What's Your Question?: Unemployment Benefits

1. What government agency collects data on unemployment insurance benefits?

United States Department of Labor


2. When was the unemployment insurance program created, and how is the program managed?

The current federal-state system of unemployment insurance (UI) traces its origins to the Social Security Act and related laws of 1935.  Each state administers a separate unemployment insurance program within guidelines established by federal law.


3. How are unemployment insurance benefits funded?

In most states, benefit funding is based solely on a tax imposed on employers.  Unemployment taxes are paid by employers to the federal government and to states to fund unemployment compensation benefits for out-of-work employees.  (Three states - currently, Alaska, New Jersey, and Pennsylvania—also impose unemployment insurance taxes on employees.)

The Federal Unemployment Tax Act (FUTA) authorizes the Internal Revenue Service (IRS) to collect a federal employer tax used to fund state workforce agencies.  Currently, the federal tax is 6.2 percent on the first $7,000 in annual wages to each employee. FUTA covers the costs of administering the program in all states, pays one-half of the cost of extended unemployment benefits during periods of high unemployment, and provides a fund from which states may borrow to pay benefits.

State law determines individual state unemployment insurance tax rates.  The state unemployment tax, paid to state workforce agencies, is used solely for the payment of benefits to eligible unemployed workers. State tax rates vary from state to state, as does the amount of each worker’s income that’s subject to the tax - which ranges from $7,000 to $34,000.


4. Is the national unemployment rate released each month by the Bureau of Labor and Statistics the same as the number of persons receiving unemployment insurance benefits?

No.  The unemployment rate released each month by the BLS estimates unemployment based on a monthly sample survey of more than 60,000 households.  A person’s unemployment status is established by responses to a series of questions about whether they have a job, whether they want a job and are available to work, and what they have done to look for work in the preceding 4 weeks.  The unemployment rate is the number of unemployed persons as a percent of the labor force (employed and unemployed persons).  There is no requirement or question relating to unemployment insurance benefits in the monthly survey. The unemployment data derived from the household survey in no way depend upon the eligibility for or receipt of unemployment insurance benefits. Some people are still unemployed even when their benefits run out, and many more are not eligible at all or delay or never apply for benefits.

Statistics on persons receiving unemployment insurance benefits (sometimes called insured unemployment) are collected as a byproduct of unemployment insurance programs.


5. How long can a person receive unemployment benefits?

Unemployment insurance payments (benefits) are intended to provide temporary financial assistance to unemployed workers who meet the requirements of state law and typically run for 26 weeks.  However, since 1970, federal law requires provisions for extended unemployment benefits in times of high and rising unemployment and some unemployed persons may qualify for these benefits.  When a state’s unemployment rate reaches a certain level, the time for receiving benefits must be extended.  The basic Extended Benefits program provides up to 13 additional weeks of benefits and some states have also enacted a voluntary program to pay up to 7 additional weeks (20 weeks maximum) of Extended Benefits during periods of extremely high unemployment. 


6. Is unemployment insurance taxable, and how often are the payments received?

Unemployment insurance payments are deemed taxable income by the Internal Revenue Service.  Most states measure unemployment in calendar weeks and make payments weekly.  


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