Unemployment trust fund; income calculations; solvency surcharge; debt status estimates

(A) For the purposes of this section: (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. (2) "Fund solvency target" 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. (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 item (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: Percentage the unemployment trust fund balance is below the fund adequacy target Rebuilding period More than 0.0000%, but less than 2.5000% One year 2.5000% or more, but less than 5.0000% Two years 5.0000% or more, but less than 7.5000% Three years 7.5000% or more Four years (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.