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H.B. 30

             1     

UNEMPLOYMENT INSURANCE AMENDMENTS

             2     
2012 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Jeremy A. Peterson

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      Committee Note:
             9          The Workforce Services and Community and Economic Development Interim
             10      Committee recommended this bill.
             11      General Description:
             12          This bill modifies the Employment Security Act by reducing the maximum
             13      unemployment insurance contribution rate for an employer beginning in calendar year
             14      2012 and capping the social unemployment insurance contribution rate for all
             15      employers for calendar year 2012 only.
             16      Highlighted Provisions:
             17          This bill:
             18          .    reduces the maximum unemployment insurance contribution rate for an employer
             19      from 9% plus the social contribution rate to 7% plus the social contribution rate
             20      beginning in calendar year 2012;
             21          .    caps the social unemployment insurance contribution rate for all employers at .4%
             22      for calendar year 2012 only;
             23          .    provides that if the reserve fund is insolvent, the reserve factor is 2.0 until the
             24      reserve fund becomes solvent; and
             25          .    makes technical changes.
             26      Money Appropriated in this Bill:
             27          None


             28      Other Special Clauses:
             29          This bill provides an immediate effective date.
             30      Utah Code Sections Affected:
             31      AMENDS:
             32          35A-4-303, as last amended by Laws of Utah 2011, Chapters 297 and 342
             33          35A-4-304, as last amended by Laws of Utah 2011, Chapter 297
             34     
             35      Be it enacted by the Legislature of the state of Utah:
             36          Section 1. Section 35A-4-303 is amended to read:
             37           35A-4-303. Determination of contribution rates.
             38          (1) (a) An employer's basic contribution rate is the same as the employer's benefit
             39      ratio[,] and is determined by dividing the total benefit costs charged back to an employer
             40      during the immediately preceding four fiscal years by the total taxable wages of the employer
             41      for the same time period, calculated to four decimal places, disregarding [the] any remaining
             42      fraction[, if any].
             43          (b) In calculating the basic contribution rate under Subsection (1)(a)[: (i)], if four fiscal
             44      years of data are not available[,]:
             45          (i) the data of [three] the number of complete fiscal years that is available shall be
             46      divided by the total taxable wages for the same time period[;]; or
             47          [(ii) if three fiscal years of data are not available, the data of two fiscal years shall be
             48      divided by the total taxable wages for the same time period; or]
             49          [(iii) if two fiscal years of data are not available, the data of one fiscal year shall be
             50      divided by the total taxable wages for the same time period.]
             51          [(2) (a) In calculating the social contribution rate under Subsection (2)(b) or (c):]
             52          [(i) if four fiscal years of data are not available, the data of three fiscal years shall be
             53      divided by the total taxable wages for the same time period; or]
             54          [(ii) if three fiscal years of data are not available, the data of two fiscal years shall be
             55      divided by the total taxable wages for the same time period.]
             56          [(b) Beginning January 1, 2005, the division shall calculate the social contribution rate
             57      by dividing all social costs as defined in Subsection 35A-4-307 (1) applicable to the preceding
             58      four fiscal years by the total taxable wages of all employers subject to contributions for the


