2023 Tennessee Code › Title 50 - EMPLOYER AND EMPLOYEE (§§ 50-1-101 — 50-11-106) › Chapter 7 - TENNESSEE EMPLOYMENT SECURITY LAW (§§ 50-7-101 — 50-7-913) › Part 4 - PREMIUMS (§§ 50-7-401 — 50-7-452) › Section 50-7-403 - Experience rating for employers

(a)
Except as provided in [former] §
62-43-113(b)(2)(A)(ii)
[repealed] of the Tennessee Employee Leasing Act pertaining to staff leasing companies and the clients of the staff leasing companies, for each twelve-month period beginning July 1, employers shall be classified, in accordance with the experience in the payment of premiums and with respect to benefits charged against their accounts, in order that premium rates may be assigned that will reflect the benefit and premium experience.
(b)
(1)
Except as provided in [former] §
62-43-113(b)(2)(A)(ii)
[repealed] of the Tennessee Employee Leasing Act pertaining to staff leasing companies and the clients of the staff leasing companies, there shall be two (2) methods used in determining the experience rating of an employer. In each method, the benefit and premium experience is to be determined from the reserve ratio. Subdivision (b)(1)(A) shall apply to any employer whose individual account has been chargeable with benefits and subject to premiums throughout the thirty-six (36) consecutive calendar month period ending on the computation date, as defined in subdivision (k)(1), and shall continue to apply until the employer has not had a payroll subject to premiums for nine (9) consecutive calendar quarters. Any other employer subject to premiums and chargeable with benefits shall be considered a new employer and shall be subject to the applicable new employer rate as provided in subdivision (b)(1)(B).
(A)
The reserve ratio of each employer subject to this subdivision (b)(1) shall be determined by totaling all premiums paid by that individual employer for all years during which that employer has been subject to this chapter and subtracting the total of all benefits charged to the account of that employer for all years. The difference shall be divided by the average taxable payroll of that employer for the three (3) most recent calendar years, ending on the computation date. The resulting quotient shall be the reserve ratio for that employer. The employer premium rate shall be determined by matching the reserve ratio to the appropriate premium rate in premium rate table 1, 2, 3, 4, 5 or 6 in subsection (g).
(B)
(i)
Prior to July 1, 2004, the reserve ratio assigned to all new employers shall be determined by ascertaining which of the Standard Industrial Classification (SIC) Codes applies to the employer's industry or business. The SIC Codes and the code numbers of the industries or businesses within each classification are:
01-09
Agriculture
10-14
Mining
15-17
Construction
20-39
Manufacturing
40-49
Transportation
50-59
Trade
60-67
Finance, Insurance, Real Estate
70-89
Services
A separate reserve ratio is determined for each classification by totaling all premiums paid by all employers within the same classification for all years during which these employers have been subject to this chapter and subtracting the total of all benefits charged to the accounts of those employers for all years. The difference shall be divided by the average taxable payrolls of those employers for the three (3) most recent calendar years, ending on the computation date. The new employer premium rate shall be two and seven-tenths percent (2.7%) for each twelve-month period beginning July 1, except when the industry or business of the new employer falls within a classification of the SIC Code that has a reserve ratio of minus four percent (-4%) or less. In those instances only, the new employer premium rates shall be determined for each twelve-month period beginning July 1, by matching the reserve ratios to the appropriate premium rates in premium rate table 1, 2, 3, 4, 5 or 6 of subsection (g). This new employer premium rate will be assigned for each tax rate year beginning July 1, until the employer's individual account has been chargeable with benefits and subject to premiums throughout the thirty-six (36) consecutive calendar month period ending on the computation date.
(ii)
Effective July 1, 2004, the premium rate assigned to each new employer for each twelve-month period beginning July 1 shall be two and seven-tenths percent (2.7%) except when the industry or business of the new employer falls within a two-digit classification of the North American Industry Classification System (NAICS) that has a reserve ratio of less than zero percent (0%). In those instances only, the new employer rates shall be determined for each twelve-month period beginning July 1 by matching the reserve ratio of a 2-digit NAICS in which the employer's industry or business is classified to the appropriate premium rates in premium rate table 1, 2, 3, 4, 5 or 6 of subsection (g). This new employer premium rate will be assigned for each tax rate year beginning each July 1, until the employer's individual account has been chargeable with benefits and subject to premiums throughout the thirty-six (36) consecutive calendar month period ending on the computation date. The reserve ratio of each two-digit NAICS is determined for each classification by:
(a)
Totaling all premiums paid by all employers within the same classification, who were active anytime within the thirty-six (36) consecutive months ending on the previous December 31, for all years during which these employers have been subject to this chapter; and
(b)
Subtracting the total of all benefits charged to the accounts of those employers for all years; and
(c)
Dividing the difference by the average taxable payrolls of those employers for the three (3) most recent calendar years ending on the previous December 31.
