Kansas Unemployment Insurance
In Kansas, as in all states, the unemployment insurance system is a federal-state joint venture, financed by both federal and state unemployment taxes. The UI program is administered by the Kansas Department of Labor, Division of Employment Security, “to provide temporary, weekly compensation to qualified unemployed workers.
The two units of this division are Benefits and Tax (Contributions). The Benefits unit determines claimant eligibility and payment of unemployment benefits. The Tax unit collects the state unemployment tax from subject employers.”
Due to Kansas House Bill No. 2576, which was enacted in April 2015, beginning in rate year 2015, all new non-construction employers who began operation on July 1, 2014, or after are eligible for the new UI contribution rate of 2.7 percent.
Alternatively, if the employer moves to Kansas from another state, the employer may pay Kansas unemployment tax rate corresponding with the employer’s earned experience from the previous state instead of the standard 2.7 percent. The minimum rate is 1 percent. To qualify for this alternative UI rate, employers must meet four requirements:
- The new employer has been in operation in another state for a minimum of three years;
- The new employer provided an authenticated account history from the employer’s operations;
- The business operations established in Kansas are of the same nature, as defined by the North American Industrial Classification System, as the operations in another state;
- The new employer must make election of the alternative rate within 30 days of notice of Kansas liability.
Additionally, the bill creates a new classification for employers called “Entering and Expanding Employers.” Targeted toward existing, growing Kansas employers, an expanding employer is eligible to receive a lower rate based on the employer’s demonstrated risk as reflected in the employer’s reserve fund ratio history or the new employer rate of 2.7 percent for four years, subject to approval by the Secretary of Labor.
To qualify for this, an employer must meet the following criteria:
- There has been a 100 percent increase in the taxable payroll over the previous year, due to employment growth and not because of a change in the taxable wage base;
- The employer has a positive account balance, meaning the employer has contributed more to the UI System than what has been paid out in benefits to workers previously employed;
- The employer maintains a positive account balance through the four-year period the reduced rate is in effect.
Employers who are not eligible for a rate computation shall pay contributions at the rate of 2.7 percent, except for employers in the construction industry, who will pay at the rate of 6 percent. House Bill 2576, passed in 2014, changed the minimum rate for positive balance employers from 0.11 to 0.09 percent.
The maximum rate remained the same at 5.4 percent. The taxable wage base for Kansas employers was $8,000 per year in 2014, $12,000 in 2015 and is $14,000 in 2016.
Lastly, the bill removed the cap placed on voluntary contributions. “Previously, the statute limited voluntary contributions to no more than five rate groups. Any employer is permitted to buy down the tax rate as much as desired.”
Prior to July 1, 2015, the maximum weekly benefit was computed from 60 percent of the average weekly wages paid to employee in insured work during the previous calendar year. After July 1, 2015, the maximum weekly benefit will be calculated at 55 percent of the average weekly wages but not to be less than $474.
Senate Bill 154, passed in 2015, changed the rate schedule for 2016 and future years. Beginning January 1, 2016, there will only be 27 rate groups for positive balanced employer in comparison to the 51 rate groups prior to 2016.
Negative balanced employer will now only have 11 rate groups as compared to 20 prior to 2016. The tax rate and the reserve ratio ranges are now fixed for both positive and negative balanced employers. The impact for employers is greater certainty from year to year concerning their unemployment contribution rate.