             59      same period, calculated to four decimal places, disregarding any remaining fraction.]
             60          [(c) Beginning January 1, 2009]
             61          (ii) if the employer is a new employer, the basic contribution rate shall be determined
             62      as described in Subsection (5).
             63          (2) (a) Subject to Subsection (2)(b), the division shall [calculate] determine the social
             64      contribution rate by dividing all social costs as defined in Subsection 35A-4-307 (1) applicable
             65      to the preceding four fiscal years by the total taxable wages of all employers subject to
             66      contributions for the same period, calculated to four decimal places, disregarding any
             67      remaining fraction, and [rounded] rounding the result to three decimal places[, disregarding any
             68      further fraction,] as follows:
             69          (i) if the fourth decimal place is .0004 or less, [or rounding up to the next higher
             70      number,] the third decimal place does not change; or
             71          (ii) if the fourth decimal place is .0005 or more, rounding the third decimal place up.
             72          (b) For calendar year 2012 only, if the calculation of the social contribution rate under
             73      Subsection (2)(a) is greater than .004, the social contribution rate for calendar year 2012 is
             74      .004.
             75          (3) (a) [Beginning January 1, 2000, the] The division shall [by administrative decision]
             76      set the reserve factor at a rate that [shall sustain] sustains an adequate reserve.
             77          (b) For the purpose of setting the reserve factor:
             78          [(i) (A) the adequate reserve is defined as between 17 and 19 months of benefits at the
             79      average of the five highest benefit cost rates in the last 25 years;]
             80          [(B) beginning January 1, 2009,] (i) the adequate reserve is defined as between 18 and
             81      24 months of benefits at the average of the five highest benefit cost rates in the last 25 years;
             82          (ii) the division shall set the reserve factor [shall be] at 1.0000 if the actual reserve fund
             83      balance as of June 30 preceding the computation date is determined to be an adequate reserve;
             84          (iii) the division shall set the reserve factor [will be set] between 0.5000 and 1.0000 if
             85      the actual reserve fund balance as of June 30 preceding the computation date is greater than the
             86      adequate reserve;
             87          (iv) the division shall set the reserve factor [will be set] between 1.0000 and 1.5000 if
             88      the actual reserve fund balance as of June 30 prior to the computation date is less than the
             89      adequate reserve;


             90          (v) if the actual reserve fund balance as of June 30 preceding the computation date is
             91      insolvent or negative or if there is an outstanding loan from the Federal Unemployment
             92      Account[,] or other lending institution, the division shall set the reserve factor [will be set] at
             93      2.0000 until the actual reserve fund balance as of June 30 preceding the computation date is
             94      determined [to be an adequate reserve] by the division to be solvent or positive and there is no
             95      outstanding loan;
             96          (vi) the division shall set the reserve factor [will be set] on or before January 1 of each
             97      year; and
             98          (vii) money made available to the state under Section 903 of the Social Security Act,
             99      42 U.S.C. 1103, as amended, which is received on or after January 1, 2004, may not be
             100      considered in establishing the reserve factor under this section for the rate year 2005 or any
             101      [subsequent] following rate year.
             102          [(4) (a) On or after January 1, 2004, an employer's overall contribution rate is the
             103      employer's basic contribution rate multiplied by the reserve factor established according to
             104      Subsection (3), calculated to four decimal places, disregarding the remaining fraction, plus the
             105      social contribution rate established according to Subsection (2), and calculated to three
             106      decimal places, disregarding the remaining fraction, but not more than a maximum overall
             107      contribution rate of 9.0%, plus the applicable social contribution rate and not less than 1.1% for
             108      new employers.]
             109          [(b)] (4) (a) Beginning January 1, 2009, an employer's overall contribution rate is:
             110          (i) except as provided in Subsection (4)(a)(ii) or (iii), the employer's basic contribution
             111      rate multiplied by the reserve factor established [according to] under Subsection (3)(b),
             112      calculated to four decimal places, disregarding [the] any remaining fraction, plus the social
             113      contribution rate established [according to] under Subsection (2), and the result calculated to
             114      three decimal places, disregarding [the] any remaining fraction[, but not more than a maximum
             115      overall contribution rate of 9%, plus the applicable social contribution rate and not less than
             116      1.1% for new employers.];
             117          (ii) if under Subsection (4)(a)(i) the overall contribution rate calculation for an
             118      employer is greater than 9% plus the applicable social contribution rate, the overall
             119      contribution rate for the employer shall be reduced to 9% plus the applicable social
             120      contribution rate; or


