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Iowa’s
Employer
Unemployment Insurance Contribution Rates Increase
Posted 3 September 2010
Iowa Workforce
Development announced that the unemployment contribution rate for
employers will be adjusted on January 1, 2011 to keep the Unemployment
Insurance Trust Fund at sufficient levels to adequately provide for
unemployment benefits. Record unemployment claims over the last two and
a half years coupled with the recession triggered the adjustment.
Each year, Iowa law requires the Department to use a required formula
to establish which contribution table will be used to determine the
rate paid by employers. Unemployment contribution rates are based on
wages, with the contribution portion for 2011 set at $24,700. Iowa has
traditionally had some of the lowest employer rates in the country.
However, as Iowa has been besieged by unemployment claims and
individuals are remaining on unemployment longer due to the recession,
the potential liability to the Trust Fund has increased. Therefore,
Iowa law dictates more money is needed to maintain the solvency of the
Trust Fund. In calendar year 2011, the rate will move from Table 4 to
Table 3.
“Iowa Workforce Development is committed to maintaining the solvency of
the Trust Fund while minimizing the effects felt by Iowa employers,”
indicated Iowa Workforce Development Director Elisabeth Buck. “The
Department is continually working with Iowans receiving unemployment
benefits to increase their skill sets and reduce barriers individuals
may have for returning to work.”
During the current recession, the trust funds in 35 states have gone
bankrupt causing massive borrowing from the federal government to cover
benefits. As a result, all of the businesses in these states will pay
significantly higher federal unemployment taxes for years to come.
In the early 1980s, the Trust Fund experienced a deficit of $166
million as payments to workers exceeded contributions paid by
employers. Iowa had to borrow from the federal government to make up
the difference. Since that time, business and labor have worked with
Iowa Workforce Development to ensure that the Trust Fund remains
solvent, avoiding the need to borrow money.
Unemployment insurance contributions provide for the benefits paid to
workers who lose their job through no fault of their own. All
unemployment contributions are deposited into the Trust Fund to pay
future benefits. The Trust Fund currently has a balance of $507
million; however 2010 is still expected to pay out the second largest
amount of benefits in history. This does not include the extended
benefits paid for by the federal government. In order to avoid
depleting the Trust Fund and thus being forced to borrow from the
federal government, Iowa law requires a rate increase.
Unemployment insurance contributions are based on two primary factors,
whether the business is new and the number of layoffs a company had
during the last five years. As a result, companies with seasonal
workers and regular shutdowns pay a higher rate than companies that
have relatively few shutdowns or layoffs.
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