Unemployment insurance experience rating index for 2004

Employment and Training Administration, Advisory System
U.S. Department of Labor
Washington, D.C. 20210
Classification: Experience Rating
Correspondence symbol: OWS/DFAS
Date: November 8, 2005
Rescissions: None
Expiration date: November 30, 2006

ADVISORY: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 4-06

TO: STATE WORKFORCE AGENCIES

FROM: CHERYL ATKINSON s/s
Administrator
Office of Workforce Security

SUBJECT: Unemployment Insurance Experience Rating Index for Rate Year 2004

1. Purpose. To transmit the Experience Rating Index (ERI) for states for rate year 2004.

2. Reference. Unemployment Insurance Program Letter (UIPL) No. 3-92, UIPL No. 37-93, UIPL No. 40-94, UIPL No. 32-95, UIPL No. 25-96, UIPL No.13-98, UIPL No. 5-99, UIPL No. 26-03, and UIPL No. 15-05.

3. Background. Experience rating is the system by which unemployment insurance tax rates vary according to factors related to the unemployment risk of an employer’s workers. In most states, these factors include a measure of benefits charged to the employer. Experience rating has three major objectives: to serve as an incentive to stabilize employment, to properly allocate the costs of unemployment benefits, and to encourage employer participation in the program. The ERI attempts to measure the degree of experience rating with respect to the first objective by determining the proportion of benefits that are effectively charged to employers. Effectively charged benefits are defined as those benefits that are charged to the beneficiary’s former employer(s) and paid for by that employer.

The best use of the ERI is to identify long-term trends and shifts within states or in the U.S. as a whole. Year-to-year comparisons may not be valid because the ERI is sensitive to the business cycle.

Rough comparisons across states may be made, but a value judgment cannot be attached to the degree of experience rating because of the nature of state laws. For example, one state may have a relatively low degree of experience rating because it pays benefits to claimants who quit their jobs for various types of good personal cause while not charging those benefits to specific employers, while another state may achieve a higher ERI by not paying benefits to those claimants at all.

Attachment I shows the historical series of the ERI from rate year 1988 to rate year 2004 for all states. Attachment II shows the ERI for rate year 2004 and the values used to calculate the ERI. Attachment III describes how the ERI is calculated and defines ineffective charges, inactive charges, and noncharges. The referenced UIPLs published the ERI for Rate Years 1988 - 2003.

4. Action Required. Please distribute to appropriate staff.

5. Inquiries. Direct inquiries to the appropriate Regional Office.

6. Attachments.

I - Experience Rating Index by State for Rate Years 1988 - 2004.
II - Experience Rating Index by State for Rate Year 2004.
III - Calculation of Experience Rating Index.

Attachment 1 (official PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2005/UIPL04-06_Attach1.pdf)

