2018 Legislative Session Issue Preview: Unemployment Insurance Trust Fund
December 14, 2017
Each year ABI works to defend the Unemployment Insurance (UI) Trust Fund, an account funded by employers used to pay unemployment benefits to unemployed Iowa workers who lose their job through no fault of their own.
ABI has strong policy on defending and protecting the integrity of this somewhat obscure, but very important trust fund. While it’s well known by employers, many other don’t know the fund is paid for by Iowa employer taxes. About 40,000 Iowa businesses pay into the fund. In Iowa, more than half of businesses have a zero percent rate, which means they don’t have any experience with the system.
Legislatively, ABI monitors the appropriation of UI Reserve Fund interest to fund unemployment field offices and any other appropriations of UI Trust Fund dollars. ABI supports IWD in its efforts to reduce fraud to the UI Trust Fund.
In addition to state employer taxes, some federal unemployment tax dollars have been funneled to states and placed in the Iowa UI Trust Fund to be used to stabilize the Fund and assist workforce development in times of greater fiscal need, such as a recession. Iowa Workforce Development has used some of this money in recent years for technology upgrades, one of the allowable purposes of these federal “Reed Act” dollars. ABI has worked legislatively on these appropriations to ensure they’re only used for their intended purpose.
Rate tables are updated annually, and given Iowa’s low unemployment rate, Iowa recently moved to a lower tax rate from tax table 6 to 7. To help maintain the stability of the UI trust fund, the fund collects more revenue when the UI fund balance is low and less in times of a healthy balance.
Iowa law stipulates that UI taxes may be collected from employers under eight different tax rate tables, and each tax rate table has 21 rate brackets (or ranks). Rates vary from 0 to 9 percent on tax rate table 1, and from 0 to 7 percent on tax rate table 8. This means tax rate table 1 collects the most UI tax, and tax rate table 8 collects the least UI tax. The Unemployment Trust fund and rate calculations are very complicated, which is why ABI works diligently to help educate lawmakers about the impact any slight change could have to the trust fund and employer rates.
ABI will keep you up to date on Unemployment Trust fund issues as the 2018 session unfolds.