             121          (iii) if under Subsection (4)(a)(i) the overall contribution rate calculation for a new
             122      employer is less than 1.1%, the overall contribution rate for the new employer shall be
             123      increased to 1.1%.
             124          (b) Beginning January 1, 2012, an employer's overall contribution rate is:
             125          (i) except as provided in Subsection (4)(b)(ii) or (iii), the employer's basic contribution
             126      rate multiplied by the reserve factor established under Subsection (3)(b), calculated to four
             127      decimal places, disregarding any remaining fraction, plus the social contribution rate
             128      established under Subsection (2), and the result calculated to three decimal places, disregarding
             129      any remaining fraction;
             130          (ii) if under Subsection (4)(b)(i) the overall contribution rate calculation for an
             131      employer is greater than 7% plus the applicable social contribution rate, the overall
             132      contribution rate for the employer shall be reduced to 7% plus the applicable social
             133      contribution rate; or
             134          (iii) if under Subsection (4)(b)(i) the overall contribution rate calculation for a new
             135      employer is less than 1.1%, the overall contribution rate for the new employer shall be
             136      increased to 1.1%.
             137          (c) The overall contribution rate described under this Subsection (4) does not include
             138      the addition of any penalty applicable to an employer:
             139          (i) as a result of delinquency in the payment of contributions as provided in Subsection
             140      (9)[.]; or
             141          [(d) The overall contribution rate does not include the addition of any penalty
             142      applicable to an employer]
             143          (ii) that is assessed a penalty rate under Subsection 35A-4-304 (5)(a).
             144          (5) (a) Except as otherwise provided in [Subsection (9), each new employer shall pay a
             145      contribution rate] this section, the basic contribution rate for a new employer is based on the
             146      average benefit cost rate experienced by employers of the major industry, as defined by
             147      department rule, to which the new employer belongs[, the basic contribution rate to be
             148      determined as follows:].
             149          [(a)] (b) Except as provided in Subsection (5)[(b)](c), by January 1 of each year, the
             150      basic contribution rate to be used in computing [the] a new employer's overall contribution rate
             151      under Subsection (4) is the benefit cost rate [which] that is the greater of:


             152          (i) the amount calculated by dividing the total benefit costs charged back to both active
             153      and inactive employers of the same major industry for the last two fiscal years by the total
             154      taxable wages paid by those employers that were paid during the same time period, computed
             155      to four decimal places, disregarding [the] any remaining fraction[, if any]; or
             156          (ii) 1%.
             157          [(b)] (c) If the major industrial classification assigned to a new employer is an industry
             158      for which a benefit cost rate does not exist because the industry has not operated in the state or
             159      has not been covered under this chapter, the employer's basic contribution rate [shall be] is
             160      5.4%. This basic contribution rate is used in computing the employer's overall contribution
             161      rate under Subsection (4).
             162          (6) Notwithstanding any other provision of this chapter, and except as provided in
             163      Subsection (7), if an employing unit that moves into this state is declared to be a qualified
             164      employer because it has sufficient payroll and benefit cost experience under another state, a
             165      rate shall be computed on the same basis as a rate is computed for all other employers subject
             166      to this chapter if that unit furnishes adequate records on which to compute the rate.
             167          (7) An employer who begins to operate in this state after having operated in another
             168      state shall be assigned the maximum overall contribution rate until the employer acquires
             169      sufficient experience in this state to be considered a "qualified employer" if the employer is:
             170          (a) regularly engaged as a contractor in the construction, improvement, or repair of
             171      buildings, roads, or other structures on lands;
             172          (b) generally regarded as being a construction contractor or a subcontractor specialized
             173      in some aspect of construction; or
             174          (c) required to have a contractor's license or similar qualification under Title 58,
             175      Chapter 55, Utah Construction Trades Licensing Act, or the equivalent in laws of another state.
             176          (8) (a) If an employer acquires the business or all or substantially all the assets of
             177      another employer and the other employer had discontinued operations upon the acquisition or
             178      transfers its trade or business, or a portion of its trade or business, under Subsection
             179      35A-4-304 (3)(a):
             180          (i) for purposes of determining and establishing the acquiring party's qualifications for
             181      an experience rating classification, the payrolls of both employers during the qualifying period
             182      shall be jointly considered in determining the period of liability with respect to:


