Unemployment Reform Legislation Introduced in Ohio House

(November 12, 2015) Legislation that would significantly overhaul the state’s unemployment insurance system was introduced earlier this week and held its first sponsor hearing. The bill, HB 394, is designed to provide solvency and stability to the system and will increase the taxable wage base for employers while also reducing workers’ eligibility for benefits.

Specifically the bill would:

• The taxable wage base on which employers pay state unemployment taxes will rise from $9,000 to $11,000 until the Unemployment Compensation Fund reaches minimum safe level, which is the lowest amount in the fund for it to be considered solvent – based on current projections, the funds would not reach this level until just before 2025.
• Once the minimum safe level is reached, the taxable wage base returns to $9,000 and the new employer rate for non-construction employers falls from 2.7% to 1%.
• For employees, if the unemployment Compensation Fund is at or below 50% of the minimum safe level, the maximum weekly benefits are frozen at the prior year’s level (based on projections, this freeze would go into effect on Jan. 1, 2018)
• The legislation will also reduce the maximum number of weeks a claimant may receive benefits from the current 26 weeks to range of 12 to 20 weeks, depending on the state employment rate at the time the application is filed.

Because of the recent economic downturn, the state began borrowing from the federal government to cover the shortfall in the program in 2009. The debt currently stands at about $775 million, down from $1.6 billion last year. Furthermore the debt has led to higher federal unemployment taxes for businesses across the state. In HB 394, the plan is for the debt to be paid off in 2017, after which the increase in the taxable wage base would go into effect.

OGA appreciates the constructive approach to addressing this issue for a long-term solution and tackling it from both an employer and employee perspective, especially as it relates to future taxes paid by Ohio businesses. Additionally once the Unemployment Compensation Fund reaches the minimum safe level, members will see some tax relief through a reduction in the FUTA tax and the SUTA tax as well as the employer rate. However, we do have concerns with the burden raising the taxable wage base will have on business operations in the short-term. We will be monitoring this legislation closely and will look to engage the sponsor on constructive input as we move forward.