The two-digit NAICS and the code numbers and the industries or businesses within each classification are:
11 Agriculture, Forestry, Fishing, Hunting
21 Mining
22 Utilities
23 Construction
31 Manufacturing - food, beverage, tobacco products, textile, apparel, leather and allied product manufacturing
32 Manufacturing - wood, paper, printing and related support services, petroleum and coal products, chemical, plastics and rubber, nonmetallic mineral product manufacturing
33 Manufacturing - primary metal, fabricated metal, machinery, computer and electronic products, electrical equipment, appliances and components, transportation equipment, furniture and related products, miscellaneous manufacturing
42 Wholesale Trade
44 Retail Trade - motor vehicle and parts dealers, furniture and home furnishings, electronics and appliances, building material and garden equipment, food and beverage, health and personal care, gasoline stations, clothing and clothing accessories stores
45 Retail Trade - sporting goods, hobby, book and music stores, general merchandise, miscellaneous store retailers, nonstore retailers
48 Transportation and Warehousing - air, rail, water, truck, transit and ground passenger, pipeline, scenic and sightseeing transportation, support activities for transportation
49 Transportation and Warehousing - postal service, couriers and messengers, warehousing and storage
51 Information - publishing, motion picture and sound recording, broadcasting and telecommunications, information services and data processing
52 Finance and Insurance
53 Real Estate and Rental and Leasing
54 Professional, Scientific and Technical Services
55 Management of Companies and Enterprises
56 Administrative and Support and Waste Management and Remediation Services
61 Educational Services
62 Health Care and Social Assistance
71 Arts, Entertainment and Recreation
72 Accommodation and Food Services
81 Other Services, except Public Administration
(iii)
(a)
Notwithstanding subdivision (b)(1)(B)(ii), the department, in determining the experience rating for new employers in operation at least three (3) years immediately preceding the date of becoming a liable employer in Tennessee, shall allow, upon election of the employer, for an interstate transfer of the employer's experience rating.
(b)
The employer shall provide the department with an authenticated account history from information accumulated from operations from the state from which the employer relocated in order to compute a Tennessee new employer premium rate.
(c)
This subdivision (b)(1)(B)(iii) shall apply to all employers relocating into Tennessee on or after July 1, 2014.
(d)
In the event that the unemployment trust fund balance is lower than or equal to seven hundred million dollars ($700,000,000), then the commissioner, in the commissioner's sole discretion, may suspend the use of this subdivision (b)(1)(B)(iii) to determine the new employer experience rating for employers relocating to Tennessee. The rate shall revert to the industry rate designated at the time of the suspension of this subdivision (b)(1)(B)(iii).
(e)
Notwithstanding any other law to the contrary, this subdivision (b)(1)(B)(iii) shall not apply to the extent that compliance with such provisions would violate federal law or cause the department a loss of federal funding.
(C)
After January 1, 1954, premiums paid up to and including January 31 shall be deemed to have been paid for the period ending December 31 of the previous calendar year, if the premiums are based on wages paid during the period ending December 31 of the previous calendar year. Benefits will be charged to employers' accounts on the basis of benefits paid during each calendar year ending on the computation date.
(2)
Mergers and Successorships.
Effective for transfers made on or after January 1, 2006, premium and benefit experience, as provided in subsections (a) and (b)(1), shall only be transferred in accordance with this subdivision (b)(2).
(A)
(i)
In the event of a merger of employers or employing units and the resulting employer is a new entity, the combined taxable payroll, benefit and premium experience of the employers or employing units involved shall be computed as of the effective date of the merger to determine a new reserve ratio and premium rate applicable to the resulting employer.
(ii)
In the event that any person or employing unit acquires or has acquired all or a distinct, severable, identifiable and segregable portion of the business of an employer and continues or has continued the acquired portion of the business of the predecessor, the successor shall be eligible to succeed to that part of the taxable payroll, benefit and premium experience of the predecessor that is attributable solely to that portion of the business that was acquired; provided, that:
(a)
Any and all of the predecessor employer's outstanding liabilities under this chapter are paid;
(b)
The parties have filed with the division of employment security a written agreement transferring the taxable payroll, benefit and premium experience, or portion of the taxable payroll, benefit and premium experience. The agreement must be executed by all of the employers or employing units involved, and must be notarized and filed during the calendar quarter in which the acquisition occurs or during the calendar quarter immediately following that quarter; and
(c)
The administrator does not determine, pursuant to the factors in subdivision (b)(2)(F), that a substantial purpose of the transfer of trade or business was to obtain a reduced liability for premiums.
(B)
(i)
In the event that there is only one (1) transferring employer and the successor, at the time of the acquisition, is not already an employer, as defined in §
50-7-205
, the reserve ratio and premium rate applicable to the predecessor employer, with respect to the period immediately preceding the date of the transfer, applies to the successor employer for the calendar quarter in which the acquisition takes place, and remains in effect until adjusted as provided in subsections (g) and (j). In the event that the successor, at the time of the acquisition, is an employing unit, as defined in §
50-7-206
, but not an employer, as defined in §
50-7-205
, the successor shall, as of the first day of the calendar year during which the transfer is made, become an employer under this chapter, and the successor's premium rate, from January 1 of the year in which the acquisition takes place until the first day of the calendar quarter during which the acquisition takes place, shall be the applicable new employer premium rate as provided in subdivision (b)(1)(B).
