SSB 5137

Washington State House of Representatives Office of Program Research	BILL ANALYSIS

Commerce & Labor Committee

SSB 5137

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Modifying industry average unemployment contribution rates.

Sponsors: Senate Committee on Labor, Commerce, Research & Development (originally sponsored by Senators Kohl-Welles and Keiser; by request of Governor Gregoire).

Brief Summary of Substitute Bill

Makes unemployment insurance contribution rates for new employers 90 percent, 100 percent, or 115 percent of average industry rates, depending on benefits charged and contributions paid by new employers in a three-year period.

Hearing Date: 3/23/07

Staff: Jill Reinmuth (786-7134).

Background:

Washington's unemployment insurance system requires covered employers to pay contributions on a percentage of taxable payroll. The contributions of covered employers are held in trust to pay benefits to unemployed workers. The contribution rates are the sum of an array calculation factor rate, a graduated social cost factor rate, and in some circumstances, a solvency surcharge.

For qualified employers:

The array calculation factor rate depends on the employer's layoff experience. Employers are placed in one of 40 rate classes, with the array calculation factor rate ranging from 0 percent to 5.4 percent.
A flat social cost factor rate is calculated as the difference between benefits paid and taxes paid, divided by total taxable payroll. The amount is then adjusted for the months of benefits in the trust fund. Employers pay a graduated social cost factor rate, ranging from 78 percent to 120 percent of the flat rate, depending on the employer's rate class.

Nonqualified employers include those who have had employees for two years or less as of
April 1 of the previous year. For new employers:

The array calculation factor rate is 115 percent of the average industry rate, but not less than 1 percent or more than 5.4 percent (the rate in rate class 40); and
The social cost factor rate is 115 percent of the average industry rate, but not more than the rate assigned to rate class 40.

Summary of Bill:

The array calculation factor rates and the social cost factor rates for new employers are:

90 percent of average industry rates if, in the three fiscal years prior to the computation date, benefits charged to new employers are less than 95 percent of contributions paid by new employers;
100 percent of average industry rates if benefits charged are at least 95 percent but less than 105 percent of contributions paid; and
115 percent of average industry rates if benefits charged are at least 105 percent of contributions paid.

The rates are subject to the following limitations:

The array calculation factor rate may not be less than 1 percent or more than 5.4 percent (the rate in rate class 40); and
The social cost factor rate may not be more than the rate assigned to rate class 40.

Rules Authority: The bill does not address the rule-making powers of an agency.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.