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Bill Summary · SF 607

Summary — SF 607 (Iowa) — Unemployment Insurance Taxes on Employers

Status: Enacted (signed by Governor Kim Reynolds, June 5, 2025)
Introduced: March 12, 2025. Effective (tax changes): calendar year 2026 (per fiscal notes).

Main purpose

SF 607 revises how employer unemployment insurance (UI) taxable wages and employer contribution rates are calculated in Iowa — lowering the taxable wage base, reducing top contribution rates, and restructuring experience-rating groupings and rate tables. The changes reduce UI taxes paid by many employers and alter the mechanics used to select contribution-rate tables.

Key provisions

  • Taxable wage base

    • Lowers the statutory percentage used to compute the state taxable wage base from 66 2/3% to 33 1/3% of the prior-year statewide average weekly wage × 52, rounded to the next $100.
    • The fiscal estimates translate this to an approximate state taxable wage base of $19,800 (down from ~$39,500); federal $7,000 floor remains applicable if lower.
    • Excludes wages paid by Iowa employers to employees who work in another state if that state extends reciprocity to Iowa.

  • Contribution rates and tables

    • Reduces the maximum employer contribution rate to 5.4% (from 9.0%).
    • Reduces benefit-ratio ranks from 21 to 9 and contribution-rate tables from 8 to 4.
    • Changes starting ranks for new employers: nonconstruction employers from rank 12 → rank 4; construction/landscaping employers from rank 21 → rank 9.
    • New approximate contribution-rate tables (A–D) and nine cumulative payroll rank cutoffs are specified in the enacted text (see bill for table).

  • Reserve fund ratio and table selection

    • Revises the formula for computing the “current reserve fund ratio” used to determine which contribution table (A–D) applies. The computation uses total funds available for benefits (on computation date or Aug 15 if higher) divided by total wages in covered employment in specified prior quarters; statutory language regarding adding $150 million (since July 1, 2007) to the funds available is retained in the enrolled bill.

  • Employer guidance

    • The bill includes a nonbinding statement that employers should use any savings from the Act to (1) pay employee salaries or benefits, or (2) serve as an alternative to unemployment benefits during seasonal unemployment.

Who is affected

  • Iowa employers (broadly) — lower UI tax liabilities for many employers, especially those with lower benefit ratios. Employers that employ workers who work across state lines (in states that reciprocate) may see exclusion of those wages for Iowa UI taxation.
  • Iowa Workforce Development — administrative changes; 3.0 FTE positions currently administering the taxable-wage credit may be reassigned.
  • Unemployment Compensation Trust Fund — reduced employer revenue to the fund.

Fiscal impact (Legislative Services Agency estimates)

  • Estimated reduction in annual UI trust fund revenue: roughly $193.2 million in CY 2026, rising to about $266.3 million by CY 2030 (cumulative annual impacts shown in fiscal notes).
  • Trust Fund balances remain positive in projections but at lower growth rates than under current law.
  • Assumptions used: changes effective CY2026; wages grow ~3% annually; no additional one-time federal deposits; interest on the fund ~2.2%.

Legislative/timing notes

  • Introduced March 12, 2025; committee report recommended passage.
  • Passed both chambers on May 14, 2025 (Senate 32–16; House 60–27); one amendment (S-3181) adopted; several other amendments were offered and lost.
  • Reported enrolled May 23, 2025; signed by Governor June 5, 2025.
  • Related companion: HF 460.

For complete legal language, contribution-rate tables, and the exact statutory amendments, consult the enrolled bill text and the Legislative Services Agency fiscal notes (SF 607).

Compiled from official sources — confirm details with the bill’s official record.

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