HB2702.DOC

Part I.

SECTION 1. The legislature finds that whenever it is anticipated that the balance in any state's unemployment compensation fund is insufficient to pay expected benefit claims during a specified period of time, the governor may request a loan from the Secretary of Labor in accordance with Title XII of the Social Security Act. In order to assure that the state will repay any loans it secures from the Secretary of Labor, Title XII provides that when a state has an outstanding loan balance on January 1 for two consecutive years, the full amount of the loan must be repaid before November 10 of the second year, or the federal unemployment tax on employers in that state will be increased for that year and further increased for each subsequent year that the loan has not been repaid.

Specifically, the 5.4 per cent credit is reduced in successive increments of a minimum 0.3 percent for each year in which a loan or loans remain unpaid (reducing the overall credit from 5.4 to 5.1, to 4.8, to 4.5 percent, etc.). Additional offset credit reductions may apply to a state beginning with the third and fifth taxable years if a loan balance is still outstanding and certain criteria are not met.

The purpose of this Act is to avoid the imposition of an increased federal unemployment tax upon employers in the State whenever the State encounters difficulty in repaying any loans that the State receives from the Secretary of Labor as assistance in paying expected unemployment benefit claims during a period when the balance in the unemployment compensation is insufficient to pay such claims.

Furthermore, this Act also provides other economic relief to employers subject to the employment security law by:

(1) Applying contribution rate schedule E for calendar year 2010, and contribution rate schedule F for calendar year 2011;

(2) Permanently retaining the adequate reserve fund at one times the product of the benefit cost rate multiplied by the total remuneration paid; and

(3) Making the contribution rate schedules semi-annual beginning with calendar year 2012.

Finally, this Act encourages unemployed individuals to return to the work force as soon as possible by keeping the maximum weekly benefit amount at seventy-five per cent of the average weekly wage, but reducing the maximum weekly benefit amount over the potential twenty-six week period of benefit eligibility.

SECTION 2. Chapter 383, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§383- Repayment of loans from Secretary of Labor through employer assessments to avoid increase of the federal tax on employers. Whenever it is anticipated that the State will have an outstanding loan balance on January 1 for two consecutive years with respect to any loan that the State receives from the Secretary of Labor to assist in the payment of expected benefit claims, the director shall assess all employers the amounts that, together with the other assets of the unemployment compensation fund, are sufficient to repay the full amount of the loan prior to November 10 of the second year following the two consecutive years of an outstanding loan balance. The director shall establish an assessment schedule based upon the contribution rate schedule of section 383-68."

SECTION 3. Section 383-22, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) In the case of an individual whose benefit year begins prior to January 5, 1992, the individual's weekly benefit amount shall be, except as otherwise provided in this section, an amount equal to one twenty-fifth of the individual's total wages for insured work paid during the calendar quarter of the individual's base period in which such total wages were highest. In the case of an individual whose benefit year begins after January 4, 1992, the individual's weekly benefit amount shall be, except as otherwise provided in this section, an amount equal to one twenty-first of the individual's total wages for insured work paid during the calendar quarter of the individual's base period in which such total wages were highest. The weekly benefit amount, if not a multiple of $1, shall be computed to the next higher multiple of $1. If an individual's weekly benefit amount is less than $5, it shall be $5. The maximum weekly benefit amount shall be determined annually as follows: On or before November 30 of each year the total remuneration paid by employers, as reported on contribution reports submitted on or before such date, with respect to all employment during the four consecutive calendar quarters ending on June 30 of the year shall be divided by the average monthly number of individuals performing services in the employment during the same four calendar quarters as reported on the contribution reports. The amount thus obtained shall be divided by fifty-two and the average weekly wage (rounded to the nearest cent) thus determined. For benefit years beginning prior to January 1, 1992, two-thirds of the average weekly wage shall constitute the maximum weekly benefit amount and shall apply to all claims for benefits filed by an individual qualifying for payment at the maximum weekly benefit amount in the benefit year commencing on or after the first day of the calendar year immediately following the determination of the maximum weekly benefit amount. For benefit years beginning January 1, 1992, but prior to January 1, 2008, [~~and beginning again on January 1, 2011,~~] seventy per cent of the average weekly wage shall constitute the maximum weekly benefit amount and shall apply to all claims for benefits filed by an individual qualifying for payment at the maximum weekly benefit amount in the benefit year commencing on or after the first day of the calendar year immediately following the determination of the maximum weekly benefit amount. For benefit years beginning January 1, 2008, [~~and ending December 31, 2010,~~] seventy-five per cent of the average weekly wage shall constitute the maximum weekly benefit amount and shall apply to all claims for benefits filed by an individual qualifying for payment at the maximum weekly benefit amount in the benefit year commencing on or after the first day of the calendar year immediately following the determination of the maximum weekly benefit amount[.]; provided that after eight weeks of payment at seventy-five per cent of the average weekly wage, the maximum weekly benefit amount shall be lowered to seventy per cent of the average weekly wage; and provided further that after eight weeks of payment at seventy per cent of the average weekly wage, the maximum weekly benefit amount shall be lowered to sixty-six and two-thirds per cent of the average weekly wage. The maximum weekly benefit amount, if not a multiple of $1, shall be computed to the next higher multiple of $1.

