Committee advances bill to extend unemployment tax look‑back and ease penalty rules

The LCI Committee voted to report favorably on S-688, a bill by Senator Massey that would change how employers’ unemployment insurance tax rates are calculated and revise penalties for late payments.

Senator from Edgefield, the bill’s floor presenter, said the measure extends the current 12-calendar-quarter "look back" (about three years) to 20 calendar quarters (about five years), phased in over three years, and adjusts the solvency formula that determines how much must remain in the trust fund before rates rise. "The first area is to extend the look back period," the senator said, arguing the change will "soften the blow for a lot of these businesses" when a claim occurs.

Why it matters: the look-back determines an employer’s experience rating; extending it spreads older claims across a longer period and can reduce sudden rate jumps for employers who file a claim. The sponsor told the committee the bill also would change the rebuilding period if the fund drops below the solvency threshold from four years to five years, translating into lower employer rates over time while aiming to keep adequate reserves.

The sponsor also described changes to penalty treatment for delinquent payments. Under the proposal, late payers would not be moved immediately into the highest of 20 tax classes; instead, they would pay their calculated rate plus two percentage points until liens are cleared. The senator cited instances where small underpayments escalated into large penalties, saying the change would preserve a deterrent while avoiding "a debt spiral" for employers.

During questioning, Senator Corbin asked whether expanding the look-back would bring COVID-era rates back into calculations. A committee member clarified the change is prospective and phased in, so employers currently in the lowest tax class would remain in that class unless they incur new claims after the bill’s effective date. Ellen Andrews Morgan, director of government affairs at DU, explained that new employers with under 12 quarters of experience are assigned a minimum federal rate (1%) and would not see their experience rating changed by the look-back expansion; however, penalties that add two points would apply if a lien were active.

Procedural step: Senator from Edgefield moved for a favorable report; the motion received a second and the committee voted by voice, recording the bill as reported favorably.

Next steps: The committee reported S-688 favorably out of committee; further floor action will follow according to legislative scheduling.