             183          (A) the filing of contribution reports;
             184          (B) the payment of contributions; and
             185          (C) [after January 1, 1985,] the benefit costs of both employers;
             186          (ii) the transferring employer shall be divested of the transferring employer's
             187      unemployment experience provided the transferring employer had discontinued operations, but
             188      only to the extent as defined under Subsection 35A-4-304 (3)(c); and
             189          (iii) if an employer transfers its trade or business, or a portion of its trade or business,
             190      as defined under Subsection 35A-4-304 (3), the transferring employer may not be divested of its
             191      employer's unemployment experience.
             192          (b) An employing unit or prospective employing unit that acquires the unemployment
             193      experience of an employer shall, for all purposes of this chapter, be an employer as of the date
             194      of acquisition.
             195          (c) Notwithstanding Section 35A-4-310 , when a transferring employer, as provided in
             196      Subsection (8)(a), is divested of the employer's unemployment experience by transferring all of
             197      the employer's business to another and by ceasing operations as of the date of the transfer, the
             198      transferring employer shall cease to be an employer, as defined by this chapter, as of the date of
             199      transfer.
             200          (9) (a) [A rate of less than 8% shall be effective January 1 of any contribution year on
             201      or after January 1, 1985, but before January 1, 1988, and a] A rate of less than the maximum
             202      overall contribution rate [on or after January 1, 1988,] is effective only [with respect to] for
             203      new employers and to those qualified employers who, except for amounts due under division
             204      determinations that have not become final, paid all contributions prescribed by the division
             205      [with respect to] for the four consecutive calendar quarters in the fiscal year immediately
             206      preceding the computation date [on or after January 1, 1985].
             207          (b) Notwithstanding Subsections (1), (5), (6), and (8), [on or after January 1, 1988,] an
             208      employer who fails to pay all contributions prescribed by the division [with respect to] for the
             209      four consecutive calendar quarters in the fiscal year immediately preceding the computation
             210      date, except for amounts due under determinations that have not become final, shall pay a
             211      contribution rate equal to the overall contribution rate determined under the experience rating
             212      provisions of this chapter, plus a surcharge of 1% of wages.
             213          (c) An employer who pays all required contributions shall, for the current contribution


             214      year, be assigned a rate based upon the employer's own experience as provided under the
             215      experience rating provisions of this chapter effective the first day of the calendar quarter in
             216      which the payment was made.
             217          (d) Delinquency in filing contribution reports may not be the basis for denial of a rate
             218      less than the maximum contribution rate.
             219          (10) If an employer makes a contribution payment based on the overall contribution
             220      rate in effect at the time the payment was made and a provision of this section retroactively
             221      reduces the overall contribution rate for that payment, the division:
             222          (a) may not directly refund the difference between what the employer paid and what
             223      the employer would have paid under the new rate; and
             224          (b) shall allow the employer to make an adjustment to a future contribution payment to
             225      offset the difference between what the employer paid and what the employer would have paid
             226      under the new rate.
             227          Section 2. Section 35A-4-304 is amended to read:
             228           35A-4-304. Special provisions regarding transfers of unemployment experience
             229      and assignment rates.
             230          (1) As used in this section:
             231          (a) "Knowingly" means having actual knowledge of or acting with deliberate ignorance
             232      or reckless disregard for the prohibition involved.
             233          (b) "Person" has the meaning given that term by Section 7701(a)(1) of the Internal
             234      Revenue Code of 1986.
             235          (c) "Trade or business" includes the employer's workforce.
             236          (d) "Violate or attempt to violate" includes intent to evade, misrepresentation, or
             237      willful nondisclosure.
             238          (2) Notwithstanding any other provision of this chapter, Subsections (3) and (4) shall
             239      apply regarding assignment of rates and transfers of unemployment experience.
             240          (3) (a) If an employer transfers its trade or business, or a portion of its trade or
             241      business, to another employer and, at the time of the transfer, there is common ownership,
             242      management, or control of the employers, then the unemployment experience attributable to
             243      each employer shall be combined into a common experience rate calculation.
             244          (b) The contribution rates of the employers shall be recalculated and made effective