(Column A) (Column B) (Column C) (Column D)

High Basic Minimum Maximum

Quarter Weekly Qualifying Total Benefits

Wages Benefit Wages in Benefit Year

$ 37.50 - 125.00 $ 5.00 $ 150.00 $ 130.00

125.01 - 150.00 6.00 180.00 156.00

150.01 - 175.00 7.00 210.00 182.00

175.01 - 200.00 8.00 240.00 208.00

200.01 - 225.00 9.00 270.00 234.00

225.01 - 250.00 10.00 300.00 260.00

250.01 - 275.00 11.00 330.00 286.00

275.01 - 300.00 12.00 360.00 312.00

300.01 - 325.00 13.00 390.00 338.00

325.01 - 350.00 14.00 420.00 364.00

350.01 - 375.00 15.00 450.00 390.00

375.01 - 400.00 16.00 480.00 416.00

400.01 - 425.00 17.00 510.00 442.00

425.01 - 450.00 18.00 540.00 468.00

450.01 - 475.00 19.00 570.00 494.00

475.01 - 500.00 20.00 600.00 520.00

500.01 - 525.00 21.00 630.00 546.00

525.01 - 550.00 22.00 660.00 572.00

550.01 - 575.00 23.00 690.00 598.00

575.01 - 600.00 24.00 720.00 624.00

600.01 - 625.00 25.00 750.00 650.00

625.01 - 650.00 26.00 780.00 676.00

650.01 - 675.00 27.00 810.00 702.00

675.01 - 700.00 28.00 840.00 728.00

700.01 - 725.00 29.00 870.00 754.00

725.01 - 750.00 30.00 900.00 780.00

750.01 - 775.00 31.00 930.00 806.00

775.01 - 800.00 32.00 960.00 832.00

800.01 - 825.00 33.00 990.00 858.00

825.01 - 850.00 34.00 1020.00 884.00

850.01 - 875.00 35.00 1050.00 910.00

875.01 - 900.00 36.00 1080.00 936.00

900.01 - 925.00 37.00 1110.00 962.00

925.01 - 950.00 38.00 1140.00 988.00

950.01 - 975.00 39.00 1170.00 1014.00

975.01 -1000.00 40.00 1200.00 1040.00

1000.01 -1025.00 41.00 1230.00 1066.00

1025.01 -1050.00 42.00 1260.00 1092.00

1050.01 -1075.00 43.00 1290.00 1118.00

1075.01 -1100.00 44.00 1320.00 1144.00

1100.01 -1125.00 45.00 1350.00 1170.00

1125.01 -1150.00 46.00 1380.00 1196.00

1150.01 -1175.00 47.00 1410.00 1222.00

1175.01 -1200.00 48.00 1440.00 1248.00

1200.01 -1225.00 49.00 1470.00 1274.00

1225.01 -1250.00 50.00 1500.00 1300.00

1250.01 -1275.00 51.00 1530.00 1326.00

1275.01 -1300.00 52.00 1560.00 1352.00

1300.01 -1325.00 53.00 1590.00 1378.00

1325.01 -1350.00 54.00 1620.00 1404.00

1350.01 and over 55.00 1650.00 1430.00"

SECTION 4. Section 383-63, Hawaii Revised Statutes, is amended by amending the definition of "adequate reserve fund" to read as follows:

""Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

Effective for the calendar years 1992 through 2007, [~~and from calendar year 2011 and thereafter,~~] "adequate reserve fund" means an amount that is equal to one and one-half times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed."

SECTION 5. Section 383-68, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Effective with calendar year 1992 and thereafter, before December 31 of the previous year the contribution rate schedule for the following calendar year shall be determined on the basis of the relationship between the most recent current reserve fund and the most recent adequate reserve fund, in accordance with this subsection and subsection (d)[.], as follows:

(1) Whenever the ratio of the current reserve fund to the adequate reserve fund is greater than 1.69, contribution rate schedule A shall apply.

(2) Whenever the ratio of the current reserve fund to the adequate reserve fund is 1.3 to 1.69, contribution rate schedule B shall apply.

