Unemployment Insurance Eligibility
One of the most important insurance policies workers “own” is their unemployment insurance. For the most part, unemployment insurance involves only the Federal and State programs that collect a small portion of weekly payrolls to pay benefits for the unemployed.
Federal Unemployment Insurance
Federal Unemployment insurance is afforded by taxes paid by an employer equal to a small percentage of an employee's earnings. In the United States, the Internal Revenue Service collects what is known as Federal Unemployment Tax, a product of the passage of the Federal Unemployment Tax Act or FUTA.
The funds collected from FUTA are used to cover the full burden of the Unemployment Insurance and Job Service programs located federally, but also in all fifty states of the union. While it is the individual states that actually pay out unemployment benefits, the states borrow from this fund to pay excessive benefits. Today, the FUTA tax rate is a whopping 6.2% of all taxable employee wages on the first $7,000 in annual income.
To offset this burden, employers are generally given a credit at the state level of up to 5.4% of an employee's income, making the actual, real cost only .8 percent of the first $7,000 in wages, or $56 per year, per employee. The Federal Government then sets eligibility requirements for unemployment insurance, and the general guidelines will be listed below.
Federal Unemployment Insurance Eligibility
Federal Unemployment Insurance is granted only to persons who have met certain criteria, and who can be considered unemployed by the calculus employed by the Bureau of Labor Statistics.
To be considered unemployed, one must first be older than sixteen years of age. Also, no unemployed person may work more than one hour per week for pay, or more than fifteen hours without pay in a family owned company.
Another important, though difficult to enforce requirement is that to be considered unemployed, an unemployed person must have been actively seeking a job in the previous four weeks. This section, however, is ambiguous, and frankly, few have been disqualified for unemployment insurance benefits because of this particular section of the law. According to guidelines, those who give up the search for a job are not part of the labor force.
Temporary leave of absence from work is not considered unemployment. This includes those who are on vacation, ill, or unable to find care for their children. Also included are leave of absence due to family and personal issues, maternity, or natural disaster related breaks in employment.
Each state has a very clearly defined requirement for the number of months, or quarters, one must work in order to receive unemployment benefits. Generally, this term ranges from six months to a year, though a few states have lower or higher requirements, depending on current law.
Subject to Change
Unemployment benefits are subject to change at any moment, and it is commonplace for states or the Federal government to extend the length of time for unemployment benefits during recessions. The standard length of time for benefits is 26 weeks, though following the “Great Recession” of 2010, unemployment benefits, through a series of extensions, expansions and temporary changes, have been extended up to 99 weeks. These extensions are known as “tiers.” Following the first 26 weeks, there is Tier 1 that provides 20 additional weeks of benefits, and Tier 2 of 14 weeks, which are available in every state.
Tier 3 benefits of an additional 13 weeks and Tier 4 benefits of 6 weeks are available only in select states. Forty-seven states and Washington D.C. participate in Tier 3, while only 25 states and Washington D.C. Participate in Tier 4 benefits. Though rare, a few states follow the four tiers with another twenty weeks of benefits.
The benefits vary by state, though generally, the weekly benefit is greater when the number of weeks available are lower. States also take into consideration inflation, current economic trends, and the cost of living to decide the appropriate amount of benefits. In Alabama, for example, the unemployed receive only $255 per week while unemployment benefits in Connecticut rise to nearly $600 per week.
In general, those who are unemployed for any reason that was not part of their own doing are qualified for unemployment insurance for a limited period of time. The only way to be sure, though, is to check with your state's unemployment office.