BILL REQ. #:  Z-0205.2 



_____________________________________________ 

SENATE BILL 5137
_____________________________________________
State of Washington60th Legislature2007 Regular Session

By Senators Kohl-Welles and Keiser; by request of Governor Gregoire

Read first time 01/11/2007.   Referred to Committee on Labor, Commerce, Research & Development.



     AN ACT Relating to revising the industry average unemployment contribution rates; amending RCW 50.29.025; and creating new sections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 50.29.025 and 2006 c 13 s 4 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, the contribution rate for each employer subject to contributions under RCW 50.24.010 shall be determined under this subsection.
     (a) A fund balance ratio shall be determined by dividing the balance in the unemployment compensation fund as of the September 30th immediately preceding the rate year by the total remuneration paid by all employers subject to contributions during the second calendar year preceding the rate year and reported to the department by the following March 31st. The division shall be carried to the fourth decimal place with the remaining fraction, if any, disregarded. The fund balance ratio shall be expressed as a percentage.
     (b) The interval of the fund balance ratio, expressed as a percentage, shall determine which tax schedule in (e) of this subsection shall be in effect for assigning tax rates for the rate year. The intervals for determining the effective tax schedule shall be:

Interval of the
Fund Balance Ratio
Expressed as a Percentage
Effective
Tax Schedule
 2.90 and aboveAA
 2.10 to 2.89A
 1.70 to 2.09B
 1.40 to 1.69C
 1.00 to 1.39D
 0.70 to 0.99E
 Less than 0.70F

     (c) An array shall be prepared, listing all qualified employers in ascending order of their benefit ratios. The array shall show for each qualified employer: (i) Identification number; (ii) benefit ratio; (iii) taxable payrolls for the four calendar quarters immediately preceding the computation date and reported to the department by the cut-off date; (iv) a cumulative total of taxable payrolls consisting of the employer's taxable payroll plus the taxable payrolls of all other employers preceding him or her in the array; and (v) the percentage equivalent of the cumulative total of taxable payrolls.
     (d) Each employer in the array shall be assigned to one of twenty rate classes according to the percentage intervals of cumulative taxable payrolls set forth in (e) of this subsection: PROVIDED, That if an employer's taxable payroll falls within two or more rate classes, the employer and any other employer with the same benefit ratio shall be assigned to the lowest rate class which includes any portion of the employer's taxable payroll.
     (e) Except as provided in RCW 50.29.026, the contribution rate for each employer in the array shall be the rate specified in the following tables for the rate class to which he or she has been assigned, as determined under (d) of this subsection, within the tax schedule which is to be in effect during the rate year:

Percent of
Cumulative
Taxable Payrolls
Schedules of Contributions Rates
for Effective Tax Schedule
From
To
Rate
Class
AA
A
B
C
D
E
F
0.005.001 0.470.470.570.971.471.872.47
5.0110.002 0.470.470.771.171.672.072.67
10.0115.003 0.570.570.971.371.772.272.87
15.0120.004 0.570.731.111.511.902.402.98
20.0125.005 0.720.921.301.702.092.593.08
25.0130.006 0.911.111.491.892.292.693.18
30.0135.007 1.001.291.692.082.482.883.27
35.0140.008 1.191.481.882.272.673.073.47
40.0145.009 1.371.672.072.472.873.273.66
45.0150.0010 1.561.862.262.663.063.463.86
50.0155.0011 1.842.142.452.853.253.663.95
55.0160.0012 2.032.332.643.043.443.854.15
60.0165.0013 2.222.522.833.233.644.044.34
65.0170.0014 2.402.713.023.433.834.244.54
70.0175.0015 2.682.903.213.624.024.434.63
75.0180.0016 2.873.093.423.814.224.534.73
80.0185.0017 3.273.473.774.174.574.874.97
85.0190.0018 3.673.874.174.574.874.975.17
90.0195.0019 4.074.274.574.975.075.175.37
95.01100.0020 5.405.405.405.405.405.405.40

