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S1108.......................................by COMMERCE AND HUMAN RESOURCES
UNEMPLOYMENT INSURANCE - Amends existing law to increase the desired fund
size multiplier from eight-tenths to nine-tenths for unemployment insurance
tax purposes.
02/09 Senate intro - 1st rdg - to printing
02/12 Rpt prt - to Com/HuRes
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature First Regular Session - 2007
IN THE SENATE
SENATE BILL NO. 1108
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO TAXABLE WAGE BASE AND TAXABLE WAGE RATES FOR UNEMPLOYMENT INSUR-
3 ANCE PURPOSES; AMENDING SECTION 72-1350, IDAHO CODE, TO INCREASE THE
4 DESIRED FUND SIZE MULTIPLIER.
5 Be It Enacted by the Legislature of the State of Idaho:
6 SECTION 1. That Section 72-1350, Idaho Code, be, and the same is hereby
7 amended to read as follows:
8 72-1350. TAXABLE WAGE BASE AND TAXABLE WAGE RATES. (1) All remuneration
9 for personal services as defined in section 72-1328, Idaho Code, equal to the
10 average annual wage in covered employment for the penultimate calendar year,
11 rounded to the nearest multiple of one hundred dollars ($100), or the amount
12 of taxable wage base specified in the federal unemployment tax act, whichever
13 is higher, shall be the taxable wage base for purposes of this chapter.
14 (2) Prior to December 31 of each year, the director shall determine the
15 taxable wage rates for the following calendar year for all covered employers,
16 except cost reimbursement employers, in accordance with this section, provided
17 however, and notwithstanding any other provision of the employment security
18 law to the contrary, for calendar years 2005 and 2006, the taxable wage rates
19 for all covered employers except cost reimbursement employers shall be deter-
20 mined as follows:
21 (a) For calendar year 2005, the taxable wage rate shall be determined
22 using a base tax rate of one and fifty hundredths percent (1.50%);
23 (b) For calendar year 2006, the taxable wage rate shall be determined
24 using a base tax rate of one and sixty-seven hundredths percent (1.67%)
25 unless, at any time prior to September 30, 2005, the actual balance in the
26 employment security fund, section 72-1346, Idaho Code, is fifty percent
27 (50%) or less than the actual balance in the reserve fund, section
28 72-1347A, Idaho Code, in which case the taxable wage rate shall be deter-
29 mined using a base tax rate calculated in accordance with subsection (5)
30 of this section.
31 (3) An average high cost ratio shall be determined by calculating the
32 average of the three (3) highest benefit cost rates in the twenty (20) year
33 period ending with the preceding year. For the purposes of this section, the
34 "benefit cost rate" is the total annual benefits paid, including the state's
35 share of extended benefits but excluding the federal share of extended bene-
36 fits and cost reimbursable benefits, divided by the total annual covered wages
37 excluding cost reimbursable wages. The resulting average high cost ratio is
38 multiplied by the desired fund size multiplier of eight nine-tenths (0.89),
39 and the result, for the purposes of this section, is referred to as the
40 "average high cost multiple" (AHCM).
41 (4) The fund balance ratio shall be determined by dividing the actual
42 balance of the employment security fund, section 72-1346, Idaho Code, and the
43 reserve fund, section 72-1347A, Idaho Code, on September 30 of the current
2
1 calendar year by the wages paid by all covered employers in Idaho, except cost
2 reimbursement employers, in the preceding calendar year.
3 (5) The base tax rate shall be determined as follows:
4 (a) Divide the fund balance ratio by the AHCM;
5 (b) Subtract the quotient obtained from the calculation in paragraph
6 (5)(a) of this section from the number two (2);
7 (c) Multiply the remainder obtained from the calculation in paragraph
8 (5)(b) of this section by two and one-tenth percent (2.1%). The product
9 obtained from this calculation shall equal the base tax rate, provided
10 however, that the base tax rate shall not be less than sixty-three hun-
11 dredths percent (0.63%) and shall not exceed three and thirty-six hun-
12 dredths percent (3.36%).
13 (6) The base tax rate calculated in accordance with subsection (5) of
14 this section shall be used to determine the taxable wage rate effective the
15 following calendar year for all covered employers except cost reimbursement
16 employers as provided in subsections (7) and (8) of this section.
