Reynolds: Iowa unemployment insurance rates to drop to 24-year low

Unemployment insurance rates for Iowa employers will drop to a 24-year low, beginning in 2023, Gov. Kim Reynolds’ office and Iowa Workforce Development announced this week.

Beginning Jan. 1, contribution rates will be drawn from Table 8, the lowest rates currently allowed under Iowa law.

State law requires unemployment insurance taxes be collected from employers under eight different tax rate tables with 21 rate brackets. Rates vary from zero percent to 9 percent on Table 1 and from zero percent to 7 percent on Table 8.

Table 7 has been used for the past five consecutive years.

The trigger for deciding which unemployment insurance rate table to implement is derived from a formula based primarily on the balance in Iowa’s unemployment insurance trust fund, unemployment benefit history and covered wage growth, according a news release from the Governor’s Office.

Reynolds last year decided to invest $237 million in federal funds from the American Rescue Plan Act to stabilize the unemployment trust fund following record payouts from unprecedented job losses during the COVID-19 pandemic.

In 2020, Reynolds also directed $490 million of coronavirus relief funds be used to support the trust fund.

Iowa Workforce Development Director Beth Townsend said employers would see, on average, a 25 percent reduction in their unemployment taxes next year “and those savings will provide more resources for Iowa employers to invest in growing their businesses.”

The switch to a lower tax table means a business paying the median tax rate on employee wages totaling $36,100 or more annually would pay $72.20 less per employee in unemployment taxes in 2023 under the same tax rank as 2022, according to the Governor’s Office.

“Iowa faced the pandemic and its economic impacts head on, and due to our conservative fiscal practices and prudent investment in Iowa’s Unemployment Trust Fund, unemployment insurance taxes in our state will soon reach their lowest rates since 1999,” Reynolds said in a statement.

Reduced benefits

Democrats, however, note Iowans will see reduced unemployment benefits.

Starting last month, unemployed workers in Iowa will receive 10 fewer weeks of state unemployment benefits under a new law signed by Reynolds.

The new law reduces the length of state unemployment benefits from 26 weeks to 16 weeks. Iowa becomes just the fourth state with 16 weeks or fewer of state unemployment benefits.

The new law also changes the requirements for taking a job that pays less than the unemployed Iowan’s previous job.

The state has not required workers to accept a job for less pay until after their fifth week on unemployment, but the new law will lower that to one week and continue ratcheting down the percentage of the employee's wage that is considered suitable.

The progressive advocacy group Progress Iowa has said the reduction will hurt laid-off workers, suppress wages and make Iowa an unwelcoming state.

“The premiums have gone down because the benefits have gone down,” Democratic state Sen. Herman Quirmbach of Ames said Thursday during an Iowa Democratic Party weekly conference call with reporters.

“And, you know, we have worker shortages in so many areas,” Quirmbach said.

“Our construction workers who are going to build all of the infrastructure that we are going to build in this state — they get laid off from time to time on a seasonal basis. If our unemployment benefits are cut, they’re going to move to other states that can keep them afloat during those seasonal periods.”

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