Experience Rating Index
Attachment I
Rate Years 1988 - 2004
%

STATE 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Alabama 71 78 74 56 49 64 52 57 60 51 INA 59 65 69 58 60 61
Alaska
(Payroll Decline System - ERI cannot be calculated)
Arizona 80 80 83 78 69 76 81 83 76 77 INA INA INA 54 50 INA 44 Arkansas 48 47 56 60 58 53 INA INA 56 61 60 60 59 59 59 INA 59 California 65 67 68 64 52 53 53 58 57 59 INA 61 61 INA INA INA 50 Colorado 45 53 60 65 64 62 68 66 56 56 65 73 72 72 70 35 53 Connecticut 62 64 58 47 42 49 59 60 65 66 70 INA INA 65 68 58 58
Delaware INA 51 71 70 INA 54 47 57 60 Report Not Required
Dist. of Columbia 47 56 72 72 62 INA 64 INA 78 77 78 INA 86 INA INA INA INA Florida 68 66 50 56 53 INA 75 72 71 71 INA INA INA 55 62 51 58 Georgia 61 65 62 65 52 58 75 79 80 67 51 INA 12 13 14 12 72 Hawaii 71 56 66 63 32 36 33 44 44 45 47 54 56 57 51 57 55 Idaho 55 64 58 53 44 54 50 60 58 53 51 53 53 51 54 46 51 Illinois 72 76 76 78 74 71 79 82 83 75 88 87 88 INA 57 49 64 Indiana 81 91 94 84 78 75 75 75 69 60 60 65 59 56 44 43 48 Iowa 78 77 67 70 74 67 66 62 70 64 60 62 66 66 62 64 59 Kansas 64 73 69 69 57 58 59 18 16 68 INA 57 63 62 58 56 50 Kentucky 79 79 75 72 58 66 72 63 70 67 INA 68 69 66 65 52 62 Louisiana 42 87 85 88 83 77 75 77 72 70 68 65 63 INA 64 55 55 Maine 62 60 60 52 41 50 60 59 58 55 60 62 54 59 47 41 48 Maryland INA 72 62 62 65 INA INA INA INA INA INA INA INA INA INA 43 INA Massachusetts 55 54 50 40 43 47 58 58 50 55 63 INA 63 63 56 38 58
&
Michigan 80 67 72 70 63 73 77 78 73 INA 68 72 67 INA 62 INA 57 Minnesota 67 66 69 62 58 64 69 INA 72 74 INA 62 63 59 30 INA INA Mississippi 40 54 53 42 51 53 50 52 50 42 47 47 46 47 44 44 44 Missouri 61 58 59 61 55 63 70 63 69 68 65 INA 60 59 53 50 49
&
Montana 54 58 62 61 55 62 63 61 60 INA INA INA 53 INA 48 INA INA Nebraska 61 57 63 60 57 56 55 57 50 48 INA 47 46 48 46 45 45 Nevada 66 67 68 63 41 59 72 77 80 76 76 72 INA INA INA INA 38 New Hampshire INA INA 81 72 55 68 77 82 84 82 81 INA 53 63 72 INA 29 New Jersey INA 78 75 70 63 51 38 61 64 59 INA 56 58 60 51 45 51 New Mexico 51 59 63 63 62 62 67 64 63 63 INA 57 51 INA INA 53 INA New York 80 73 61 55 51 82 84 85 86 85 83 71 71 71 71 68 76 North Carolina INA INA INA 50 44 42 31 INA 8 44 37 INA INA 40 43 INA INA North Dakota 62 65 57 64 60 56 64 59 62 52 72 INA 77 79 81 80 80 Ohio 70 74 74 70 65 65 73 71 72 62 62 INA INA INA INA INA 50 Oklahoma 50 64 60 47 28 34 47 52 51 50 51 36 23 37 22 26 46 Oregon 59 63 56 60 51 50 48 45 55 54 70 52 53 54 54 44 47 Pennsylvania 66 69 65 62 56 57 64 64 62 55 61 60 59 61 59 INA 55 Puerto Rico INA INA INA INA INA INA INA 83 INA INA INA INA 79 INA INA INA INA Rhode Island 75 69 68 58 55 64 75 72 70 66 INA INA 73 INA 70 66 65 South Carolina 58 62 65 61 54 52 58 56 57 57 60 58 56 56 52 41 47 South Dakota 59 38 48 45 49 44 47 53 50 47 INA 47 47 56 45 43 44 Tennessee INA 69 66 68 71 73 73 65 63 65 46 61 61 INA 52 57 59 Texas 53 58 55 52 51 49 INA 53 55 53 INA INA 56 61 61 56 58 Utah 61 70 70 69 66 61 66 68 73 INA INA INA INA INA INA INA INA Vermont 70 66 63 58 54 48 51 48 49 48 47 INA 43 43 40 34 37 Virgin Islands INA INA INA INA INA INA INA INA INA INA INA INA INA INA INA INA INA Virginia 65 68 70 61 51 66 77 81 79 74 58 62 64 68 52 36 55 Washington 60 63 63 61 57 56 55 50 51 55 58 61 58 64 57 INA INA* West Virginia 83 51 56 58 56 62 59 58 60 53 INA INA INA 55 57 58 50 Wisconsin 90 82 78 66 65 70 70 69 67 65 63 63 INA 60 57 50 56 Wyoming 38 62 INA 55 63 60 41 46 42 43 INA 48 INA 55 59 58 54

INA - Information Not Available.