     (f) The contribution rate for each employer not qualified to be in the array shall be as follows:
     (i) Employers who do not meet the definition of "qualified employer" by reason of failure to pay contributions when due shall be assigned a contribution rate two-tenths higher than that in rate class 20 for the applicable rate year, except employers who have an approved agency-deferred payment contract by September 30 of the previous rate year. If any employer with an approved agency-deferred payment contract fails to make any one of the succeeding deferred payments or fails to submit any succeeding tax report and payment in a timely manner, the employer's tax rate shall immediately revert to a contribution rate two-tenths higher than that in rate class 20 for the applicable rate year; and
     (ii) For all other employers not qualified to be in the array, the contribution rate shall be a rate equal to the average industry rate as determined by the commissioner; however, the rate may not be less than one percent.
     (2) Beginning with contributions assessed for rate year 2005, the contribution rate for each employer subject to contributions under RCW 50.24.010 shall be the sum of the array calculation factor rate and the graduated social cost factor rate determined under this subsection, and the solvency surcharge determined under RCW 50.29.041, if any.
     (a) The array calculation factor rate shall be determined as follows:
     (i) An array shall be prepared, listing all qualified employers in ascending order of their benefit ratios. The array shall show for each qualified employer: (A) Identification number; (B) benefit ratio; and (C) taxable payrolls for the four consecutive calendar quarters immediately preceding the computation date and reported to the employment security department by the cut-off date.
     (ii) Each employer in the array shall be assigned to one of forty rate classes according to his or her benefit ratio as follows, and, except as provided in RCW 50.29.026, the array calculation factor rate for each employer in the array shall be the rate specified in the rate class to which the employer has been assigned:

Benefit RatioRate
Class
Rate
(percent)
At leastLess than
0.00000110.00
0.0000010.00125020.13
0.0012500.00250030.25
0.0025000.00375040.38
0.0037500.00500050.50
0.0050000.00625060.63
0.0062500.00750070.75
0.0075000.00875080.88
0.0087500.01000091.00
0.0100000.011250101.15
0.0112500.012500111.30
0.0125000.013750121.45
0.0137500.015000131.60
0.0150000.016250141.75
0.0162500.017500151.90
0.0175000.018750162.05
0.0187500.020000172.20
0.0200000.021250182.35
0.0212500.022500192.50
0.0225000.023750202.65
0.0237500.025000212.80
0.0250000.026250222.95
0.0262500.027500233.10
0.0275000.028750243.25
0.0287500.030000253.40
0.0300000.031250263.55
0.0312500.032500273.70
0.0325000.033750283.85
0.0337500.035000294.00
0.0350000.036250304.15
0.0362500.037500314.30
0.0375000.040000324.45
0.0400000.042500334.60
0.0425000.045000344.75
0.0450000.047500354.90
0.0475000.050000365.05
0.0500000.052500375.20
0.0525000.055000385.30
0.0550000.057500395.35
0.057500405.40