(ii)
In the event that the successor is already an employer at the time of the acquisition, the reserve ratio applicable at the time of the acquisition to the successor employer shall continue to be applicable until the end of the rate year in which the succession occurs.
(iii)
Commencing with the next premium rate year after an employer has transferred a distinct, severable, identifiable and segregable portion of the employer's business, the reserve ratio and premium rate of the predecessor employer shall be based on the portion of the taxable payroll, benefit and premium experience remaining to the credit of the predecessor employer after the transfer.
(C)
Notwithstanding any other law, this subdivision (b)(2)(C) shall apply regarding assignment of premium rates and transfers of benefit and premium experience of an employer's trade or business, or a portion of an employer's trade or business, to another employer, if, at the time of the transfer, there is any common ownership, management or control of the two (2) employers. In such cases, the benefit and premium experience attributable to the transferred trade or business shall be transferred to the employer to whom the trade or business is so transferred. The reserve ratios and premium rates of both employers shall be recalculated and made effective immediately upon the date of the transfer of the trade or business. For the purposes of this section:
(i)
"Trade or business" includes the employer's workforce;
(ii)
"Common ownership, management or control" includes any individual who has at least a ten percent (10%) ownership interest in or participates in the management or control of the predecessor's trade or business, and who has a relative who has a ten percent (10%) ownership interest in or participates in the management or control of the successor's trade or business; and
(iii)
For purposes of this subdivision (b)(2)(C), "relative" means spouse, child, stepchild, adopted child, grandchild, son-in-law, daughter in-law, parent, step-parent, parent-in-law, grandparent, brother, sister, half brother, half sister, step-brother, step-sister, brother-in-law, sister-in-law, aunt, uncle, nephew and niece.
(D)
If, following a transfer of experience under subdivision (b)(2)(C), the administrator, pursuant to the factors in subdivision (b)(2)(F), determines that a substantial purpose of the transfer of trade or business was to obtain a reduced liability for premiums, the experience rating factors of the employers involved shall be combined into a single account and a single premium rate assigned to the account as of the date of the transfer.
(E)
If a person or employing unit is not an employer under this chapter at the time the person or employing unit acquires the trade or business of an employer, the unemployment experience of the acquired business shall not be transferred to the person or employing unit, if the administrator, pursuant to the factors in subdivision (b)(2)(F), finds that the person or employing unit acquired the business solely or primarily for the purpose of obtaining a lower rate of premiums. Instead, the person or employing unit shall be assigned the applicable new employer rate under subdivision (b)(1)(B).
(F)
In determining whether a business was acquired, or a transfer of a trade or business, or portion of a trade or business, was made solely or primarily or substantially for the purpose of obtaining a lower rate of premiums, the administrator shall use objective factors, which may include the cost of acquiring the business, whether the person or employing unit continued the business enterprise of the acquired business, how long the business enterprise was continued, or whether a substantial number of new employees were hired for performance of duties unrelated to the business activity conducted prior to acquisition.
(G)
Enforcement.
Any person or employing unit that knowingly violates or attempts to violate this section, or knowingly advises another person or employing unit to violate this section, shall be subject to the following penalties and punishments:
(i)
Both the predecessor and successor employers:
(a)
Shall be assigned the applicable premium rate under the laws of this chapter, and shall immediately owe the department the difference between the premiums determined by the applicable premium rate and the premiums actually paid, plus any interest due as provided in §
50-7-404(a)
; and
(b)
Shall pay, in addition to their applicable premium rate, a penalty rate of two percent (2%) of the taxable payroll for each quarter, beginning on the date of the infraction and continuing throughout the three (3) premium rate years following the first July 1 after the date on which the department made the determination of the infraction. Revenue from the penalty rate shall be deposited into the unemployment compensation special administrative fund, established under §
50-7-503
, and shall not be included in the determination of an employer's reserve ratio as provided in subdivision (b)(1)(A);
(ii)
Any person found in violation of this section, against whom the penalties as set forth in subdivision (b)(2)(G)(i) are not enforceable, is subject to a civil money penalty of not more than fifty thousand dollars ($50,000). In making the assessment, the administrator shall give due consideration to the appropriateness of the penalty with respect to the size of the business of the person or employing unit charged, the gravity of the violation, the good faith of the person or employing unit, and the person or employing unit's history of previous violations. The penalty shall be deposited in the unemployment compensation special administrative fund, established under §
50-7-503
; and
(iii)
In addition to the penalties imposed by subdivisions (b)(2)(G)(i) and (ii), any violation of this subdivision (b)(2) may be prosecuted as a Class A misdemeanor under title 40, chapter 35.
(H)
For purposes of this subdivision (b)(2):
(i)
"Knowingly" means having actual knowledge of or acting with deliberate ignorance or reckless disregard for the prohibition involved;
(ii)
"Violates or attempts to violate" means, but is not limited to, intent to evade, misrepresentation or willful nondisclosure; and
(iii)
"Person" has the meaning given that term by § 7701(a)(1) of the Internal Revenue Code of 1986 (
26 U.S.C. § 7701(a)(1)
).
(I)
The administrator shall establish procedures to identify the transfer or acquisition of a business for purposes of this subdivision (b)(2).
