Waiving or altering work search requirements will increase IWD federal UI administrative
expenses by an estimated $60,000 in FY 2022. The Bill may, depending if or how IWD
establishes new administrative rules to enact this section, marginally increase benefits paid
from the UI Trust Fund by an amount that cannot be estimated due to a lack of data.
• 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.
• 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 Impact of SF 617
Section of Bill FTE Category FY 2022 FY 2023 Funding Source
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
Work Search Federal UI
IWD System Expenses $ 60,000 0
Requirements Administrative Funding
Reinstate Waiting Week Benefits to Claimants $ 0 $ -23,300,000 UI Trust Fund
TOTAL -3.0 $ 60,000 $ -28,151,000
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Sources
Legislative Services Agency
Iowa Department of Workforce Development
United States Department of Labor
Iowa Department of Management
/s/ Holly M. Lyons
May 3, 2021
Doc ID 1220441
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: 96.1A, 96.3, 96.4