     (b) The graduated social cost factor rate shall be determined as follows:
     (i)(A) Except as provided in (b)(i)(B) and (C) of this subsection, the commissioner shall calculate the flat social cost factor for a rate year by dividing the total social cost by the total taxable payroll. The division shall be carried to the second decimal place with the remaining fraction disregarded unless it amounts to five hundredths or more, in which case the second decimal place shall be rounded to the next higher digit. The flat social cost factor shall be expressed as a percentage.
     (B) If, on the cut-off date, the balance in the unemployment compensation fund is determined by the commissioner to be an amount that will provide more than ten months of unemployment benefits, the commissioner shall calculate the flat social cost factor for the rate year immediately following the cut-off date by reducing the total social cost by the dollar amount that represents the number of months for which the balance in the unemployment compensation fund on the cut-off date will provide benefits above ten months and dividing the result by the total taxable payroll. However, the calculation under this subsection (2)(b)(i)(B) for a rate year may not result in a flat social cost factor that is more than four-tenths lower than the calculation under (b)(i)(A) of this subsection for that rate year.
     For the purposes of this subsection, the commissioner shall determine the number of months of unemployment benefits in the unemployment compensation fund using the benefit cost rate for the average of the three highest calendar benefit cost rates in the twenty consecutive completed calendar years immediately preceding the cut-off date or a period of consecutive calendar years immediately preceding the cut-off date that includes three recessions, if longer.
     (C) The minimum flat social cost factor calculated under this subsection (2)(b) shall be six-tenths of one percent, except that if the balance in the unemployment compensation fund is determined by the commissioner to be an amount that will provide:
     (I) At least twelve months but less than fourteen months of unemployment benefits, the minimum shall be five-tenths of one percent; or
     (II) At least fourteen months of unemployment benefits, the minimum shall be five-tenths of one percent, except that, for employers in rate class 1, the minimum shall be forty-five hundredths of one percent.
     (ii)(A) Except as provided in (b)(ii)(B) of this subsection, the graduated social cost factor rate for each employer in the array is the flat social cost factor multiplied by the percentage specified as follows for the rate class to which the employer has been assigned in (a)(ii) of this subsection, except that the sum of an employer's array calculation factor rate and the graduated social cost factor rate may not exceed six and five-tenths percent or, for employers whose North American industry classification system code is within "111," "112," "1141," "115," "3114," "3117," "42448," or "49312," may not exceed six percent through rate year 2007 and may not exceed five and seven-tenths percent for rate year 2008 and thereafter:
     (I) Rate class 1 - 78 percent;
     (II) Rate class 2 - 82 percent;
     (III) Rate class 3 - 86 percent;
     (IV) Rate class 4 - 90 percent;
     (V) Rate class 5 - 94 percent;
     (VI) Rate class 6 - 98 percent;
     (VII) Rate class 7 - 102 percent;
     (VIII) Rate class 8 - 106 percent;
     (IX) Rate class 9 - 110 percent;
     (X) Rate class 10 - 114 percent;
     (XI) Rate class 11 - 118 percent; and
     (XII) Rate classes 12 through 40 - 120 percent.
     (B) For contributions assessed beginning July 1, 2005, through December 31, 2007, for employers whose North American industry classification system code is "111," "112," "1141," "115," "3114," "3117," "42448," or "49312," the graduated social cost factor rate is zero.
     (iii) For the purposes of this section:
     (A) "Total social cost" means the amount calculated by subtracting the array calculation factor contributions paid by all employers with respect to the four consecutive calendar quarters immediately preceding the computation date and paid to the employment security department by the cut-off date from the total unemployment benefits paid to claimants in the same four consecutive calendar quarters. To calculate the flat social cost factor for rate year 2005, the commissioner shall calculate the total social cost using the array calculation factor contributions that would have been required to be paid by all employers in the calculation period if (a) of this subsection had been in effect for the relevant period.
     (B) "Total taxable payroll" means the total amount of wages subject to tax, as determined under RCW 50.24.010, for all employers in the four consecutive calendar quarters immediately preceding the computation date and reported to the employment security department by the cut-off date.
     (c) The array calculation factor rate for each employer not qualified to be in the array shall be as follows:
     (i) Employers who do not meet the definition of "qualified employer" by reason of failure to pay contributions when due shall be assigned an array calculation factor rate two-tenths higher than that in rate class 40, except employers who have an approved agency-deferred payment contract by September 30th of the previous rate year. If any employer with an approved agency-deferred payment contract fails to make any one of the succeeding deferred payments or fails to submit any succeeding tax report and payment in a timely manner, the employer's tax rate shall immediately revert to an array calculation factor rate two-tenths higher than that in rate class 40; and
     (ii) For all other employers not qualified to be in the array, the array calculation factor rate shall be a rate equal to the average industry array calculation factor rate as determined by the commissioner((, plus fifteen percent of that amount)); however, the rate may not be less than one percent or more than the array calculation factor rate in rate class 40.
     (d) The graduated social cost factor rate for each employer not qualified to be in the array shall be as follows:
     (i) For employers whose array calculation factor rate is determined under (c)(i) of this subsection, the social cost factor rate shall be the social cost factor rate assigned to rate class 40 under (b)(ii) of this subsection.
     (ii) For employers whose array calculation factor rate is determined under (c)(ii) of this subsection, the social cost factor rate shall be a rate equal to the average industry social cost factor rate as determined by the commissioner, ((plus fifteen percent of that amount,)) but not more than the social cost factor rate assigned to rate class 40 under (b)(ii) of this subsection.
     (3) Assignment of employers by the commissioner to industrial classification, for purposes of this section, shall be in accordance with established classification practices found in the "Standard Industrial Classification Manual" issued by the federal office of management and budget to the third digit provided in the standard industrial classification code, or in the North American industry classification system code.

NEW SECTION.  Sec. 2   If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state or the eligibility of employers in this state for federal unemployment tax credits, the conflicting part of this act is inoperative solely to the extent of the conflict, and the finding or determination does not affect the operation of the remainder of this act. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state or the granting of federal unemployment tax credits to employers in this state.

NEW SECTION.  Sec. 3   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 4   This act applies for rate years beginning on or after January 1, 2008.

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