(J)
This subdivision (b)(2) shall be interpreted and applied in a manner that meets the minimum requirements contained in any guidance or regulations issued by the United States department of labor.
(K)
As provided in [former] §
62-43-113(b)(2)(A)(ii)
(
b
) [repealed] of the Tennessee Employee Leasing Act, a staff leasing company shall not be considered a successor employer, within the meaning of this section, to any client and shall not acquire the experience history of any client with whom there is not any common ownership, management or control. Upon terminating the relationship with the staff leasing company, the client shall not be considered a successor employer, within the meaning of this chapter, to the staff leasing company and shall not acquire any portion of the experience history of the aggregate reserve account of the staff leasing company with whom there is not any common ownership, management or control.
(L)
Nothing in this section shall be construed to authorize or require the refund of any sums lawfully paid into the unemployment compensation fund created by Acts 1936 (1st E.S.), ch. 1, § 9(a), [repealed], and by Acts 1947, ch. 29, § 9(A), as amended, § 6901.9(A) of the Code Supplement of 1950 or by §
50-7-501(a)
.
(c)
Nothing in this section shall be construed to grant any employer, or individuals in any employer's service, or otherwise, prior claim or rights to the amounts paid by the employer into the fund either on behalf of the employer or on behalf of the claimants.
(d)
(1)
(A)
Benefits paid to a claimant for the year 1941 and subsequent years are to be charged to the accounts of the claimant's employers in the base period, the amount of the charges, chargeable to the account of each employer, to be that portion of the total benefits paid the claimant as the wages paid the claimant by the employer in the base period are to the total wages paid the claimant during the claimant's base period for insured work by all the claimant's employers in the base period.
(B)
(i)
Except as provided in §
50-7-304(b)(2)(D)
, no employer's account shall be charged hereunder for any benefits paid to a former employee who left the employment of the employer under conditions that result in the imposition of a disqualification under §
50-7-303(a)(1), (a)(2), or (a)(4)
, or that would have resulted in a disqualification under such subdivision except for a following period of bona fide employment by another employing unit. However, if the employer fails to establish that fact, by submitting the information as the administrator may require, within fifteen (15) calendar days after the date of mailing of written notification by the administrator, that the claimant has first filed a claim for benefits to the last known address of the employer, or within fifteen (15) calendar days after the date the written notification is given to the employer, whichever first occurs, the employer's account will be charged for the benefit payments.
(ii)
No employer's account shall be charged for any benefits paid to a former employee who left the employer to enter training approved under the Trade Act of 1974; provided, that the work left is not suitable employment as defined under § 236(e) of the Trade Act of 1974 (
19 U.S.C. § 2296
).
(iii)
The noncharging provisions referred to in subdivisions (d)(1)(B)(i) and (ii) do not apply to eligible employers who elect to reimburse the state for benefits paid in lieu of premiums, as provided by the federal Unemployment Tax Act (
26 U.S.C. § 3301
et seq.), or this chapter.
(C)
(i)
Benefits paid to an individual who, during the individual's base period, was paid wages for part-time employment with an employer shall not be used as a factor in determining the future premium rate of the employer if the employer continues to give employment to the claimant to the same extent while the claimant is receiving benefits as during the base period. However, if the employer fails to establish that fact, by submitting information the administrator requires, within fifteen (15) calendar days after the date of mailing of written notification by the administrator, that the claimant has first filed a claim for benefits to the last known address of the employer or within fifteen (15) calendar days after the date the written notice is given to the employer, whichever first occurs, the employer's account will be charged for the benefit payments.
(ii)
The noncharging provision referred to in subdivision (d)(1)(C)(i) does not apply to eligible employers who elect to reimburse the state for benefits paid in lieu of premiums, as provided by the federal Unemployment Tax Act (
26 U.S.C. § 3301
et seq.), or this chapter.
(2)
One-half (1/2) of extended benefits paid to a claimant for the year 1971 and subsequent years are to be charged to the accounts of the claimant's employers in the base period in the same manner provided for the charging of regular benefits with respect to calendar year 1941 and subsequent years hereinbefore set forth.
(3)
Benefits paid based on wage credits that are required to be transferred from the state under the wage combining plan referred to in §
50-7-706(a)
may not be noncharged except to the extent permitted by both this chapter and the federal Unemployment Tax Act (
26 U.S.C. § 3301
et seq.).
(4)
Notwithstanding any other provisions of this chapter, no employer's experience rating account shall be charged, and no employer shall be liable for payments in lieu of premiums, with respect to any benefits or extended benefits that are reimbursed to the state by the federal government.
(5)
Unemployment insurance benefits paid to claimants for unemployment that is directly caused by a major natural disaster declared by the president of the United States pursuant to the Disaster Relief Act of 1974 and the Disaster Relief and Emergency Assistance Amendments of 1988 will not be charged to the account of any base-period premium paying employer of the individuals, if the individuals would have been eligible for disaster unemployment assistance with respect to that unemployment but for their receipt of unemployment insurance benefits.
