The formula used by Iowa to determine employer unemployment insurance taxes has been revised for 2016. This will cause the estimated average contribution rate for employers to increase from 1.24 percent to 1.57 percent.
Iowa law requires Iowa Workforce Development to establish the tax table that will be used to determine the unemployment tax rate for eligible employers each year. The unemployment insurance rate table trigger formula is primarily based on the trust fund balance, unemployment benefit payment history and covered wage growth. The formula is designed to enable the trust fund to keep pace with potential liabilities as covered employment and wages grow.
In a press release Iowa Workforce Development Director Beth Townsend praised the stability within the Unemployment Insurance Trust Fund saying, “While the change to the unemployment tax rate is less than favorable, Iowa’s unemployment tax rate is among the lowest in the nation, due to the strength of our trust fund. That, coupled with sound fiscal management, prevented Iowa from having to borrow federal funds during the most recent recession. We still have a large number of zero-rated employers and new, non-construction employers continue to pay 1.0 percent, one of the lowest tax rates in the country.”