Unemployment Insurance. 
The unemployment insurance (UI) system, administered by the Employment Security Department (ESD), is designed to provide partial wage replacement for unemployed workers.  A worker is eligible to receive benefits if he or she:  worked at least 680 hours in covered employment in his or her base year; was separated from employment through no fault of his or her own or quit work for good cause; is able to work; and is actively searching for work.  The current maximum weekly benefit amount is $1,019.  With some exceptions, a worker must be eligible for a one-week waiting period before receiving benefits. 

Employer Payroll Taxes.
Benefits are financed through contributions paid by employers, referred to as payroll taxes.  An employer's tax rate includes an experience-rated factor (experience rating), a social-cost factor (social tax), and under certain conditions, a solvency surcharge.  Some entities may qualify as reimbursable employers, allowing them to reimburse the ESD for UI benefits actually paid instead of contributing by payroll taxes.

An employer's experience rating is based on the amount of UI benefits paid to its former employees.  Those benefits are charged to base year employers on a pro rata basis.  A benefit ratio is computed by dividing the total amount of UI benefits charged to the account of the employer by the taxable payrolls.  An employer is assigned to an experience rate class (ranging from 1 to 40) according to its benefit ratio.  Notably, some UI benefits are charged only to separating employers or are not charged directly to any employer.

The social tax is generally calculated by the difference between total UI benefits paid and taxes paid, divided by the total payroll.  The social tax is graduated for employers based on their experience rate classes, with a maximum rate of 1.22 percent.  A solvency surcharge applies if there are fewer than seven months of UI benefits in the UI trust fund.  In 2021 the state enacted Engrossed Substitute Senate Bill (ESSB) 5061, which made certain temporary changes to UI payroll taxes.  Among other things, ESSB 5061 reduced the maximum social tax rate and suspended the solvency charge through 2025.

Voluntary Contribution Program.

The Voluntary Contribution Program (Program) allows an employer to reduce its experience rating by reimbursing the unemployment insurance trust fund for unemployment benefits paid to its former employees.  An employer must meet certain criteria to participate in the Program.  In 2021 the state temporarily expanded access to the Program by enacting temporary changes in ESSB 5061.  Those changes expire May 31, 2026.  Eligibility criteria are as follows: 

The temporary changes to the Program from ESSB 5061 are made permanent.  In order to qualify, an employer must: 

• submit contribution payments by March 31;
• have had an increase of at least eight rate classes from the previous calendar year; and
• make payments resulting in a reduction of two rate classes.

The surcharge on payments to the Program is eliminated. 

(In support) The Voluntary Contribution Program (Program) is a mechanism that allows an employer to buy down its experience rating by directly paying for UI benefits following an unexpected and sizable increase in an uptake of UI benefits.  In 2021 the Legislature adopted a variety of changes to the UI system in order to help provide relief for persons impacted by the COVID-19 pandemic.  Among those changes, the Legislature expanded access to the Program.  While initially set to be temporary, the expansion has ultimately proven to be very successful.  This situation arises in very few instances, typically small businesses.  For those small businesses that do not anticipate more volatility in the uptake of benefits, the Program has proven to be a critical tool for stabilizing payroll taxes on an ongoing basis. 

(Opposed) None. 

Representative Larry Springer, prime sponsor; and Caitlyn Jekel, Employment Security Department.