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H.B. 345

             1     

UNEMPLOYMENT INSURANCE AMENDMENTS

             2     
2000 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: John E. Swallow

             5      AN ACT RELATING TO UNEMPLOYMENT INSURANCE; AMENDING THE
             6      UNEMPLOYMENT INSURANCE TAX RATE FORMULA TO FIX THE SOCIAL
             7      CONTRIBUTION RATE AT A SET AMOUNT AND TO PROVIDE AN ADMINISTRATIVE
             8      ADJUSTMENT FOR THE RESERVE FACTOR; AND MAKING TECHNICAL CHANGES.
             9      This act affects sections of Utah Code Annotated 1953 as follows:
             10      AMENDS:
             11          35A-4-303, as last amended by Chapter 148, Laws of Utah 1997
             12      Be it enacted by the Legislature of the state of Utah:
             13          Section 1. Section 35A-4-303 is amended to read:
             14           35A-4-303. Determination of contribution rates.
             15          (1) (a) On or before January 1 of each year beginning January 1, 1985, an employer's basic
             16      contribution rate will be the same as the employer's benefit ratio, determined by dividing the total
             17      benefit costs charged back to an employer during the immediately preceding four fiscal years by
             18      the total taxable wages of the employer for the same time period, calculated to four decimal places,
             19      disregarding the remaining fraction, if any.
             20          (b) In calculating the basic contribution rate under Subsection (1)(a):
             21          (i) if four fiscal years of data are not available, the data of three fiscal years shall be
             22      divided by the total taxable wages for the same time period;
             23          (ii) if three fiscal years of data are not available, the data of two fiscal years shall be
             24      divided by the total taxable wages for the same time period; or
             25          (iii) if two fiscal years of data are not available, the data of one fiscal year shall be divided
             26      by the total taxable wages for the same time period.
             27          (2) (a) On or before January 1 of each year beginning with January 1, 1985, all social costs


             28      as defined in Subsection 35A-4-307 (1) applicable to the immediately preceding four fiscal years
             29      shall be divided by the total taxable wages of all employers subject to contributions for the same
             30      time period, calculated to four decimal places, disregarding the remaining fraction, if any.
             31          (b) In calculating the social contribution rate under Subsection (2)(a):
             32          (i) if four fiscal years of data are not available, the data of three fiscal years shall be
             33      divided by the total taxable wages for the same time period; or
             34          (ii) if three fiscal years of data are not available, the data of two fiscal years shall be
             35      divided by the total taxable wages for the same time period.
             36          [(c) The quotient under Subsections (2)(a) and (b) is the social contribution rate and shall
             37      be added to each employer's basic contribution rate after the basic contribution rate has been
             38      adjusted by the reserve factor, if there is a reserve factor for that year.]
             39          (c) On or after January 1, 2000, the social contribution rate shall be:
             40          (i) set at 0.0010 for any rate year in which the reserve factor established in Subsection
             41      (3)(c) is equal to or less than 1.0000; or
             42          (ii) calculated by dividing all social costs as defined in Subsection 35A-4-307 (1)
             43      applicable to the preceding four fiscal years by the total taxable wages of all employers subject to
             44      contributions for the same time period, calculated to four decimal places, disregarding any
             45      remaining fraction, for any rate year in which the reserve factor established in Subsection (3)(c)
             46      is greater than 1.0000.
             47          (3) (a) On or before January 1 of each year beginning with January 1, 1985, the reserve
             48      factor shall be computed under Subsection (3)(b). For purposes of computing the reserve factor:
             49          (i) the five-year average benefit cost rate is calculated by:
             50          (A) determining the five highest benefit cost rates experienced in the 25 years ending
             51      December 31 one year prior to the computation date;
             52          (B) adding together the rates determined under Subsection (3)(a)(i)(A); and
             53          (C) dividing the amount under Subsection (3)(a)(i)(B) by five, calculated to four decimal
             54      places, disregarding the remaining fraction, if any;
             55          (ii) the minimum adequate reserve fund balance is calculated by:
             56          (A) multiplying the five-year average benefit cost rate by 1.5; and
             57          (B) multiplying the amount under Subsection (3)(a)(ii)(A) by total wages of the fiscal year
             58      ending prior to the computation date, rounded to the nearest dollar;


