A bill that is related to Act 006 passed earlier this year, and would raise the unemployment insurance (“UI”) contribution rates for 21 of the 160 tax schedule rates for Hawaii employers, passed Third Reading before the Hawaii State Senate on Tuesday, April 10, 2012. This bill, in its current form, is HB 2264 HD2 SD1.
This measure haw now been sent back to the State House of Representatives to “agree” or “disagree” to the current form of the the bill. At this point, it is unclear whether the House will agree or disagree to the current form of the bill. It is worth noting, however, that the only revision made by the Senate was to change the effective date of this new law (if passed) to July 1, 2012 (it was January 1, 2013 in the House’s version.) In addition, that revision was made at the suggestion of the Department of Labor and Industrial Relations. Therefore, there is a likelihood that the measure will be accepted – or agreed to – by the House in its current form.
If this bill passes Final Reading in the House, it will be sent to Governor Abercrombie for his approval. If the House “disagrees” with the current form of the bill, it will be sent to a conference committee, which will be comprised of senators and representatives. If the bill is passed out of conference committee, it will then need to be approved again by the full House and Senate.
Under this new law, tax rates will rise from anywhere between 0.2% to 1.2% of an employer’s taxable wage base. (The taxable wage base has a maximum of $38,800 for 2012.) The maximum tax rate will increase from 5.4% to 6.6%. The smallest increase will be from 5.4% to 5.6% per employee, whereas the largest increase will be from 5.4% to 6.6% per employee. Based on the taxable wage base for 2012, this 1.2% increase could lead to a maximum increase of $465 per employee.
This bill is an interesting one for employers, because some employers will be negatively impacted by the new law, whereas other employers will actually benefit from the changes. Specifically, this bill affects only employers with a negative reserve ratio (meaning they have had a lot of unemployment benefits charged against them). Employers with a positive reserve ratio will not have their UI contribution rates affected under this measure. Additionally (and I apologize if this is getting complicated to follow), the overall UI tax schedule is determined by the amount of money in the state’s UI fund. If the UI fund is higher, employers are placed on a lower tax schedule. If the fund is lower, employers are placed on a higher tax schedule. Therefore, the long term effect of HB 2264 HD2 SD1 is that a heavier burden will be placed on employers with a negative reserve ratio to replenish the state’s UI fund, which will in turn, lower the overall tax schedule for all employers.
You can read a copy of HB 2264 HD2 SD1 here.