(3) Whenever the ratio of the current reserve fund to the adequate reserve fund is 1.0 to 1.29, contribution rate schedule C shall apply.

(4) Whenever the ratio of the current reserve fund to the adequate reserve fund is .80 to .99, contribution rate schedule D shall apply.

(5) Whenever the ratio of the current reserve fund to the adequate reserve fund is .60 to .79, contribution rate schedule E shall apply.

(6) Whenever the ratio of the current reserve fund to the adequate reserve fund is .40 to .59, contribution rate schedule F shall apply.

(7) Whenever the ratio of the current reserve fund to the adequate reserve fund is .20 to .39, contribution rate schedule G shall apply.

(8) Whenever the ratio of the current reserve fund to the adequate reserve fund is less than .20, contribution rate schedule H shall apply.

Notwithstanding the ratio of the current reserve fund to the adequate reserve fund, contribution rate schedule E shall apply for calendar year 2010, and contribution rate schedule F shall apply for calendar year 2011."

Part II.

SECTION 6. Section 383-61, Hawaii Revised Statutes, is amended as follows:

1. By amending subsections (a) and (b) to read:

"(a) Contributions with respect to wages for employment shall accrue and become payable by each employer for each half of a calendar year in which the employer is subject to this chapter. The contributions shall become due and be paid by each employer to the director of labor and industrial relations for the fund in accordance with such rules as the department of labor and industrial relations may prescribe, and shall not be deducted, in whole or in part, from the wages of individuals in the employer's employ.

(b) Except as provided in subsections (c) and (d), the term "wages" does not include remuneration paid with respect to employment to an individual by an employer during any half of a calendar year which exceeds the average [~~annual~~] semi-annual wage, rounded to the nearest hundred dollars, for the [~~four~~] two calendar quarter period ending on June 30 or December 31, respectively, of the preceding [~~year.~~] years.

The average [~~annual~~] semi-annual wage for the first half of a calendar year shall be computed as follows: on or before November 30 of each year the total remuneration paid by employers, as reported on contribution reports on or before [~~such~~] that date, with respect to all employment during the [~~four~~] two consecutive calendar quarters ending on June 30 of [~~such~~] that year shall be divided by the average monthly number of individuals performing services in [~~such employment~~] during the same [~~four~~] two calendar quarters as reported on [~~such~~] the contribution reports and rounded to the nearest hundred dollars.

The average semi-annual wage for the second half of a calendar year shall be computed as follows: on or before May 30 of each year the total remuneration paid by employers, as reported on contribution reports on or before that date, with respect to all employment during the two consecutive calendar quarters ending on December 31 of the previous year, shall be divided by the average monthly number of individuals performing services during the same two calendar quarters, as reported on the contribution reports and rounded to the nearest hundred dollars."

2. By amending subsections (e) and (f) to read:

"(e) If an employer during any half of a calendar year acquires substantially all the property used in a trade or business, or in a separate unit of a trade or business, of another employer, and after the acquisition employs an individual who, prior to the acquisition, was employed by the predecessor, then for the purpose of determining whether remuneration in excess of the average [~~annual~~] semi-annual wages has been paid to the individual for employment, remuneration paid to the individual by the predecessor during the half of the calendar year shall be considered as having been paid by the successor employer. For the purposes of this subsection, the term "employment" includes services constituting employment under any employment security law of another state or of the federal government.

(f) Subsections (b) through (e) notwithstanding, for the purposes of this part the term "wages" shall include at least that amount of remuneration paid in a half of a calendar year to an individual by an employer or the employer's predecessor with respect to employment during any calendar year [~~which~~] that is subject to a tax under a federal law imposing a tax against which credit may be taken for contributions required to be paid into a state unemployment fund."

SECTION 7. Section 383-63, Hawaii Revised Statutes, is amended to read as follows:

"§383-63 Definitions for experience rating provisions. As used in sections 383-63 to 383-69:

"Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

Effective for the calendar years 1992 through 2007, and [~~from~~] for calendar year 2011 [~~and thereafter~~], "adequate reserve fund" means an amount that is equal to one and one-half times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

Effective from calendar year 2012 and thereafter, "adequate reserve fund" for the first half of a calendar year means an amount that is equal to one and one-half times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on May 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last two calendar quarters ending on December 31 of the previous year, as reported on contribution reports filed on or before April 30 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

Effective from calendar year 2012 and thereafter, "adequate reserve fund" for the second half of a calendar year means an amount that is equal to one and one-half times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last two calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