17 (7) Table of Rate Classes, Tax Factors and Minimum and Maximum Taxable
18 Wage Rates
19 Cumulative Taxable Payroll Limits Eligible Employers
20 More Than Equal to Minimum Maximum
21 (% of or Less Than Taxable Taxable
22 Rate Taxable (% of Taxable Tax Wage Wage
23 Class Payroll) Payroll) Factor Rate Rate
24 1 -- 12 0.2857 0.180% 0.960%
25 2 12 24 0.4762 0.300% 1.600%
26 3 24 36 0.5714 0.360% 1.920%
27 4 36 48 0.6667 0.420% 2.240%
28 5 48 60 0.7619 0.480% 2.560%
29 6 60 72 0.8571 0.540% 2.880%
30 7 72 -- 0.9524 0.600% 3.200%
31 Standard-Rated Employers
32 Minimum Maximum
33 Taxable Taxable
34 Tax Wage Wage
35 Factor Rate Rate
36 1.000 1.000% 3.360%
37 Cumulative Taxable Payroll Limits Deficit Employers
38 More Than Equal to Minimum Maximum
39 (% of or Less Than Taxable Taxable
40 Rate Taxable (% of Taxable Tax Wage Wage
41 Class Payroll) Payroll) Factor Rate Rate
42 -1 -- 30 1.7143 1.080% 4.800%
43 -2 30 50 1.9048 1.200% 5.200%
44 -3 50 65 2.0952 1.320% 5.600%
45 -4 65 80 2.2857 1.440% 6.000%
46 -5 80 95 2.6667 1.680% 6.400%
47 -6 95 -- 2.6667 5.400% 6.800%
48 (8) Each covered employer, except cost reimbursement employers, will be
49 assigned a taxable wage rate and a contribution rate as follows:
50 (a) Each employer, except standard-rated employers, will be assigned to
51 one (1) of the rate classes for eligible and deficit employers provided in
52 subsection (7) of this section based upon the employer's experience as
53 determined under the provisions of sections 72-1319, 72-1319A, 72-1351 and
3
1 72-1351A, Idaho Code.
2 (b) For each rate class provided in subsection (7) of this section, the
3 department will multiply the base tax rate determined in accordance with
4 subsection (5) of this section by the tax factor listed for that rate
5 class in the table provided in subsection (7) of this section. The product
6 obtained from this calculation shall be the taxable wage rate for employ-
7 ers assigned to that rate class, provided however, that the taxable wage
8 rate shall not be less than the minimum taxable wage rate assigned to that
9 rate class and shall not exceed the maximum taxable wage rate assigned to
10 that rate class in the table provided in subsection (7) of this section.
11 (c) For standard-rated employers, the department will multiply the base
12 tax rate determined in accordance with subsection (5) of this section by
13 the tax factor listed for standard-rated employers in the table provided
14 in subsection (7) of this section. The product obtained from this calcula-
15 tion shall be the taxable wage rate for standard-rated employers, provided
16 however, that the taxable wage rate shall not be less than the minimum
17 taxable wage rate assigned to standard-rated employers and shall not
18 exceed the maximum taxable wage rate assigned to standard-rated employers
19 in the table provided in subsection (7) of this section.
20 (d) Deficit employers who have been assigned a taxable wage rate from
21 deficit rate class six will be assigned contribution rates equal to their
22 taxable wage rate.
23 (e) All other eligible, standard-rated and deficit employers will be
24 assigned contribution rates equal to ninety-seven percent (97%) of their
25 taxable wage rate. Provided however, that for each calendar year a reserve
26 tax is imposed pursuant to section 72-1347A, Idaho Code, the contribution
27 rates for employers assigned contribution rates pursuant to this paragraph
28 shall be eighty percent (80%) of their taxable wage rate.
29 (9) Each employer shall be notified of his taxable wage rate as deter-
30 mined for any calendar year pursuant to this section and section 72-1351,
31 Idaho Code. Such determination shall become conclusive and binding upon the
32 employer, unless within fourteen (14) days after delivery or mailing of the
33 notice thereof to his last known address, the employer files an application
34 for redetermination, setting forth his reasons therefor. Reconsideration shall
35 be limited to transactions occurring subsequent to any previous determination
36 which has become final. The employer shall be promptly notified of the rede-
37 termination, which shall become final unless an appeal is filed within four-
38 teen (14) days after delivery or mailing of notice to his last known address.
39 Proceedings on the appeal shall be in accordance with the provisions of sec-
40 tion 72-1361, Idaho Code.
STATEMENT OF PURPOSE
RS 16959
Section 72-1350, Idaho Code, sets out the formula for calculating
employer tax rates for assessment of the unemployment insurance
tax. Part of that calculation determines the balance the
Unemployment Insurance Trust Fund must maintain to handle benefit
claims equal to the average of the three highest claim years in the
previous 20 years. The formula currently calls for the trust fund
to be maintained at 80 percent, or a multiple of 0.8, of that
average. This results in comparatively wide annual swings up and
down in tax rates. Raising the trust fund target to 90 percent, or
a multiple of 0.9, would smooth those fluctuations out and provide
a more stable tax rates for employers year to year.
FISCAL NOTE
There would be no impact on the state General Fund. There would be
an increase in the balance of the Unemployment Insurance Trust Fund
of an average of $5 million a year over the next five years. This
will have a minimal impact on employer tax rates between 2008 and
2011, and the tax rate will be essentially the same under either
0.8 or 0.9 multiple in 2012.
CONTACT:
Name: Bob Fick
Agency: Commerce and Labor, Dept. of
Phone: 332-3570 ext 3628
STATEMENT OF PURPOSE/FISCAL NOTE S 1108