             59          (iii) the maximum adequate reserve fund balance is calculated by:
             60          (A) multiplying the five-year average benefit cost rate by 2.0; and
             61          (B) multiplying the amount under Subsection (3)(a)(iii)(A) by the total wages used under
             62      Subsection (3)(a)(ii)(B), rounded to the nearest dollar; and
             63          (iv) the computation date is the January 1 on which the reserve factor is calculated.
             64          (b) (i) The reserve factor is one if the actual reserve fund balance as of June 30 preceding
             65      the computation date is:
             66          (A) equal to or greater than the minimum adequate reserve fund balance; and
             67          (B) equal to or less than the maximum adequate reserve fund balance.
             68          (ii) If the actual reserve fund balance as of June 30 preceding the computation date is less
             69      than the minimum adequate reserve fund balance, the reserve factor shall be the greater of:
             70          (A) 2.0000 minus an amount equal to the actual reserve fund balance divided by the
             71      minimum adequate reserve fund balance, calculated to four decimal places, disregarding the
             72      remaining fraction, if any; or
             73          (B) the reserve factor calculated in the prior year.
             74          (iii) The reserve factor is 2.0000 if:
             75          (A) the actual reserve fund balance as of June 30 preceding the computation date is:
             76          (I) insolvent; or
             77          (II) negative; or
             78          (B) there is an outstanding loan from the Federal Unemployment Account.
             79          (iv) If the actual reserve fund balance as of June 30 preceding the computation date is more
             80      than the maximum adequate reserve fund balance, the reserve factor shall be calculated by:
             81          (A) dividing the actual reserve fund balance by the maximum adequate reserve fund
             82      balance, calculated to four decimal places, disregarding the remaining fraction, if any; and
             83          (B) subtracting the amount under Subsection (3)(b)(iv)(A) from 2.0000.
             84          (c) Beginning January 1, 2000, the division shall by administrative decision set the reserve
             85      factor at a rate that shall sustain an adequate reserve. For the purpose of setting the reserve factor:
             86          (i) the adequate reserve is defined as between 17 and19 months of benefits at the average
             87      of the five highest benefit cost rates in the last 25 years;
             88          (ii) the reserve factor shall be 1.0000 if the actual reserve fund balance as of June 30
             89      preceding the computation date is determined to be an adequate reserve;


             90          (iii) the reserve factor will be set between 0.5000 and 1.0000 if the actual reserve fund
             91      balance as of June 30 preceding the computation date is greater than the adequate reserve;
             92          (iv) the reserve factor will be set between 1.0000 and 1.5000 if the actual reserve fund
             93      balance as of June 30 prior to the computation date is less than the adequate reserve;
             94          (v) if the actual reserve fund balance as of June 30 preceding the computation date is
             95      insolvent or negative or if there is an outstanding loan from the Federal Unemployment Account,
             96      the reserve factor will be set at 2.0000 until the actual reserve fund balance as of June 30 preceding
             97      the computation date is determined to be an adequate reserve; and
             98          (vi) the reserve factor will be set on or before January 1 of each year.
             99          (4) (a) Until January 1, 1995, an employer's overall contribution rate is the employer's
             100      basic contribution rate multiplied by the reserve factor, if there is a reserve factor, calculated to
             101      four decimal places, disregarding any further fraction, plus the social contribution rate, and
             102      rounded up to the next higher multiple of .10%, but not more than a maximum overall contribution
             103      rate of 8.0% and not less than 1% for new employers.
             104          (b) On or after January 1, 1995, an employer's overall contribution rate is the employer's
             105      basic contribution rate multiplied by the reserve factor, calculated to four decimal places,
             106      disregarding any further fraction, plus the social contribution rate, and rounded to three decimal
             107      places, disregarding any further fraction, if the fourth decimal place is .0004 or less, or rounding
             108      up to the next higher number, if the fourth decimal place is .0005 or more, but not more than a
             109      maximum overall contribution rate of 8.0% and not less than 1% for new employers.
             110          (c) On or after January 1, 2000, an employer's overall contribution rate is the employer's
             111      basic contribution rate multiplied by the reserve factor established according to Subsection (3)(c),
             112      calculated to four decimal places, disregarding the remaining fraction, plus the social contribution
             113      rate established according to Subsection (2)(c), and calculated to three decimal places, disregarding
             114      the remaining fraction, but not more than a maximum overall contribution rate of 8.0%, plus the
             115      applicable social contribution rate and not less than 1.1% for new employers.
             116          [(c)] (d) The overall contribution rate does not include the addition of any penalty
             117      applicable to an employer as a result of delinquency in the payment of contributions as provided
             118      in Subsection (10).
             119          (5) Except as provided in Subsection (10), each new employer shall pay a contribution rate
             120      based on the average benefit cost rate experienced by employers of the major industry as defined


