A few weeks ago, the Department of Iowa Workforce Development announced Iowa’s unemployment trust fund is running low. As a result, mandatory contribution rates from Iowa’s employers will increase for the first time in 8 years beginning January 1, 2010. Iowa Workforce Development estimates 60 percent of Iowa’s 80,000 employers will be affected by the change.
Currently, the unemployment trust fund has a balance of $508 million. However, throughout the last twelve months, $709 million in unemployment benefits have been paid to Iowans out of work. In July 2009, $75.5 million in benefits were paid out to 74,135 claimants, 148% or $45 million more than was paid in July 2008. In the last month alone unemployment payments increased by 20%. Iowa’s unemployment rate is currently at 6.5% and is expected to continue to increase, meaning additional dollars will be needed to pay claims.
Employer contributions are established from two primary factors, whether or not the business is new, and the number of layoffs a business has made in the last five years. Therefore, employers who frequently layoff employees pay a higher unemployment contribution rate than those who do not. Iowa Workforce Development is required by law to use a formula to establish the contribution matrix used to decide the rate paid by employers. Unemployment contribution rates are determined by wages, with the contribution portion set at $24,500 for 2010.