DE and OK are Benefit Wage Ratio States. The numbers provided by these states are estimates and the data is not required.

• Reported data failed consistency checks.
  &
  Revised Data

Attachment 2 (official PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2005/UIPL04-06_Attach2.pdf)

Attachment II
EXPERIENCE RATING INDEX BY STATE
RATE YEAR 2004

                 Experience      Ineffective Charges         Inactive Charges              Noncharges               Benefits          ERI

STATE Rating ($000s) as % of ($000s) as % of ($000s) as % of ($000s)
System BEN BEN BEN
Alabama BR 54,603 18.0% 13,689 4.5% 50,205 16.6% 302,940 61 Alaska PD NA NA NA 139,737 NA Arizona RR 120,045 38.7% 13,612 4.4% 40,226 13.0% 309,934 44 Arkansas RR 23,535 8.1% 4,778 1.6% 89,665 30.9% 289,743 59
California RR 2,051,855 33.3% 681,067 11.1% 364,037 5.9% 6,162,727 50
Colorado RR 178,976 34.8% 47,137 9.2% 16,765 3.3% 514,552 53 Connecticut BR 180,799 25.5% 74,269 10.5% 42,159 6.0% 707,989 58 Delaware BWR NA 5,506 4.7% 28,273 24.1% 117,467 NA
Dist. of Columbia RR REPORT NOT SUBMITTED
Florida BR 192,624 17.0% 117,939 10.4% 160,308 14.2% 1,129,951 58
Georgia RR 96,505 13.2% 54,902 7.5% 50,694 6.9% 730,072 72 Hawaii RR 22,271 18.2% 13,297 10.9% 19,261 15.8% 122,160 55 Idaho RR2 50,764 30.0% 3,871 2.3% 28,673 17.0% 169,104 51
Illinois BR 639,112 28.8% 30,431 1.4% 125,892 5.7% 2,219,975 64
Indiana RR 182,768 26.0% 86,762 12.4% 95,992 13.7% 702,380 48 Iowa BR2 60,296 16.8% 28,188 7.9% 59,127 16.5% 358,470 59 Kansas RR2 92,120 26.0% 29,602 8.4% 54,133 15.3% 353,763 50 Kentucky RR 114,292 26.0% 35,543 8.1% 16,443 3.7% 439,963 62 Louisiana RR 69,174 26.2% 7,272 2.8% 43,233 16.4% 264,328 55 Maine RR2 23,570 19.2% 841 0.7% 38,978 31.8% 122,683 48 Maryland BR 84,916 15.9% 39,214 7.3% INA 534,373 INA Massachusetts RR 555,655 31.3% 3,240 0.2% 180,491 10.2% 1,776,967 58
Michigan BR1 465,752 23.8% 258,771 13.2% 107,436 5.5% 1,957,021 57
Minnesota BR INA 115,166 13.5% 74,869 8.8% 852,422 INA Mississippi BR 46,736 25.3% 25,552 13.8% 31,038 16.8% 185,020 44 Missouri RR 173,778 28.3% 3,857 0.6% 138,556 22.6% 614,440 49 Montana RR2 14,348 19.7% INA 9,709 13.3% 72,971 INA Nebraska RR 26,188 20.6% 7,808 6.2% 36,459 28.7% 126,963 45 Nevada RR2 84,767 27.9% 59,314 19.5% 44,012 14.5% 304,005 38 New Hampshire RR 45,006 45.3% 11,579 11.7% 14,124 14.2% 99,391 29
New Jersey RR 547,824 27.0% 198,195 9.8% 251,586 12.4% 2,025,940 51
New Mexico RR INA 3,182 2.9% 24,782 22.6% 109,877 INA
New York RR 435,455 14.9% 182,186 6.2% 96,636 3.3% 2,918,492 76
North Carolina RR INA INA INA INA INA North Dakota RR2 1,101 2.5% 2,422 5.4% 5,211 11.7% 44,489 80
Ohio RR 455,510 33.9% 76,596 5.7% 139,852 10.4% 1,343,364 50
Oklahoma BWR 55,687 21.7% 34,794 13.6% 47,424 18.5% 256,076 46 Oregon BR2 187,789 22.5% 60,131 7.2% 192,521 23.0% 836,272 47
Pennsylvania BR1 693,713 28.0% 194,445 7.9% 226,622 9.2% 2,473,843 55
Puerto Rico RR REPORT NOT SUBMITTED Rhode Island RR 31,907 17.8% 12,863 7.2% 18,219 10.2% 178,895 65 South Carolina RR 87,198 22.0% 60,508 15.2% 62,709 15.8% 396,885 47 South Dakota RR 10,418 33.8% 2,066 6.7% 4,718 15.3% 30,837 44 Tennessee RR 90,643 16.3% 70,543 12.7% 64,246 11.6% 554,956 59
Texas BR 316,801 14.9% 193,093 9.1% 379,150 17.9% 2,122,765 58
Utah BR INA 12,708 7.0% 31,291 17.2% 182,178 INA Vermont BR2 29,418 31.1% 11,787 12.5% 18,431 19.5% 94,604 37
Virgin Islands RR REPORT NOT SUBMITTED
Virginia BR 214,201 34.1% 39,348 6.3% 31,130 5.0% 628,244 55 Washington BR2 INA INA INA INA INA West Virginia RR 51,062 29.4% 22,850 13.2% 12,872 7.4% 173,465 50 Wisconsin RR 221,744 23.8% 41,930 4.5% 147,266 15.8% 931,269 56 Wyoming BR 12,141 28.6% 124 0.3% 7,188 16.9% 42,523 54

