On December 27, 2016, Ohio Governor Kasich signed into law SB 235, touted by state legislators and business/labor groups as a compromise for state unemployment insurance (SUI) reform.

Go here to listen to comments made by business and labor groups regarding the compromise during a December 2016 press conference.

The legislation will increase the SUI taxable wage base from the current $9,000 to $9,500 for calendar years 2018-2019, reverting back to $9,000 effective January 1, 2020 (unless changed by future legislation). From January 1, 2018 to December 31, 2019, the maximum UI benefit amount will be frozen at the 2017 level.

SB 235 also removed language that was added to the UI law under legislation enacted in mid-2016 (HB 390) that allowed the state to repay its federal UI loan. The deleted provision would have required an increase to employer experience rates of up to 0.5% when outstanding advances/loans from the federal government existed as of the rate computation date.

During the press conference, Speaker of the Ohio House Clifford Rosenberger (R-Clarksville) committed to further conversations between legislators and business/labor groups regarding state UI trust fund solvency and pledged to solidify a plan by April 2017 for continued trust fund growth.

Other legislation called for long-term UI reform

The authors of HB 390 further called upon the legislature to adopt long-term reforms to the state UI system to shore up the unemployment trust fund balance and avoid long-term borrowing in the future. HB 394, introduced in November 2015, was expected to be reworked and considered for this purpose. Bill language would have:

— Based the desired state UI trust fund balance on the US Department of Labor's recommended minimum safe level of a 1.0 average high cost multiple (AHCM);
— Increase the employer taxable wage base from $9,000 to $11,000 whenever the trust fund balance is below the 1.0 AHCM;
— Eliminated dependency classes for UI benefits;
— Froze the maximum UI weekly benefit amount; and
— Limited UI benefit payments to 12 to 20 weeks (reduced from a maximum of 26 weeks), based on the unemployment rate.

Employers should be prepared for the possibility that some of these suggested reform items may crop up again during further negotiations between interested parties.

2017 SUI tax rates increased by surcharge to repay state loan

As we previously reported, experience-rated employers will pay an additional surcharge of 0.6% for calendar year 2017 to be used to repay the state loan secured under HB 390 to repay the state's federal loan. Although the surcharge is combined with the SUI tax rate on the quarterly contribution return, employers do not receive credit to their SUI accounts and the surcharge amount is not reported to the federal government as FUTA certified taxes.

The 2017 SUI tax rates range from 0.3% to 8.8% (up from the 2016 range of 0.3% to 8.7%), plus the 0.6% surcharge.

In addition to the new surcharge, 30% of SUI tax rates will increase by 0.1% for 2017. The other 70% of the 2017 SUI rate schedule will remain the same as for 2016. See the Ohio Department of Job and Family Service's website.

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