A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 41-31-5, RELATING TO CONTRIBUTIONS AND PAYMENTS TO THE UNEMPLOYMENT TRUST FUND DEFINITIONS, SO AS TO CHANGE THE LOOKBACK PERIOD FOR THE BENEFIT RATIO; BY AMENDING SECTION 41-31-45, RELATING TO DEBT STATUS ESTIMATES, SO AS TO PROVIDE FOR A SOLVENCY TARGET FOR THE FUND; BY AMENDING SECTION 41-31-60, RELATING TO THE TAX RATE WHEN A DELINQUENT REPORT IS RECEIVED, SO AS TO CHANGE THE PENALTY FOR AN OUTSTANDING LIEN; BY AMENDING SECTION 41-31-350, RELATING TO THE PENALTY FOR FAILURE TO FILE A REPORT, SO AS TO REMOVE THE CAP ON THE PENALTY FOR FAILING TO FILE A REPORT; AND BY AMENDING SECTION 41-31-370, RELATING TO INTEREST ON UNPAID CONTRIBUTIONS, SO AS TO REMOVE THE CAP ON THE PNEALTY FOR FAILURE TO PAY CONTRIBUTIONS.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  Section 41-31-5 of the S.C. Code is amended to read:

 

    Section 41-31-5. As used in this chapter:

    (1) "Benefit ratio" means:

       (a) for the period of January 1, 2011, through December 31, 2013, the number calculated by dividing the sum of all benefits charged to an employer during the forty calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than forty but more than one calendar quarter of data are available, the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place;

       (b) from January 1, 2014, through tax year 2026, the number calculated by dividing the sum of all benefits charged to an employer during the twelve calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than twelve but more than one calendar quarters of data are available, the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place.;

       (c) For tax year 2027, the number calculated by dividing the sum of all benefits charged to an employer during the sixteen calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than sixteen but more than one calendar

quarters of data are available, then the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place; and

       (d) Beginning in tax year 2028, the number calculated by dividing the sum of all benefits charged to an employer during the twenty calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than twenty but more than one calendar quarters of data are available, then the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place.

    (2) "Department" means the Department of Employment and Workforce.

    (3) "Statewide average required rate" means the amount of income projected to be needed by the unemployment insurance trust fund for the upcoming calendar year divided by the estimated taxable wages over the same period rounded to the sixth decimal place.

    (4) "Statewide average interest surcharge" means the amount of income projected to be needed to pay interest on outstanding federal advances during the upcoming calendar year divided by the estimated taxable wages for the upcoming calendar year.

 

SECTION 2.  Section 41-31-45 of the S.C. Code is amended to read:

 

    Section 41-31-45.  (A) For the purposes of this section:

       (1) "Average high cost multiple" means the number of years the department could pay unemployment compensation, based upon the statewide reserve ratio, if the department paid the compensation at a rate equivalent to the average benefit cost rate in the three calendar years during the previous twenty calendar years, or the last three recessions, in which the benefit cost rates were the highest.

       (2) "Benefit cost rate" means the rate determined by dividing the unemployment compensation benefits paid during a calendar year by the total covered wages in the State during that year. The calculation of the benefit cost rate may not include the wages and unemployment compensation paid by employers covered under Section 3309 of the Internal Revenue Code of 1986.

       (3)(1) "Income needed to pay benefits" means the estimate of benefits payable in a given calendar year less the estimate of interest to be earned by the unemployment insurance trust fund for that calendar year.

       (4) "Statewide reserve ratio" means the ratio determined by dividing the balance in the trust fund reserve as of June thirtieth by the total covered wages for the previous twelve months in the State as of June thirtieth. The calculation of the statewide reserve ratio may not include the wages and unemployment compensation paid by employers covered under Section 3309 of the Internal Revenue

Code of 1986.

       (5)(2) "Fund adequacysolvency target" means an average high-cost multiple of one is defined as the value computed as the product of 0.08 and:

           (a) the size of the South Carolina labor force as determined annually by the U.S. Bureau of Labor Statistics;

           (b) the maximum weekly benefit amount set by the department in accordance with Section 41-35-40; and

           (c) the maximum number of weeks of unemployment benefits available in accordance with Section 41-35-50.