(6)
Any employer that elects to make payments in lieu of premiums into the unemployment compensation fund as provided in this subdivision (d)(6) shall not be liable to make the payments with respect to the benefits paid to any claimant whose base-period wages include wages for previously uncovered services, as defined in §
50-7-213
, to the extent that the unemployment compensation fund is reimbursed for the benefits pursuant to § 121 of Pub. L. No. 94-566, entitled the Unemployment Compensation Amendments of 1976.
(7)
Benefits paid to any claimant whose base-period wages include wages for previously uncovered services, as defined in §
50-7-213
, shall not be charged to any taxpaying employers (premium paying employers as distinguished from the employers that are eligible to elect and who do elect to make reimbursement payments in lieu of premiums) account to the extent that the unemployment compensation fund is reimbursed for the benefits pursuant to § 121 of Pub. L. No. 94-566, entitled the Unemployment Compensation Amendments of 1976.
(8)
[Repealed effective July 1, 2022.]
(e)
The standard rate of premiums payable shall be five and one-half percent (5.5%) with respect to nongovernmental employers and one and one-half percent (1.5%) with respect to governmental employers, except as provided in this section.
(f)
In the event that the division of employment security has not received before April 1 reports giving the necessary payroll information to determine an employer's reserve ratio applicable for the next premium rate year, the taxable payroll of the most recent calendar year in which the employer submitted all reports due with an increase of fifty percent (50%) will be used in computing the reserve ratio applicable for the next premium rate year if the employer has a plus reserve on the most recent computation date. For those employers with a minus reserve as of the most recent computation date, the payroll of the most recent calendar year in which the employer submitted all reports will be reduced by fifty percent (50%). However, no employer with a zero (0) or plus reserve will be assigned a rate based on a minus reserve, and no employer with a minus reserve will be assigned a rate greater than the highest rate in the applicable premium table set forth in subsection (g).
(g)
Variations from the standard rate of premiums for employers other than those referred to in §
50-7-207(b)(3)(A) and (B)
shall be determined, beginning January 1, 2009, by the reserve ratio of each employer in accordance with premium rate chart for nongovernmental employers tables 1, 2, 3, 4, 5 or 6 as set forth in this subsection (g), depending on the provisions of subsection (j); provided, however, that beginning January 1, 2009, there shall be imposed an additional premium of six-tenths of one percent (0.6%) on all rates in tables 1, 2 and 3, until such time as the unemployment trust fund balance equals or exceeds six hundred fifty million dollars ($650,000,000), as determined in accordance with subsection (j), at which time such additional premium shall expire.
Reserve Ratio Percent
Premium Table 1 Trust Fund under $450 Million
Premium Table 2 Trust Fund $450 to under $525 million
Premium Table 3 Trust Fund $525 to under $650 million
Premium Table 4 Trust Fund $650 to under $750 million
Premium Table 5 Trust Fund $750 to under $850 million
Premium Table 6 Trust Fund $850 million and over
20.0 and over
0.50
0.45
0.40
0.30
0.15
0.01
18.0 and less than 20.0
0.70
0.65
0.55
0.35
0.20
0.05
16.0 and less than 18.0
0.90
0.70
0.65
0.40
0.25
0.10
14.0 and less than 16.0
1.10
0.75
0.70
0.45
0.32
0.17
12.0 and less than 14.0
1.30
1.20
1.00
0.50
0.40
0.25
11.0 and less than 12.0
1.60
1.40
1.20
0.75
0.60
0.30
9.5 and less than 11.0
2.10
1.80
1.50
1.00
0.80
0.50
8.0 and less than 9.5
2.50
2.10
1.80
1.20
1.00
0.70
7.0 and less than 8.0
2.90
2.50
2.10
1.50
1.30
1.00
6.0 and less than 7.0
3.30
2.80
2.40
1.80
1.60
1.30
5.0 and less than 6.0
3.80
3.20
2.65
2.10
1.90
1.60
2.7 and less than 5.0
4.10
3.50
3.00
2.40
2.20
1.90
0.0 and less than 2.7
4.50
3.90
3.30
3.00
2.60
2.30
Less than 0.0 and more than -2.0
5.00
5.00
5.00
5.00
5.00
5.00
-2.0 and more than -4.0
5.50
5.50
5.50
5.50
5.50
5.50
-4.0 and more than -6.0
6.00
6.00
6.00
6.00
6.00
6.00
-6.0 and more than -8.0
6.50
6.50
6.50
6.50
6.50
6.50
-8.0 and more than -10.0
7.00
7.00
7.00
7.00
7.00
7.00
-10.0 and more than -12.0
7.50
7.50
7.50
7.50
7.50
7.50
-12.0 and more than -14.0
8.00
8.00
8.00
8.00
8.00
8.00
-14.0 and more than -16.0
8.50
8.50
8.50
8.50
8.50
8.50
-16.0 and more than -18.0
9.00
9.00
9.00
9.00
9.00
9.00
-18.0 and more than -20.0
9.50
9.50
9.50
9.50
9.50
9.50
-20.0 and under
10.00
10.00
10.00
10.00
10.00
10.00
Variations from the standard rate of contributions for governmental employers referred to in §
50-7-207(b)(3)(A) and (B)
shall be determined by the reserve ratio of each governmental employer in accordance with the premium rate chart for governmental employers set forth below.
