DES MOINES — Iowa employers who pay into the state unemployment trust fund will see their contributions drop by $108 million when the average jobless insurance tax rate drops from 1.6 percent to 1.2 percent for the 2015 calendar year, Gov. Terry Branstad announced Monday.
“Due to Iowa’s strong economic condition, Iowa employers will see significant tax savings,” said Branstad in announcing a tax rate reduction for the fourth straight year. The last time unemployment taxes dipped to 1.2 percent rate under table seven of the jobless insurance charts was 2002, he noted.
Iowa has about 78,000 employers, nearly half of which contribute to the jobless insurance fund that is used by the Iowa Workforce Development to operate unemployment insurance benefit programs for laid-off or idled Iowans. In 2013, eligible employers paid $565.5 million into the trust fund while the payout totaled $418.8 million.
IWD Director Teresa Wahlert said Iowa’s improving economy and 4.5 percent jobless rate — seventh lowest in the nation — has meant the trust fund balance has grown from $446 million when Branstad took office in 2011 to $1.2 billion now, making another rate reduction possible for next year.
Before a national recession hit in 2008, Iowa collected $351 million in jobless insurance taxes and paid out $329 million in benefits, said IWD spokeswoman Kerry Koonce. By 2009, that had swung to $352 million in employer tax collections and $788 million in payouts to unemployed Iowans during a three-year period when payments outpaced collections.
The average tax rate charged employers on the first $27,000 in wages paid per employee rose to 2.8 percent in 2011 but has gradually declined to 1.6 percent for the current year and the projected 1.2 percent rate in 2015, Koonce said. The new employer non-construction rate in Iowa for 2015 will be 1.0 percent in 2015, the lowest permitted rate by federal law, she added.
“Iowa has one of the lowest UI tax rates in the nation,” said Wahlert, who noted her agency has been able to use federal dollars to rebuild the number of investigators in the unemployment insurance program from a low of four after a state early-retirement program in 2010 to a current level of eight with expectations the number will grow to 11 by February 2015.
Iowa Workforce Development is the state agency charged with collecting unemployment insurance taxes from employers and operating Iowa’s unemployment insurance payment programs for workers. Annually, IWD officials establish the appropriate table for the following year and unemployment tax rates are based on wages and recent unemployment benefit payments.
Branstad said Iowa has made progress in improving its economic and employment climate, but sectors continue to face challenges such as the recent announcement that Deere & Co. would be laying off some workers in Iowa as corn prices lag in part due to federal inaction on the renewable fuel standard.
Koonce said Monday’s announcement was “great news” because the unemployment insurance tax rates are among the factors employers consider when making business decisions.