       (6)(3) "Trust fund reserve" excludes distributions from the federal government pursuant to 42 U.S.C. 1103, commonly referred to as the Reed Act.

       (4) "Solvency surcharge" is a surcharge imposed on contributory employers in each year the unemployment trust fund is solvent but the trust fund reserve does not meet the fund solvency target.

       (5) "Fiscal year" begins on July first of each year and ends on June thirtieth of the succeeding year.

       (6) "Tax year" begins on January first of each year and ends on December thirty-first of each year.

       (7) "Cap" is the maximum projected amount of revenue to be generated in a single year and is the greater amount of either:

           (a) the actual benefits paid in the prior fiscal year; or

           (b) the projected benefits for the next tax year.

       (8) "Actual tax collections" excludes all penalties, interests, contingency surcharges, and recording fees.

    (B) Each year the department must calculate the income necessary to pay benefits and reach the fund solvency target for the unemployment trust fund. The department determines the total income needed as follows:

       (1) Projected benefits will be determined for the next tax year with annual historical data as well as unemployment rate projections provided by the Congressional Budget Office.

       (2) A solvency surcharge shall be in effect for each tax year the trust fund reserve is less than the fund solvency target, as of June thirtieth. The aggregate amount of the solvency surcharge will be determined for each tax year to be the amount calculated to return the unemployment trust fund to the fund solvency target within five years subject to:

           (a) When actual benefits paid in the prior fiscal year are greater than the actual tax collections received in the prior fiscal year, then the cap is triggered. Once triggered, then:

               (i) If projected benefits for the next tax year are less than the actual benefits paid in the prior fiscal year, then the solvency surcharge shall be the difference between the actual benefits paid in the prior fiscal year and the projected benefits.

               (ii) If projected benefits for the next tax year are greater than the actual benefits paid in the

prior fiscal year, then no additional solvency surcharge will be added for the next tax year.

           (b) After the cap has been triggered, once actual benefits paid in the prior fiscal year were less than actual tax collections in the prior fiscal year, then tax rates for the next tax year will be set based on returning the unemployment trust fund to the fund solvency target within the next five years.

       (3) If the balance of the unemployment trust fund, as of the end of the most recently completed fiscal year, is greater than the fund solvency target, then the department may use the surplus amount to reduce taxes in the next tax year.

       (4) Notwithstanding the provisions of subsection (2), once the fund solvency target has been met, in subsequent tax years, if the unemployment trust fund balance does not meet the fund solvency target as of the end of the most recently completed fiscal year, then the solvency surcharge shall be set as follows:

12 13	Percentage the unemployment trust fund balance is below the fund adequacy target	Rebuilding period
14	More than 0.0000%, but less than 2.5000%	One year
15	2.5000% or more, but less than 5.0000%	Two years
16	5.0000% or more, but less than 7.5000%	Three years
17	7.5000% or more	Four years

    (B)(C) For each calendar year during which the state Unemployment Insurance Trust Fund is in debt status, the department must estimate the amount of income necessary to pay benefits for that year, the amount of income necessary to avoid automatic FUTA credit reductions, and an amount of income necessary to repay all outstanding federal loans within five years. Additional estimates of interest costs shall be determined concurrently.

       (1) Estimates of the revenue needed to pay benefits will be based on Congressional Budget Office projections for the subsequent calendar year's total unemployment rate. This total unemployment rate will be adjusted for South Carolina based on the historic relationship between the unemployment rate in South Carolina and the national unemployment rate calculated from 1980 to present.

       (2) The historic relationship, calculated from 1980 to present, between the total unemployment rate and the insured unemployment rate in South Carolina will be used to adjust the projected total unemployment rate to the rate of insured unemployment.

       (3) Estimates of forecasted benefits will be based upon the prior three year average of the annual number of weeks compensated multiplied by an estimate of the average weekly benefit for the next year.

       (4) Estimates of amounts to pay to avoid FUTA credit reductions and amount of repayments on the loan will be projected through consultation with officials at the US Department of Labor.