PREMIUM RATE CHART FOR GOVERNMENTAL EMPLOYERS
Reserve Ratio Percent
Premium Rate Percent
8.0 and over
0.3
7.0 and less than 8.0
0.4
6.0 and less than 7.0
0.6
5.0 and less than 6.0
0.8
4.0 and less than 5.0
1.0
3.0 and less than 4.0
1.2
2.0 and less than 3.0
1.4
1.5 and less than 2.0
1.5
1.0 and less than 1.5
1.6
0.5 and less than 1.0
1.7
0.0 and less than 0.5
1.8
Less than 0.0 and more than -3.5
2.0
-3.5 and more than -7.0
2.2
-7.0 and more than -10.0
2.4
-10.0 and more than -13.0
2.7
-13.0 and under
3.0
(h)
Benefits paid to employees of nonprofit organizations shall be financed in accordance with this subsection (h). For the purpose of this subsection (h), a nonprofit organization is an organization, or group of organizations, described in § 501(c)(3) of the Internal Revenue Code (
26 U.S.C. § 501(c)(3)
), that is exempt from income tax under § 501(a) of the Internal Revenue Code (
26 U.S.C. § 501(a)
).
(1)
Any nonprofit organization that, pursuant to §
50-7-205(5)
is, or becomes, subject to this chapter on or after January 1, 1972, shall pay premiums under §§
50-7-401
,
50-7-402
and this section, unless it elects, in accordance with this subdivision (h)(1), to pay to the administrator for the unemployment fund an amount equal to the amount of regular benefits and of one-half (1/2) of the extended benefits paid, that is attributable to service in the employ of the nonprofit organization, to claimants for weeks of unemployment that begin during the effective period of the election.
(A)
Any nonprofit organization that becomes subject to this chapter after January 1, 1972, may elect to become liable for payments in lieu of premiums for a period of not less than twelve (12) months ending with a taxable year and beginning with the date on which the subjectivity begins by filing a written notice of its election with the administrator not later than thirty (30) days immediately following the date of the determination of the subjectivity.
(B)
Any nonprofit organization that makes an election in accordance with subdivision (h)(1)(A) will continue to be liable for payments in lieu of premiums until it files with the administrator a written notice terminating its election not later than thirty (30) days prior to the beginning of the taxable year for which the termination first becomes effective.
(C)
Any nonprofit organization that has been paying premiums under this chapter for a period subsequent to January 1, 1972, may change to a reimbursable basis by filing with the administrator, not later than thirty (30) days prior to the beginning of any taxable year, a written notice of election to become liable for payments in lieu of premiums. The election shall not be terminable by the organization for that taxable year and the next taxable year.
(D)
The administrator may, for good cause, extend the period within which the notice of election, or a notice of termination, must be filed and may permit an election to be retroactive, but not any earlier than with respect to benefits paid after December 31, 1969.
(E)
The administrator, in accordance with regulations the commissioner prescribes, shall notify in writing each nonprofit organization of any determination that the administrator may make of its status as an employer and of the effective date of any election that it makes and of any termination of the election. The determinations shall be subject to review and redetermination in accordance with §
50-7-404(h)
.
(F)
For the purposes of this subsection (h), "taxable year" means the period beginning January 1, 1972, through June 30, 1973, and thereafter the period beginning July 1 and extending through June 30 of the following year.
(2)
Payments in lieu of premiums shall be made in accordance with this subdivision (h)(2), including either subdivision (h)(2)(A) or (B), which follows:
(A)
At the end of each calendar quarter, or at the end of any other period as determined by the administrator, the administrator shall bill each nonprofit organization, or group of organizations, that has elected to make payments in lieu of premiums for an amount equal to the full amount of regular benefits, plus one-half (1/2) of the amount of extended benefits paid during the quarter or other prescribed period that is attributable to service in the employ of the organization; or
(B)
(i)
Each nonprofit organization that has elected payments in lieu of premiums may request permission to make the payments as provided in this subdivision (h)(2). The method of payment shall become effective upon approval by the administrator;
(ii)
At the end of each calendar quarter, or at the end of such other period as determined by the administrator, the administrator shall bill each nonprofit organization for an amount representing one (1) of the following:
(a)
For years after 1972, the percentage of its total payroll for the immediately preceding calendar year that the administrator determines. The determination shall be based each year on the average benefit costs attributable to service in the employ of nonprofit organizations during the preceding calendar year; or
(b)
For any organization that did not pay wages throughout the four (4) calendar quarters of the preceding calendar year, the percentage of its payroll during the year that the administrator determines;
(iii)
At the end of each taxable year, the administrator may modify the quarterly percentage of payroll thereafter payable by the nonprofit organization in order to minimize excess or insufficient payments;
(iv)
At the end of each taxable year, the administrator shall determine whether the total of payments for the year made by a nonprofit organization is less than, or in excess of, the total amount of regular benefits, plus one-half (1/2) of the amount of extended benefits paid to claimants during the taxable year based on wages attributable to service in the employ of the organization. Each nonprofit organization whose total payments for the year are less than the amount so determined shall be liable for payment of the unpaid balance to the fund in accordance with subdivision (h)(2)(C). If the total payments exceed the amount so determined for the taxable year, all or a part of the excess may, at the discretion of the administrator, be refunded from the fund or retained in the fund as part of the payments that may be required for the next taxable year.
