What is the Federal-State Unemployment Insurance Program?
The Federal-State Unemployment Insurance Program provides financial benefits to unemployed workers who meet state eligibility requirements. During 2017, 5.7 million claims were paid, representing $29.9 billion in benefits. Benefits are based on a percentage of an individual’s earnings over the most recent 52-week period.
How Did The Federal-State Unemployment Insurance Program Start?
The first Federal Unemployment Insurance program was created as part of the Social Security Act of 1935, when the government was going through a significant shift in social policy development and reform. By 1937, every state and territory had enacted their own unemployment insurance programs. Throughout the country, the unemployment insurance system was established as a federal-state joint venture, which has been financed by both federal and state unemployment taxes.
When launched, the program provided benefits for 16 weeks, but currently, that period has been extended in most states. Each state maintains its own Unemployment Insurance (UI) trust fund reserve built from state taxes, primarily on employers; the fund is used only to pay for state UI benefits. According to the Department of Labor’s 2018 Trust Fund Solvency Report, the solvency levels of state UI trust funds are below the recommended minimum solvency standard in 29 states and jurisdictions.
In July 2010, with unemployment rates at 9-percent and 14.6 million people unemployed, Congress passed the Emergency Unemployment Compensation Act, which added $34 billion to the national debt. Interestingly, in December 2013, Congress allowed the Unemployment Insurance benefits to expire, returning unemployment benefits to 26 weeks. This non-action by Congress negatively impacted 800,000 unemployed workers.
”The fundamental case for unemployment protection lies in the fact that under a democratic form of society we are forced to prevent any large-scale starvation. Funds must be provided somehow . . . It is practical sense to build a system which will gather the funds in good times and disburse them in bad times. This simple theory underlies all formal proposals for unemployment insurance, for unemployment reserves.” -Stanley King in American Labor Legislation Review, December 1933
Richard has been conducting research on Retirement Insurance for more than 20 years. He received his Master of Accountancy (MAcc) in 1998 and is a licensed Certified Public Accountant (CPA). In the aftermath of the 2008 financial crisis, Richard found himself surrounded by friends and family who were concerned about their retirement and how they would be able to afford a comfortable life during their golden years.