             121      by department rule to which the new employer belongs, the basic contribution rate to be
             122      determined as follows:
             123          (a) Except as provided in Subsection (5)(b), on or before January 1 of each year, the basic
             124      contribution rate to be used in computing the employer's overall contribution rate is the benefit cost
             125      rate which is the greater of:
             126          (i) the amount calculated by dividing the total benefit costs charged back to both active
             127      and inactive employers of the same major industry for the last two fiscal years by the total taxable
             128      wages paid by those employers that were paid during the same time period, computed to four
             129      decimal places, disregarding the remaining fraction, if any; or
             130          (ii) 1%.
             131          (b) If the major industrial classification assigned to a new employer is an industry for
             132      which a benefit cost rate does not exist because the industry has not operated in the state or has not
             133      been covered under this chapter, the employer's basic contribution rate shall be 5.4%. This basic
             134      contribution rate is used in computing the employer's overall contribution rate.
             135          (6) (a) A reopening employer's basic contribution rate is the average overall contribution
             136      rate for all employers in the state, but not less than 1%, until such time as the reopening employer
             137      becomes a qualified employer as defined in Section 35A-4-301 .
             138          (b) The average overall contribution rate for all employers in the state shall be defined by
             139      rule.
             140          (c) The reopening employer is an employer that is not substantially related to or affiliated
             141      with the predecessor employer and that acquires, for the purpose of reopening, substantially all the
             142      assets of a business or operating component of a business that has been closed or substantially
             143      closed for 90 days or more of its normal operating period immediately prior to the acquisition.
             144          (d) A business or operating component of a business has been substantially closed if:
             145          (i) its normal production has been stopped;
             146          (ii) a majority of its workers have been laid off; and
             147          (iii) the services of remaining employees are devoted to the protection and disposition of
             148      assets and inventory or administrative duties.
             149          (7) Notwithstanding any other provision of this chapter, and except as provided in
             150      Subsection (8), if an employing unit that moves into this state is declared to be a qualified
             151      employer because it has sufficient payroll and benefit cost experience under another state, a rate


             152      shall be computed on the same basis as a rate is computed for all other employers subject to this
             153      chapter if that unit furnishes adequate records on which to compute the rate.
             154          (8) An employer who begins to operate in this state after having operated in another state
             155      shall be assigned the maximum overall contribution rate until the employer acquires sufficient
             156      experience in this state to be considered a "qualified employer" if the employer is:
             157          (a) regularly engaged as a contractor in the construction, improvement, or repair of
             158      buildings, roads, or other structures on lands;
             159          (b) generally regarded as being a construction contractor or a subcontractor specialized in
             160      some aspect of construction; or
             161          (c) required to have a contractor's license or similar qualification under Title 58, Chapter
             162      55, Utah Construction Trades Licensing Act, or the equivalent in laws of another state.
             163          (9) (a) If an employer, other than a reopening employer, acquires the business or all or
             164      substantially all the assets of another employer and the other employer had discontinued operations
             165      upon the acquisition:
             166          (i) for purposes of determining and establishing the acquiring party's qualifications for an
             167      experience rating classification, the payrolls of both employers during the qualifying period shall
             168      be jointly considered in determining the period of liability with respect to:
             169          (A) the filing of contribution reports;
             170          (B) the payment of contributions; and
             171          (C) after January 1, 1985, the benefit costs of both employers; and
             172          (ii) the transferring employer shall be divested of the transferring employer's payroll
             173      experience.
             174          (b) Any employing unit or prospective employing unit that acquires the payroll experience
             175      of an employer shall, for all purposes of this chapter, be an employer as of the date of acquisition.
             176          (c) Notwithstanding Section 35A-4-310 , when a transferring employer, as provided in
             177      Subsection (9)(a), is divested of the employer's payroll experience by transferring all of the
             178      employer's business to another and by ceasing operations as of the date of the transfer, the
             179      transferring employer shall cease to be an employer, as defined by this chapter, as of the date of
             180      transfer.
             181          (10) (a) A rate of less than 8% shall be effective January 1 of any contribution year on or
             182      after January 1, 1985, but before January 1, 1988, and a rate of less than the maximum overall


             183      contribution rate on or after January 1, 1988, only with respect to new employers and to those
             184      qualified employers who, except for amounts due under division determinations that have not
             185      become final, paid all contributions prescribed by the division with respect to the four consecutive
             186      calendar quarters in the fiscal year immediately preceding the computation date on or after January
             187      1, 1985.
             188          (b) Notwithstanding Subsections (1), (5), (6), (7), and (9), on or after January 1, 1988, any
             189      employer who fails to pay all contributions prescribed by the division with respect to the four
             190      consecutive calendar quarters in the fiscal year immediately preceding the computation date,
             191      except for amounts due under determinations that have not become final, shall pay a contribution
             192      rate equal to the overall contribution rate determined under the experience rating provisions of this
             193      chapter, plus a surcharge of 1% of wages.
             194          (c) Any employer who pays all required contributions shall, for the current contribution
             195      year, be assigned a rate based upon the employer's own experience as provided under the
             196      experience rating provisions of this chapter effective the first day of the calendar quarter in which
             197      the payment was made.
             198          (d) Delinquency in filing contribution reports shall not be the basis for denial of a rate less
             199      than the maximum contribution rate.




Legislative Review Note
    as of 2-4-00 9:05 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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