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Federal Unemployment 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. |
| Unemployment insurance |
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| • Terms and definitions • Court cases • Unemployment insurance programs in the states • Reform proposals related to unemployment insurance • Reform activity in the states related to unemployment insurance • Index of articles about unemployment insurance |
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The Federal Unemployment Account (FUA) is an account within the federal Unemployment Trust Fund that loans money to State Unemployment Trust Funds to assist workforce agencies in meeting unemployment insurance obligations. The account is funded with Federal Unemployment Tax Act (FUTA) tax revenues.[1][2]
Federal Unemployment Account: Background
The FUA was established in 1935 under Title 12 of the Social Security Act. The law states:
| “ | Advances shall be made to the States from the Federal unemployment account in the Unemployment Trust Fund as provided in this section, and shall be repayable, with interest to the extent provided in section 1202(b), in the manner provided in sections 901(d)(1), 903(b)(2), and 1202.[3][4] | ” |
Federal Unemployment 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
- ↑ Social Security Administration, "ADVANCES TO STATE UNEMPLOYMENT FUNDS," 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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