AK is a Payroll Decline state and is not required to report Ineffective Charges. DE is Benefit-Wage state and is not required to report Ineffective Charges – all benefit charges are estimates. OK is Benefit-Wage state and is not required to report Ineffective Charges – all benefit charges are estimates. Data relates to July 2004 –June 2005 rate year for New Hampshire, New Jersey, Tennessee and Vermont
1
2
State also uses reserve ratio elements in its system. State uses an array method for assigning tax rates.
INA - Information not available
NA - Data not Applicable
INA* - Reported data failed consistency checks
RR - Reserve Ratio; BR - Benefit Ratio; BWR - Benefit Wage Ratio; PD - Payroll Decline

Attachment 3 (official PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2005/UIPL04-06_Attach3.pdf)

ATTACHMENT III

EXPERIENCE RATING INDEX CALCULATION

The ERI is calculated by first computing "effective benefit charges" by taking the total benefits paid during the reporting period and subtracting from them the ineffective charges, inactive charges, and noncharges. The remainder is then divided by the total benefits.

ERI = ((BEN-(IEC+IAC+NNC)) / BEN )* 100
where:

IEC = Ineffective charges: Calculated from the ETA 204, Section C. -- Those charges for which employer taxes do not fully cover the benefits charged. Employers are aggregated, by experience factor, into approximately 30 groups. Within each group, the excess, if any, of benefits charged over estimated contributions is calculated. IEC is the sum of these excesses over all groups.

IAC = Inactive charges: ETA 204, Section B, item 6(a) (2). -- Charges to employers who have gone out of business and from which taxes cannot be collected.

NNC = Noncharges: ETA 204, Section B, item 6(b) plus item 7(b) -- Payments made to claimants, but not charged to a particular employer.

BEN = Total benefits paid during the computation year: ETA 204, Section B, item 5 minus item 7(a).

Example:
State Data: IEC = 50,588
IAC = 12,132
NNC = 38,182
BEN = 205,777

State’s ERI = ((BEN-(IEC+IAC+NNC)) / BEN) * 100 = ((205777 - (50588 + 12132 + 38182)) / 205777) * 100 = 51