    (C) After the fund returns to solvency, the department must promulgate regulations concerning the income needed to pay benefits in each year and return the trust fund to an adequate level as defined in

subsection (A)(5).

 

SECTION 3.  Section 41-31-60 of the S.C. Code is amended to read:

 

    Section 41-31-60.  (A) If on the computation date upon which an employer's tax rate is to be computed as provided in Section 41-31-40 there is a delinquent report, the tax class twenty rate must be assigned to the employer until the next computation date or until all outstanding tax reports have been filed.

    (B)(1) No employer is permitted to pay his unemployment compensation tax at a reduced tax rate class for any quarter when a tax execution issued prior to January 1, 2027, in accordance with Section 41-31-390 with respect to delinquent unemployment compensation tax for a previous quarter is unpaid and outstanding against the employer.  If on the computation date upon which an employer's tax rate is computed as provided in Section 41-31-40 there is an outstanding tax execution, the tax class twenty rate must be assigned to the employer until the next computation date or until such time as all outstanding tax executions have been paid.  An employer who has a department-approved installment payment agreement shall be permitted to pay its unemployment compensation tax at the annual rate as determined pursuant to Section 41-31-50.  However, any such employer's tax rate shall immediately revert to the tax class twenty rate if the employer fails to make any one of the succeeding deferred payments or fails to submit any succeeding wage report and payment in a timely manner as required by the department-approved installment payment agreement.

       (2) For any quarter when a tax execution issued on or after January 1, 2027, in accordance with Section 41-31-390 with respect to delinquent unemployment compensation tax for a previous quarter is unpaid and outstanding against the employer, an employer must pay his unemployment compensation tax at an increased rate of contribution that is the sum of two percent plus the employer's rate as otherwise determined pursuant to this chapter.

       (3) When an employer has an outstanding tax execution issued on or after January 1, 2027, and a tax execution issued prior to January 1, 2027, also remains outstanding, the tax class twenty rate must be assigned to the employer until such time as all outstanding tax executions issued prior to January 1, 2027, have been paid.

    (C) An employer with an outstanding tax execution who has a department-approved installment payment agreement shall be permitted to pay its unemployment compensation tax at the annual rate as determined pursuant to this chapter. However, any such employer's tax rate shall immediately revert to the applicable increased rate if the employer fails to make any one of the succeeding deferred payments or fails to submit any succeeding wage report and payment in a timely manner as required by the department-approved installment payment agreement.

 

SECTION 4.  Section 41-31-350 of the S.C. Code is amended to read:

 

    Section 41-31-350. An employer that fails to file a report concerning wages or contributions pursuant to Chapters 27 through 41 of this title within fifteen days from the date upon which the department mailed a demand for the report, the department shall assess the employer a penalty of ten percent of the contributions due but no less than twenty-five nor more than one thousand dollars in addition to the contributions payable with respect to the report.

 

SECTION 5.  Section 41-31-370 of the S.C. Code is amended to read:

 

    Section 41-31-370. (A) Contributions unpaid on the date on which they are due and payable, as prescribed by the department, shall bear interest at the rate of one percent for each month or fraction for which they remain unpaid but contributions as have accrued prior to the establishment of an employer's liability shall bear interest at the rate of one-half of one percent a month or fraction of a month, to the date on which liability is established, unless it is found by the department that the delay in the establishment of liability resulted from wilful negligence of the employer, and shall bear interest at the rate of one percent a month or fraction for which they remain unpaid thereafter.

    (B) If any employer's amount of contributions which are due and payable, as prescribed by the department, are unpaid ten days following the date on which an assessment or debit memorandum was issued, a penalty of ten percent of the amount of contributions due and payable, not to exceed one thousand dollars, must be paid in addition to any other interest or penalty which may be applicable.

    (C) The department may, for good cause, extend the time for the filing of reports and the payment of contributions. Any person to whom the extension is granted shall pay in addition to the contribution due, interest at the rate of one percent per month or fraction of a month from the due date of the contribution to the date of payment.

 

SECTION 6.  This act takes effect upon approval by the Governor on July 1, 2026.

 

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