UI contributions may be collected from employers under eight different tax rate tables, each table having 21 ranks. Rates vary from 0.000 percent to 9.000 percent on Table 1 and from 0.000 percent to 7.000 percent on Table 8. (This means that Table 1 collects the most and Table 8 collects the least tax).
The tables were established to help maintain the solvency of the UI Trust Fund. As such, a formula in the law mandates movement to a table that collects more revenue when the balance in the UI Trust Fund is low and movement to a table collecting less revenue when the balance is high.
The rate table in effect for any given year is applicable to all participating employers. The rate table in effect for all private employers for 2022 is Contribution Rate Table 7. The rate table in effect for all private employers for 2023 is Contribution Rate Table 8.
In addition to mandating the tax table in effect, the Iowa UI law provides a formula for determining the tax rates of individual employers.
In the benefit ratio system two factors are calculated. An employer’s five-year average annual benefit payment is divided by the employer’s five-year average annual taxable payroll. The result is benefits expressed as a percent of taxable payroll, or a benefit ratio. Each employer’s benefit ratio is then compared to every other employer’s benefit ratio in a ranking or array system. Those with the lowest benefit ratio receive the lowest tax rates.
Your rank is determined by how your benefit ratio compares to the benefit ratios of other employers.
Each employer’s rank is calculated by listing their increasing benefit ratios from the lowest benefit ratio to the highest benefit ratio. Next, employers are divided into 21 groups or ranks. Each of the 21 ranks contain approximately 4.76 percent (or 1/21) of the total taxable wages reported by the same employers for the four calendar quarters immediately preceding the rate computation date (July 1). Currently, approximately 44 percent of Iowa’s ranked employers have a 0.000 percent rate.
Employers who do not agree with an unemployment tax rate computation may file an appeal. The appeal must:
Grounds may include an error in the rate, a favorable claims decision issued since the rate computation date, or that you expect to receive one on an appeal in progress. Grounds do not include fairness or financial hardship as we can not reduce rates that are correctly calculated. Your appeal must be in writing and mailed, emailed or faxed to:
Iowa Workforce Development
Unemployment Insurance Tax Bureau
1000 East Grand Ave.
Des Moines IA 50319-0209
Email: iwduitax@iwd.iowa.gov
Fax: (515) 242-5247
Once the appeal is scheduled, you will receive further communication from the Division of Administrative Appeals including an appeal packet, date and time of appeal, and instructions for participation.
Benefit paid on a UI claim are generally charged to the accounts of the claimant's base-period employers. The most recent base-period employer is charged first with benefits paid until the wage credits are exhausted. Once wage credits are exhausted from the most recent base-period employer, charges go the next most recent employer and so on.
The base-period is a four quarter (one year) time frame using the first four of the last five completed calendar quarters at the time an initial UI claim is filed. The diagram below identifies how to determine the base period. For additional information, please refer to the Unemployment Insurance Benefits Handbook.
Within 40 days after the close of each calendar quarter, IWD sends each contributory employer a Statement of Charges listing the UI benefits paid to former employees and charged to the employer’s UI tax account.
This statement is sent for informational purposes and is not a bill. In order to compare this statement to your annual Notice of Tax Rate, you should retain it for five years. You are given 30 days from the date the Statement of Charges was sent to file an appeal of any charges that are shown on the statement. Instructions for appealing are on the back of the statement.
If your account carries an outstanding balance, you will receive a monthly Statement of Amount Due. Interest will continue to accrue daily on contributions due until the amount is paid in full. Failure to pay may result in further collection action such as: Jeopardy Assessments, Liens, Distress Warrants, Garnishments, Injunctions and/or taking an offset from payment due to you from the State of Iowa or the Internal Revenue Service. If you are unable to make payment in full, contact UI Tax Collections to see if you qualify for a payment plan.
Within 30 days after the close of each calendar quarter, IWD sends each reimbursable employer a Notice of Reimbursable Benefit Charges listing the UI benefits paid to former employees and charged to the employer's UI tax account.
This notice is sent for collection purposes. Payment in full is due within 30 days of the date the notice is sent to avoid interest. If the amount due is not paid within 30 days, interest will accrue at the rate of 1 percent per month on the remaining balance until paid in full (1/30 of 1 percent per day).
You are given 15 days from the date the Notice of Reimbursable Benefit Charges was sent to file an appeal of any charges that are on the notice. Instructions for appealing are on the back of the notice.