Employment Security Administration Account
| How is the joint federal-state unemployment insurance program funded? Federal and state unemployment taxes fund the joint federal-state unemployment insurance program. Federal unemployment tax revenues fund accounts in the federal Unemployment Trust Fund (UTF) that pay for federal and state unemployment insurance program administration costs, the federal portion of extended benefits, and loans to State Unemployment Trust Funds. State unemployment tax revenues fund State Unemployment Trust Funds, which pay regular benefits and the state portion of extended benefits. Read more about unemployment taxes here. |
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The Employment Security Administration Account (ESAA) is an account within the federal Unemployment Trust Fund that pays for federal and state unemployment insurance administration costs. The account is funded with Federal Unemployment Tax Act (FUTA) tax revenues.[1][2]
Employment Security Administration Account: Background
The ESAA was established in 1961 under Title 42, Section 1101, of the U.S. Code. The law states:
| “ | There is hereby appropriated to the Unemployment Trust Fund for credit to the employment security administration account, out of any moneys in the Treasury not otherwise appropriated, for the fiscal year ending June 30, 1961, and for each fiscal year thereafter, an amount equal to 100 per centum of the tax (including interest, penalties, and additions to the tax) received during the fiscal year under the Federal Unemployment Tax Act [26 U.S.C. 3301 et seq.] and covered into the Treasury.[3][4] | ” |
Employment Security Administration Account: Funding
- See also: Federal Unemployment Tax
The Federal Unemployment Tax Act (FUTA), passed in 1939, created a federal unemployment tax to fund the joint federal-state unemployment insurance program. The legality of FUTA was challenged and affirmed in Steward Machine Co. v. Collector of Internal Revenue (1937).
The federal unemployment tax, or FUTA tax, is collected by the Internal Revenue Service (IRS) and transferred to the Unemployment Trust Fund (UTF).
FUTA revenue funds the UTF's Employment Security Administration Account, which pays for federal and state unemployment insurance administration costs. The excess funds not needed for the Administration account fund the Extended Unemployment Compensation Account (EUCA) to pay the federal half of extended benefits. Excesses from the EUCA flow into the Federal Unemployment Account, which loans funds to State Trust Fund Accounts (STFA).[5]
STFAs are funded by state unemployment taxes and are used to pay regular unemployment benefits.
See also
- Unemployment insurance
- Unemployment insurance fraud
- Unemployment insurance fraud recovery
- Unemployment taxes
- Unemployment Trust Fund
- Unemployment filings during the coronavirus (COVID-19) pandemic, 2020-2021
- State government plans to end federal unemployment benefits related to the coronavirus (COVID-19) pandemic, 2021
External links
Footnotes
- ↑ Tax Policy Center, "Briefing Book," accessed May 25, 2021
- ↑ United States Department of Labor, "State UI Trust Fund Solvency Report," April 16, 2021
- ↑ Cornell Law School, "42 U.S. Code § 1101 - Employment security administration account," accessed July 13, 2021
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Washington State Legislature, "Washington State's Experience Rating System," accessed July 6, 2021
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