Unemployment Insurance: What You Need to Know

Unemployment insurance (UI) is a program designed to offer temporary financial support to those unemployed. Unemployment insurance is a jointly-owned program of the state and federal governments. Although individual states implement their own requirements, they all follow the same general guidelines.

Remember, not everyone who loses their job qualifies for UI. If you are eligible, expect to receive an amount equivalent to a portion of your total earnings. The state will look at the last 52 weeks. On average, states payout for about 26 weeks.

There are many tools to help you be more financially sound, such as budgeting and making logical investments. However, the challenges become different when you try to manage your money while unemployed. Not having a steady income can minimize flexibility and options.

The Federal Unemployment Tax Act of 1939 began unemployment insurance. The federal and state governments have a jointly-owned program that provides temporary financial support to help people who’ve lost their jobs through no fault of their own. This includes the downsizing of an organization or company bankruptcy.

Each state has its specific eligibility requirements and payout periods, but they all follow the same guidelines set by the federal government. However, you can generally claim benefits for up to 26 weeks. It allows you to get a portion of your annual wages as a weekly stipend.

We know the Federal Unemployment Tax Act (FUTA) funds unemployment insurance. But where does the money come from?

FUTA requires all businesses with employees to pay a payroll tax. Organizations owe FUTA tax on the first $7,000 they give every employee as their salary in a calendar year.

The 2022 FUTA tax rate is at 6%. The organization remains responsible for determining how much of the $7,000 it has paid each quarter. Remember, FUTA only affects the business — deductions are not taken from the employees' wages.

Although all 50 states and the District of Columbia administer unemployment insurance, it doesn't mean everyone who doesn't have a job is eligible.

Understanding when you can file a claim to receive temporary support is crucial. Since every state implements a version of the program, requirements may vary between locations.

MoneyGeek highlights these below.

Now that you have a better understanding of what unemployment insurance is, let's look at the benefits provided. Specifically, how long you're eligible to receive them. Remember, the main objective of UI is to provide financial support, but only temporarily.

Once you determine that your situation allows you to qualify for unemployment insurance (UI), the next step is to apply. MoneyGeek breaks the process down into three action steps.

Although the payout period of each state is different, most have a maximum of 26 weeks. Ideally, you should be able to obtain new employment within this time frame. However, that's not always the case. In some situations, you may need more time.

To ensure you remain eligible for unemployment insurance, do the following consistently:

• Continue to file claims (you may have to do this weekly or bi-weekly, depending on your state)
• Actively seek employment and remain eligible (and ready) to work
• Report earnings, job offers (and those you declined) each week
• Make a physical appearance at the claims office or American Job Center if requested

Remember, your state may have other eligibility requirements. Gather the information specific to your state to avoid any issues or delays to your benefits.

Besides not meeting your state's eligibility requirements, several situations may disqualify you from receiving unemployment benefits. It's best to know what these are if you want to receive unemployment insurance.

The arrival of COVID-19 was a game-changer. It increased unemployment from 6.2 million in February 2020 to 20.5 million in May 2020. As a result, former President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020.

It gave way to the following benefits for individuals who lost their jobs due to the pandemic:

• Federal Pandemic Unemployment Compensation (FUTA): This benefit allowed unemployed workers to receive an additional $600 per week. Its first incarnation ran until July 25, 2020, after which it expired. On December 26 of the same year, policymakers readjusted the benefit to an additional $300.
• Pandemic Unemployment Assistance (PUA): It expanded the population that qualifies for unemployment insurance. This way, individuals who previously couldn’t file a claim found a way to receive unemployment benefits. These included freelancers, self-employed workers and independent contractors — even those who didn't meet wage and work duration requirements qualified for assistance.
• Pandemic Emergency Unemployment Compensation (PEUC): It extended the payout period after individuals maximized the typical unemployment benefit.

The following administration under President Biden gave way to the American Rescue Plan, a modification and extension of the CARES Act. It expired in September 2021.

Although MoneyGeek hopes that unemployment is not a season you have to experience, it's essential to understand how it works and how to stay financially stable until re-employed. We gathered commonly asked questions on this subject. These answers may help you during unemployment.

Unemployment is a challenging place to be in. Try to remember that it is temporary. Fortunately, plenty of resources online can help you manage your circumstances better.

• Resources for Workers Impacted by Coronavirus Layoffs and Lost Wages: Read about various strategies that can help you stay afloat after losing a job.
• The Ripple Effects of Coronavirus-Related Lost Jobs and Wages: No business sector was unaffected by the pandemic. See how various industries affect each other in terms of unemployment.
• American Employment and the Pandemic: COVID-19 Cases and Job Recovery by State and Political Affiliation: The country is slowly recovering from the effects of the pandemic. However, each state is recovering differently. MoneyGeek’s page highlights those states that have seen the most improvement and those that continue to struggle.
• Starting a New Career: You can see losing your job as a setback or an opportunity to find a new career. This page provides information to help you get back on track.
• Social Media and Your Job Search: Social media platforms aren’t limited to posting life updates. You can also use it to find your next job. MoneyGeek shows you how.
• The Top Cities for U.S. Job Seekers in 2022: Some people consider relocating after becoming unemployed. If this is you, make sure you’re moving to a state with more opportunities.