["Annual payroll" means the total amount of wages for employment paid by an employer during a calendar year; and "average annual payroll" means the average of the annual payrolls of an employer for a period consisting of the three consecutive calendar years immediately preceding the calendar year for which rates are computed, except that, for an employer whose account has been chargeable with benefits throughout at least one year but less than three years ending on December 31, 1955, and each December 31 thereafter, "average annual payroll" means one-third of the sum of the employer's cumulative payrolls for the period in which the employer has been subject to this chapter, but not more than the three calendar years ending on such December 31. Whenever there was or is a change in the definition of "employment" or in the definition of "wages", effective for the purposes of this chapter generally or of this part at the commencement of or at a date within the three-year period of any average annual payroll, "employment" and "wages" for the purpose of determining each annual payroll within such period and the average annual payroll for such period, shall have the meaning prior to the effective date of such change which they had in accordance with this chapter then in effect and shall have the meaning after the effective date of such change assigned to them by the amendment to this chapter providing for such change.]

"Base period employers" means employers by whom an individual was paid the individual's base period wages.

"Base period wages" means the wages paid to an individual during the individual's base period for insured work.

"Benefit cost rate" means the rate derived by dividing the total net benefits paid to all individuals during a [~~twelve-consecutive-calendar-month~~] six-consecutive-calendar-month period by the total remuneration paid by all employers with respect to employment for which contributions are payable during the last [~~four~~] two completed calendar quarters ending at least [~~five~~] three months before the end of the [~~twelve-consecutive-month period.~~] six-consecutive-month period. "Remuneration", as used in this [~~paragraph,~~] definition, means wages as defined in section 383-10.

"Contributions" [~~includes~~] include the money payments required by this chapter to be made into the fund by any employing unit on account of having individuals in its employ. "Contributions" does not include penalties or interest for delinquency in payments.

"Current reserve fund" means the total assets of the fund available for the payment of benefits on May 30 and November 30 of each year (exclusive of all moneys credited under section 903 of the Social Security Act to the account of this State in the unemployment trust fund which have been appropriated for expenses of administration whether or not withdrawn from the trust fund).

"Reserve balance" means the difference between all contributions paid by an employer and credited to the employer's account for all periods before January 1 (including those paid before February 1 of the same year with respect to wages paid by the employer before January 1 of the same year) and July 1 and the total benefits chargeable to the employer's account for all periods before January 1 and July 1 of the same [~~year.~~] years.

"Semi-annual payroll" means the total amount of wages for employment paid by an employer during one-half of a calendar year; and "average semi-annual payroll" means the average of the semi-annual payrolls of an employer for a period consisting of the three consecutive calendar half-years immediately preceding the calendar half-year for which rates are computed; except that, for an employer whose account has been chargeable with benefits throughout at least one year but less than three years ending on December 31, 1955, and each December 31 thereafter, "average semi-annual payroll" means one-third of the sum of the employer's cumulative payrolls for the period in which the employer has been subject to this chapter, but not more than the three calendar half-years ending on such December 31. Whenever there was or is a change in the definition of "employment" or in the definition of "wages", effective for the purposes of this chapter generally or of this part, at the commencement of or at a date within the three-half-year period of any average semi-annual payroll, "employment" and "wages" for the purpose of determining each semi-annual payroll within such period and the average semi-annual payroll for such period, shall have the meaning prior to the effective date of such change, which they had in accordance with this chapter then in effect and shall have the meaning after the effective date of such change assigned to them by the amendment to this chapter providing for such change."

SECTION 8. Section 383-65, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Except as otherwise provided in subsection (b), benefits paid to an individual shall be charged against the accounts of the individual's base period employers and the amount of benefits so chargeable against each base period employer's account shall bear the same ratio to the total benefits paid to the individual as the base period wages paid to the individual by the employer bear to the total amount of base period wages paid to the individual by all of the individual's base period employers. Benefits paid shall be charged to employers' accounts in the calendar [~~year~~] half-year in which the benefits are paid."

SECTION 9. Section 383-67, Hawaii Revised Statutes, is amended to read as follows:

"§383-67 Reserve ratio. For [~~the calendar year 1970 and for~~] each half of a calendar year [~~thereafter~~], an employer's reserve ratio shall be determined by dividing the employer's most recent reserve balance by the employer's most recent average [~~annual~~] semi-annual payroll. The ratio shall be rounded to the nearest ten-thousandths."

SECTION 10. Section 383-68, Hawaii Revised Statutes, is amended by amending subsections (c) and (d) as follows:

(c) Effective [~~with calendar year 1992 and thereafter,~~] January 1, 2012, before December 31 of the previous year and June 30 of the same year, the contribution rate schedule for the following [~~calendar year~~] six month period shall be determined on the basis of the relationship between the most recent current reserve fund and the most recent adequate reserve fund, in accordance with this subsection and subsection (d).