H.B. 433 made significant changes to Delaware's state unemployment insurance (SUI) law, which will collectively change the amount of SUI taxes paid by many experience-rated employers.

SUI wage base

Under prior law adopted in 2013 (H.B. 168), and except for a temporary measure effective only for the 2019 tax year (H.B. 198), the SUI wage base was tied to the state's unemployment insurance trust fund balance as of September 30:

• $18,500 if the balance is $125 million or less
• $16,500 if the balance is greater than $125 million, but less than $175 million
• $14,500 if the balance is at least $175 million, but no greater than $ 225 million
• $12,500 if the balance is greater than $225 million, but less than $275 million; $10,500 if the balance is $275 million or greater (Del. Chapter 33, Sec. 3302)

The SUI wage base was $10,500 for 2023 and 2024.

Effective January 1, 2027, H.B. 433 moves Delaware to a fixed SUI wage, which increases incrementally each year until it reaches $16,500 in 2027.

Schedule of SUI wage base increases 2025–2027

US Department of Labor, Comparison of State Unemployment Laws)

New Delaware experience rating method

Effective January 1, 2027, the state will switch from the Benefit Ratio method to the Benefit-Wage Ratio method for determining the SUI tax rate assigned to experience-rated employers. According to the House Committee Report on H.B. 433, this change was made "to be more responsive to changes in the economy over time, to better sustain the solvency of the Unemployment Trust Fund, and to be easier to administer."

Until the new rating system goes into effect on January 1, 2027, the law provides temporary relief to employers that pay SUI taxes in 2025 and 2026 by reducing new employer SUI tax rates, simplifying SUI tax rate schedules and reducing or holding constant overall SUI tax rates.

Four possible experience rating methods

Under federal law, states are given flexibility to choose the method they will adopt for determining the method used for determining the tax rate assigned to experience-rated employers.

According to the US Department of Labor (Conformity Requirements for State UI laws), there are currently four experience rating methods used by the states and US territories:

• Reserve Ratio Formula. This is the first and most common experience rating system where UI benefit payouts are subtracted from the employer's SUI contributions and the resulting balance is divided by the total payroll. SUI tax rates are then assigned according to a schedule of SUI tax rates for a specified range of reserve ratios — the higher the ratio, the lower the assigned SUI tax rate.
• Benefit Ratio. This, the second most common experience rating system used by 20 states, now including Delaware, is the ratio of UI benefit payouts divided by the employer's payroll index without taking employer SUI contributions into account. SUI tax rates are then assigned according to a SUI tax rate schedule.
• Benefit Wage Ratio. The benefit wage ratio is the total amount of wages that were paid in the base periods of employees who drew UI benefits over the previous three years divided by the employer's total payroll over the same three-year period. The employer's experience factor is multiplied by the state experience factor to arrive at the employer's SUI tax rate. Since Delaware's switch to the Benefit Ratio method, now only one state, Oklahoma, uses this method.
• Variations in payroll. The increase or decrease in an employer's payroll is an indicator of its risk for increased UI benefit claims. UI benefit payouts and terminations are not factors in determining an employer's SUI tax rate. Alaska is the only state that uses this method.

Ernst & Young LLP insights

Considering Delaware's changing unemployment insurance provisions through 2027, employers should review their assigned SUI tax rates for accuracy and promptly notify the Delaware Division of Unemployment Insurance of any errors.

For information concerning the state SUI wages bases and tax rates for 2025, see our special report.