(C)
Payment of any bill rendered under subdivision (h)(2)(A) or (h)(2)(B) shall be made not later than thirty (30) calendar days after the date the bill is mailed to or given to the organization, whichever occurs first, unless the organization has timely filed with the division of employment security a written application for review and redetermination in accordance with §
50-7-404(h)
;
(D)
Payments made by any nonprofit organization under this subsection (h) shall not be deducted or deductible, in whole or in part, from the remuneration of individuals in the employ of the organization;
(E)
The amount due specified in any bill shall be conclusive on the organization, unless the organization has timely filed with the division of employment security a written application for review and redetermination in accordance with §
50-7-404(h)
; and
(F)
Past-due payments of amounts in lieu of premiums shall be subject to the same interest and penalties that, pursuant to §
50-7-404
, apply to the past-due premiums.
(3)
If any nonprofit organization is delinquent in making payments in lieu of premiums as required under subdivision (h)(2), the administrator may terminate the organization's election to make payments in lieu of premiums as of the beginning of the next taxable year, and the termination shall be effective for that and the next taxable year.
(4)
Each employer that is liable for payments in lieu of premiums shall pay to the administrator for the fund the amount of regular benefits, plus the amount of one-half (1/2) of extended benefits paid that are attributable to service in the employ of the employer. If benefits paid to a claimant are based on wages paid by more than one (1) employer and one (1) or more of the employers are liable for payments in lieu of premiums, the amount payable to the fund by each employer that is liable for the payments shall be determined in accordance with subdivision (h)(4)(A) or (h)(4)(B):
(A)
Proportionate allocation, when fewer than all base-period employers are liable for reimbursement.
If benefits paid to a claimant are based on wages paid by one (1) or more employers who are liable for payments in lieu of premiums and on wages paid by one (1) or more employers who are liable for premiums, the amount of benefits payable by each employer that is liable for payments in lieu of premiums shall be an amount that bears the same ratio to the total benefits paid to the individual as the total base-period wages paid to the claimant by the employer bear to the total base-period wages paid to the claimant by all of the claimant's base-period employers; or
(B)
Proportionate allocation, when all base-period employers are liable for reimbursement.
If benefits paid to a claimant are based on wages paid by two (2) or more employers that are liable for payments in lieu of premiums, the amount of benefits payable by each employer shall be an amount that bears the same ratio to the total benefits paid to the claimant as the total base-period wages paid to the claimant by the employer bear to the total base-period wages paid to the claimant by all of the claimant's base-period employers.
(5)
(A)
(i)
Two (2) or more employers that have become liable for payments in lieu of premiums, in accordance with subdivision (h)(1), may file a joint application to the administrator for the establishment of a group account for the purpose of sharing the cost of benefits paid that are attributable to service in the employ of the employers.
(ii)
Each application shall identify and authorize a group representative to act as the group's agent for the purposes of this subdivision (h)(5).
(iii)
Upon the administrator's approval of the application, the administrator shall establish a group account for the employers effective as of the beginning of the calendar quarter in which the administrator receives the application and shall notify the group's representative of the effective date of the account.
(iv)
The account shall remain in effect for not less than two (2) years and thereafter until terminated at the discretion of the administrator or upon application by the group.
(v)
Upon establishment of the account, each member of the group shall be liable for payments in lieu of premiums with respect to each calendar quarter in the amount that bears the same ratio to the total benefits paid in the quarter that are attributable to service performed in the employ of all members of the group as the total wages paid for service in employment by the member in the quarter bear to the total wages paid during the quarter for service performed in the employ of all members of the group.
(vi)
The commissioner shall prescribe regulations the commissioner deems necessary with respect to applications for establishment, maintenance and termination of group accounts that are authorized by this subdivision (h)(5)(A), for addition of new members to, and withdrawal of active members from, the accounts, and for the determination of the amounts that are payable under this subdivision (h)(5)(A) by members of the group and the time and manner of the payments.
(B)
For the purpose of this chapter, this state, the different designated entities of this state, and each of its political subdivisions are regarded as individual governmental entities, and each governmental entity is individually accorded the option of electing to pay premiums or make payments in lieu of premiums to the full extent provided in this section.
(C)
Insofar as these governmental employers are concerned and insofar as newly covered nonprofit organizations becoming liable as a result of this chapter on or after January 1, 1978, are concerned, "taxable year" means the period beginning January 1, 1978, through June 30, 1979, and thereafter the period beginning July 1 and extending through June 30 of the following year; provided, that any employing unit becoming an employer as a result of §
50-7-205(4)
(state and local governmental entities) is liable to pay premiums as set forth in this chapter, unless it elects in accordance with this section to pay to the administrator for the unemployment fund, an amount equal to the amount of regular benefits and the amount of extended benefits paid that are attributable to service in the employ of the governmental employer to claimants for weeks of unemployment that begin during the effective period of the election with the exception of benefits or extended benefits reimbursed to the state by the federal government pursuant to applicable law.
