ADVISORY:	UNEMPLOYMENT INSURANCE PROGRAM LETTER No.26-03
TO:	ALL STATE WORKFORCE AGENCIES

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

SUBJECT:

Experience Rating Index for Rate Years 1998-2002

1. Purpose.To transmit the Experience Rating Index (ERI) for states for rate years 1998-2002.

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 and UIPL No. 5-99.

3. Background. The referenced UIPLs published the ERI for Rate Years 1988 - 1997. This UIPL renews the ERI series and is the first publication of ERI and ETA 204 data since the Section C format was changed in 1998.

RESCISSIONSNone EXPIRATION DATEMay 31, 2004 Experience rating is the system by which tax rates vary in relation to an employer's experience with unemployment. Experience rating has three major objectives: to serve as an incentive to stabilize employment, to produce proper allocation of the cost of unemployment benefits and to encourage employer participation in the program. The Experience Rating Index attempts to measure the degree of experience rating in states' Unemployment Insurance systems by determining the proportion of benefits that are effectively charged to employers. Attachment VII describes how the Experience Rating Index is calculated. The higher the Experience Rating Index the greater the degree of experience rating.

RESCISSIONS	EXPIRATION DATE
None	May 31, 2004

4. ETA 204 Changes. Starting with reports for rate year 1998, a new uniform format for Section C of the ETA 204 report has been in place. Under the old format, employers were grouped by tax rate and then aggregated to larger groups if a state had more than 30 tax rate groups. Thus the number and experience factor ranges of the groups varied widely across states. The new format standardized Section C for three purposes: 1) to allow for electronic submission of Section C; 2) to allow for a uniform methodology across states for calculating the Ineffective Charges (IEC) component of the ERI; and 3) to allow for better analysis of the data. In the new format, employers are grouped by experience factor (e.g. reserve ratio) rather than by tax rate. All states with the same experience rating system are required to use the same groupings of employers. There is one set of groupings for benefit ratio states and another set of groupings for reserve ratio states.

5. Action Required. Please distribute to appropriate staff. As the tables show, many states were unable to provide Section C in the new format for some or all of the years shown. Those states that have not yet programmed the revised Section C are requested to do so as soon as possible, since missing reports severely limit the usefulness of the data. The ETA 204 report is a required report.

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

7. Attachments.

I - Experience Rating Index by State for Rate Years 1988 - 2001.
II - Experience Rating Index by State for Rate Year 1998.
III - Experience Rating Index by State for Rate Year 1999.
IV - Experience Rating Index by State for Rate Year 2000.
V - Experience Rating Index by State for Rate Year 2001.
VI - Experience Rating Index by State for Rate Year 2002.
VII -Calculation of Experience Rating Index.