State may start charging employers’ unemployment accounts for COVID claims

By: - April 9, 2020 1:03 pm

Iowa Workforce Development Director Beth Townsend speaks at a news conference April 9, 2020, in Johnston, Iowa. (AP Photo/Charlie Neibergall, pool)

As unemployment claims skyrocket due to the COVID-19 pandemic, Iowa employers may have to start sharing the cost, state officials said Thursday.

So far, employers’ accounts are not being charged for COVID-19-related unemployment claims. That will change based on the balance in the state’s unemployment insurance trust fund, Beth Townsend, Iowa Workforce Development director, said.

Once the unemployment insurance trust fund reaches a balance of $950 million, the state will start charging employers’ accounts for unemployment claims, she said. The current balance is $1.13 billion, “so about $180 million away from the trigger,” Townsend said.

Iowa paid $27.6 million in benefits and there was a total of 64,187 new claims for the week of March 29.  That was slightly more than double the $13.7 million paid out the week before.

The expanded unemployment benefits under the federal CARES Act will not come from the trust fund and the experiential ratings on businesses will not be affected by these claims, Townsend said.

The move is meant to avoid higher unemployment insurance tax rates for employers, she said.

“However, the overall balance strongly affects the federal tax table Iowa employers will be in in 2021,” she said. “We are currently in tax table seven and we believe setting this trigger will help to ensure we do not fall into tax table six. The tax tables affect the baseline tax rates for employers and is therefore key to helping minimize the impact of this event moving forward and spurring our recovery,” she said.

Under Iowa law, unemployment insurance taxes may be collected from employers under eight different tax rate tables, according to IWD’s website.  Each table has 21 rate brackets. The higher the table number, the lower the tax collections.

“The tables were established to help maintain the stability 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 fund is low and movement to a table collecting less revenue when the balance is high,” IWD’s website states.

Townsend also pleaded for patience as IWD continues to receive “tens of thousands” of calls a day.

“I would ask that all Iowans provide the hard-working dedicated and committed staff at IWD the same patience and grace they would their friends and neighbors. We may not get to you as quickly as we normally would. But we will get to you and more important we will get your claims paid,” she said.

Townsend advised callers to “please wait for the ringing to stop. You will hear momentary silence and then someone will answer the phone.” She said IWD is also working to clean out its email box by the end of each day.

Resources on IWD’s website now includes online applications for the federal CARES benefits for self-employed, independent contractors, nonprofit employees and gig economy workers, as well as for state unemployment benefits.

She also warned that people who voluntarily quit their jobs are not eligible for unemployment benefits.

“I want to remind you that you cannot voluntarily quit your job in an effort to obtain the weekly benefit or unemployment benefits,” she said. “Voluntary quits are a disqualifier for unemployment benefits. You must be either laid off in a temporary layoff or have reduced hours to qualify for unemployment insurance benefits.”

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