(i)
State-owned institutions of higher education and state-owned hospitals that are employers under §
50-7-205(4)
are accorded the same options relating to the payment of premiums or reimbursement for benefits paid as those accorded nonprofit organizations under subsection (h).
(j)
(1)
The administrator shall, on June 30 and December 31 of each year, make and publish findings as to the balance in the unemployment compensation trust fund. The balance the administrator finds in the trust fund shall determine the appropriate premium table applicable for the subsequent six-month period as to all employers who qualify under subdivision (b)(1) for a premium rate based on subdivision (b)(1)(A).
(2)
This section shall not apply to those employers referred to in §
50-7-207(b)(3)(A) and (B)
.
(k)
As used in this chapter:
(1)
"Computation date" means December 31 of each calendar year with respect to rates of premiums applicable for the twelve-month period beginning with the following July 1;
(2)
"Premium rate year" means the period of time beginning July 1 of any year and ending on June 30 of the succeeding year; and
(3)
"Taxable payroll" means the total amount of taxable wages paid for employment by an employer during a twelve-month period ending on December 31.
(l)
The administrator shall promptly notify each employer of the employer's rate of premiums as determined for any period pursuant to this section, and shall also provide for periodic notification to each employer of benefits paid and chargeable to the employer's account, or the status of the employer's account, and the administrator shall further make rules and regulations necessary to make this section effective.
(m)
(1)
If the administrator finds that an employer's business is closed solely because of the entrance of one (1) or more of the owners, officers, partners, or the majority stockholder, into the armed forces of the United States or of any of its allies, or of the United Nations, after July 1, 1950, the employer's account shall not be terminated; and, if the business is resumed within two (2) years after the discharge or release from active duty in the armed forces of that person or persons, the employer's experience shall be deemed to have been continuous throughout the period.
(2)
The reserve ratio of the employer shall be the total premiums paid by the employer, minus all benefits, including benefits paid to any claimant during the period such employer was in the armed forces, based upon the wages paid by the employer prior to the employer's entrance into the forces, divided by the employer's average taxable payroll for the three (3) most recent calendar years ending on the computation date during the whole of which respectively the employer has been in business.
(3)
This subsection (m) does not authorize cash refunds; any adjustments required under this subsection (m) shall be only by credit against premiums due or to be due by the employer.
(n)
(1)
Any premium rate determination rendered with respect to an employer pursuant to this chapter shall be final and conclusive upon the employer for all purposes and in all proceedings whatsoever unless the employer has timely filed with the division of employment security a written application for review and redetermination in accordance with §
50-7-404(h)
.
(2)
Subdivision (n)(1) does not change any cutoff dates as set forth in other sections of the law for filing reports or claims for refund giving the information necessary for computation of rates.
Amended by 2021 Tenn. Acts, ch. 538, s 2, eff. 5/25/2021.
Amended by 2020 Tenn. Acts, ch. 745, s 3, eff. 6/22/2020.
Amended by 2014 Tenn. Acts, ch. 762, s 1, eff. 7/1/2014.
Acts 1947, ch. 29, § 7; C. Supp. 1950, § 6901.7 (Williams, § 6901.31); Acts 1951, ch. 139, §§ 6-8; 1953, ch. 244, § 5; modified; Acts 1955, ch. 115, § 11; 1957, ch. 146, § 9; 1959, ch. 160, § 3; 1959, ch. 202, §§ 8, 9; 1961, ch. 70, § 4; 1963, ch. 176, § 5; 1965, ch. 183, §§ 4, 5; 1967, ch. 208, § 4; 1969, ch. 32, § 3; 1970, ch. 397, § 3; 1971, ch. 132, §§ 3, 4; 1971, ch. 204, §§ 6-8; 1973, ch. 130, § 8; 1974, ch. 460, §§ 7-9; 1975, ch. 190, § 8; 1977, ch. 330, §§ 21-25; 1978, ch. 744, §§ 10-12; 1980, ch. 641, §§ 3, 4; 1980, ch. 783, §§ 3-6; 1982, ch. 820, §§ 8-14; T.C.A. (orig. ed.), § 50-1328; Acts 1983, ch. 439, §§ 4-8; 1984, ch. 701, § 4; 1984, ch. 702, § 3; 1985, ch. 317, §§ 1, 7-10; 1985, ch. 318, §§ 44-57; 1986, ch. 597, §§ 4-8; 1987, ch. 148, § 7; 1989, ch. 333, §§ 4, 5; 1989, ch. 388, §§ 7-12; 1992, ch. 694, §§ 8-10; 1993, ch. 194, §§ 18-26; 1993, ch. 305, §§ 2-4; 1995, ch. 239, §§ 3, 4; 1996, ch. 916, §§ 1-3; 1998, ch. 1110, §§ 1 - 3; 1999, ch. 520, § 41; 2001, ch. 379, §§ 1 - 3; 2004, ch. 510, §§ 1 - 3; 2004, ch. 927, §§ 1 - 3; 2004, ch. 946, § 2; 2005, ch. 357, §§ 2 - 9; 2006, ch. 623, §§ 1 - 4; 2007 , ch. 197, § 1; 2009 , ch. 550, §§ 8 - 12.