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Unemployment Benefits

Unemployment insurance became available for employees, as a federal program, in the United States as Title III and Title IX of the Social Security Act of 1935. Remember, unemployment is a Federal-State coordinated program which means each state administers its own program within a set of national guidelines promulgated under Federal law. Eligible recipients receive partial income replacement to regularly employed members of the labor force who become involuntarily unemployed. To be eligible for benefits a worker must register at a public employment office, must have a prescribed amount of employment and earnings during a specified base period, and be available for work and able to work.

The amount of the weekly benefit amount a worker may receive while unemployed varies according to the benefit formula used by each State and the amount of the worker's past earnings. All States establish a ceiling on the maximum amount a worker may receive. The number of weeks for which unemployment benefits can be paid ranges from 1 to 29 weeks. The most common duration is 26 weeks for the regular permanent program. Workers who have exhausted their unemployment benefits in the regular program may be eligible for additional payments for up to 13 weeks under a permanent program for extended benefits during periods of very high unemployment Federal unemployment benefits have been established for several groups, including Federal military and civilian personnel.

The Department of Labor is responsible for ascertaining that the State unemployment insurance programs conform with Federal requirements. Unemployment benefits and funding for administration of the program generally are financed from taxes paid by employers on workers' earnings up to a set maximum.

The Social Security Act provided two inducements to the States to enact unemployment insurance laws. A uniform national tax was imposed on the payrolls of industrial and commercial employers who employed 8 or more workers in 20 or more weeks in a calendar year. Employers who paid a tax to a State with an approved unemployment insurance law could credit up to 90% of their State tax against the national tax. Thus, employers in States without an unemployment insurance law would have little advantage in competing with similar businesses in States with such a law, because they would still be subject to the Federal payroll tax. Moreover, their employees would not be eligible for benefits. As a further inducement, the Social Security Act authorized grants to States to meet the costs of administering their systems.

Federal law requires State unemployment insurance programs to meet certain requirements if employers are to receive their offset against the Federal tax and if the State is to receive Federal grants for administration. These requirements are intended to assure that State systems are fairly administered and financially secure. One of these requirements is that all contributions collected under State laws be deposited in the unemployment trust fund in the Department of Treasury. The fund is invested as a whole, but each State has a separate account to which its deposits and its share of interest on investments are credited. A State may withdraw money from its account at any time, but only to pay benefits. Thus, unlike the workers' compensation and temporary disability insurance in the majority of States, unemployment insurance benefits are paid exclusively through a public fund. Private plans cannot be substituted for the State plan.

Aside from Federal standards, each State has major discretion regarding the content and development of its unemployment insurance law. The State itself decides the amount and duration of benefits (except for certain Federal requirements concerning Federal-State Extended Benefits); the contribution rates (within limits); and, in general, eligibility requirements and disqualification provisions. The States also directly administer their programs - collecting contributions, maintaining wage records (where applicable), taking claims, determining eligibility, and paying benefits to unemployed workers.

Federal civilian employees and ex-servicemembers have been brought under the unemployment insurance system through special Federal legislation. Their benefits are financed through Federal funds, but administered by the States and paid in accordance with State laws. Railroad workers are covered by a separate unemployment insurance law enacted by Congress. Unemployment benefits are available as a matter of right that is, without a means test to unemployed workers who have demonstrated their attachment to the labor force by a specified amount of recent work and/or earnings in covered employment. All workers whose employers contribute to or make payments in lieu of contributions to State unemployment funds are eligible if they become involuntarily unemployed and are able to work, available for work, and actively seeking work.

Workers must also meet the eligibility and qualifying requirements of the State law. Workers who meet these eligibility conditions may still be denied benefits if they are found to be responsible for their own unemployment.

The benefit may be reduced if the worker is receiving certain types of income - pension, back pay, or workers' compensation for temporary partial disability. Unemployment benefits are subject to Federal income taxes.

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