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HB 554

Unemployment Insurance Modernization Act of 2025

2025 Regular Session Introduced by Lorig Charkoudian

Maryland's Unemployment Insurance Modernization Act expands benefits, links them to wage growth, and raises the employer tax base, with automatic yearly updates beginning 2025.

Hearing 2/26 at 1:00 p.m.
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Bill Summary · HB 554

Summary — HB 554: Unemployment Insurance Modernization Act of 2025

Status: Hearing scheduled 2/26 at 1:00 p.m.
Introduced: Nov. 12, 2024 (Delegate Charkoudian)
Effective date in bill text: July 1, 2025

Purpose

The bill overhauls major components of Maryland’s Unemployment Insurance (UI) program to increase benefit levels for claimants, index key values to wage growth or inflation, and raise the employer taxable wage base used to fund UI. It aims to modernize benefit formulas and make annual adjustments automatic (via the Secretary of Labor) rather than fixed-dollar updates.

Key provisions

  • Weekly benefit amount (WBA)

    • Sets a new minimum WBA equal to 15% of the State average weekly wage (AWW).
    • Requires the maximum WBA to increase annually (phased in 2025–2027) to reach 50% of State AWW by calendar year 2028.
    • Requires the Department to calculate and update the State AWW on July 1 each year; Secretary sets the max WBA annually (percentages to phase in).
    • Changes the method for assigning a claimant’s WBA: divide wages in the claimant’s highest-earning base‑period quarter by 24 (fractions rounded up).

  • Dependent allowance and income disregard

    • Increases dependent allowance from $8 to $25 per dependent (limit retained at five dependents) and requires annual inflation adjustments for dependent allowance and income disregard.
    • Continues to subtract a portion of earnings from weekly benefits, but requires annual inflation adjustment to the earnings threshold that is disregarded (example: current $50 disregard).

  • Taxable wage base (employer side)

    • Replaces the fixed $8,500 taxable wage base with an annually set amount that must increase in 2026–27 to reach 20% of the State average annual wage (AAW) beginning in 2028. Secretary to set taxable wage base by regulation.

  • Administrative rules

    • Secretary of Labor must determine and publish the AAW/AWW and adopt implementing regulations.

Timeline & implementation mechanics

  • Bill takes effect July 1, 2025 (benefit changes effective July 1 each year per Secretary’s determinations).
  • Taxable wage base changes effective January 1, 2026 for employer contributions.
  • MD Labor must perform annual calculations and system updates; the department warned reprogramming/testing complexity may delay meeting the July 1, 2025 start date.

Fiscal and economic impacts (from Department of Legislative Services fiscal note)

  • One-time MD Labor programming costs: approx. $750,000 (FY2026) and $815,000 (FY2027), expected to be federally funded if available.
  • UI Trust Fund (nonbudgeted) — revenues and expenditures will increase substantially beginning FY2026, with DLS estimating effects could be “several hundred million dollars annually” once fully phased in (FY2028–FY2029). The bill roughly doubles employer UI taxes and UI benefits in DLS’s assessment.
  • State as employer: reimbursements to the UI Trust Fund for benefits paid to former state employees are expected to increase significantly (potentially > $1.0 million annually).
  • Revenue interactions: higher UI benefits increase taxable income (state/local income tax receipts); higher employer UI taxes reduce taxable corporate income (reducing income tax receipts). Net fiscal effect on general fund revenues is uncertain but could be significant.
  • Local governments and small businesses: described as meaningfully affected (as employers and recipients of tax revenues); increased employer costs could be material for small employers.

Who is affected

  • Unemployed workers/claimants: higher minimum and maximum weekly benefits, higher dependent allowances, automatic annual adjustments tied to wages/inflation.
  • Employers (private, state, local): higher taxable wage base and likely higher UI contribution rates — increased payroll tax burden beginning 2026 and phased up through 2028.
  • Maryland Department of Labor: system programming and ongoing administrative duties.
  • Unemployment Insurance Trust Fund, state and local budgets: significantly altered receipts/expenditures; short- and long-term fiscal impacts.

Illustrative figures (from fiscal note examples — illustrative only)

  • Example maximum WBA: $525 (2025 example), rising in examples to $815 (2028) and ~$865 (2030).
  • Example taxable wage base: $8,500 (2025), $11,490 (2026), $18,060 (2028) in the DLS illustrative schedule.
  • Dependent allowance example: $25 (2025 onward, with inflation indexing).

Uncertainties & implementation notes

  • Exact fiscal outcomes depend on wage growth, inflation, unemployment rates, and percentages the Secretary sets during the phase-in years.
  • MD Labor flagged potential implementation delays due to IT reprogramming complexity.
  • DLS could not produce precise UITF estimates; full effects expected once phased in (by 2028–29).

Sources: bill text (introduced version), Department of Legislative Services fiscal and policy note (revised first reader).

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

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