             245      upon the date of the transfer of trade or business as determined by division rule in accordance
             246      with Title 63G, Chapter 3, Utah Administrative Rulemaking Act.
             247          (c) (i) If one or more of the employers is a qualified employer at the time of the
             248      transfer, then all employing units that are party to a transfer described in Subsection (3)(a) of
             249      this section shall be assigned an overall contribution rate under Subsection 35A-4-303 (4)[(d)],
             250      using combined unemployment experience rating factors, for the rate year during which the
             251      transfer occurred and for the subsequent three rate years.
             252          (ii) If none of the employing units is a qualified employer at the time of the transfer,
             253      then all employing units that are party to the transfer described in Subsection (3)(a) shall be
             254      assigned the highest overall contribution rate applicable at the time of the transfer to any
             255      employer who is party to the acquisition for the rate year during which the transfer occurred
             256      and for subsequent rate years until the time when one or more of the employing units is a
             257      qualified employer.
             258          (iii) Once one or more employing units described in Subsection (3)(c)(ii) is a qualified
             259      employer, all the employing units shall be assigned an overall rate under Subsection
             260      35A-4-303 (4)[(d)], using combined unemployment experience rating factors for subsequent
             261      rate years, not to exceed three years following the year of the transfer.
             262          (d) The transfer of some or all of an employer's workforce to another employer shall be
             263      considered a transfer of its trade or business when, as the result of the transfer, the transferring
             264      employer no longer performs trade or business with respect to the transferred workforce, and
             265      the trade or business is now performed by the employer to whom the workforce is transferred.
             266          (4) (a) Whenever a person is not an employer under this chapter at the time it acquires
             267      the trade or business of an employer, the unemployment experience of the acquired business
             268      may not be transferred to that person if the division finds that the person acquired the business
             269      solely or primarily for the purpose of obtaining a lower rate of contributions.
             270          (b) The person shall be assigned the applicable new employer rate under Subsection
             271      35A-4-303 (5).
             272          (c) In determining whether the business was acquired solely or primarily for the
             273      purpose of obtaining a lower rate of contributions, the division shall use objective factors
             274      which may include:
             275          (i) the cost of acquiring the business;


             276          (ii) whether the person continued the business enterprise of the acquired business;
             277          (iii) how long the business enterprise was continued; or
             278          (iv) whether a substantial number of new employees were hired for performance of
             279      duties unrelated to the business activity conducted prior to acquisition.
             280          (5) (a) If a person knowingly violates or attempts to violate Subsection (3) or (4) or any
             281      other provision of this chapter related to determining the assignment of a contribution rate, or if
             282      a person knowingly advises another person in a way that results in a violation of any of those
             283      subsections or provisions, the person is subject to the following penalties:
             284          (i) (A) If the person is an employer, then the employer shall be assigned an overall
             285      contribution rate of 5.4% for the rate year during which the violation or attempted violation
             286      occurred and for the subsequent rate year.
             287          (B) If the person's business is already at 5.4% for any year, or if the amount of increase
             288      in the person's rate would be less than 2% for that year, then a penalty surcharge of
             289      contributions of 2% of taxable wages shall be imposed for the rate year during which the
             290      violation or attempted violation occurred and for the subsequent rate year.
             291          (ii) (A) If the person is not an employer, the person shall be subject to a civil penalty of
             292      not more than $5,000.
             293          (B) The fine shall be deposited in the penalty and interest account established under
             294      Section 35A-4-506 .
             295          (b) (i) In addition to the penalty imposed by Subsection (5)(a), a violation of this
             296      section may be prosecuted as unemployment insurance fraud.
             297          (ii) The determination of the degree of an offense shall be measured by the total value
             298      of all contributions avoided or reduced or contributions sought to be avoided or reduced by the
             299      unlawful conduct as applied to the degrees listed under Subsection 76-8-1301 (2)(a).
             300          (6) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             301      division shall make rules to identify the transfer or acquisition of a business for purposes of this
             302      section.
             303          (7) This section shall be interpreted and applied in a manner that meets the minimum
             304      requirements contained in any guidance or regulations issued by the United States Department
             305      of Labor.
             306          Section 3. Effective date.


             307          If approved by two-thirds of all the members elected to each house, this bill takes effect
             308      upon approval by the governor, or the day following the constitutional time limit of Utah
             309      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             310      the date of veto override.




Legislative Review Note
    as of 11-17-11 11:41 AM


Office of Legislative Research and General Counsel


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