Unemployment insurance in Alabama
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- See also: Unemployment insurance in the states
Unemployment insurance is a term that refers to a joint federal and state program that provides temporary monetary benefits to eligible laid-off workers who are actively seeking new employment. Qualifying individuals receive unemployment compensation as a percentage of their lost wages in the form of weekly cash benefits while they search for new employment.[1][2]
The federal government oversees the general administration of state unemployment insurance programs. The states control the specific features of their unemployment insurance programs, such as eligibility requirements and length of benefits.[2]
Although the word insurance is in the term, a few key differences distinguish unemployment insurance from private insurance plans such as home insurance, car insurance, or health insurance. In most states, employers—rather than individuals themselves—pay unemployment taxes that fund state unemployment insurance programs. When an individual loses their employment (and meets eligibility requirements), state-administered unemployment insurance programs provide temporary monetary benefits to the former employee. Unemployment insurance compensation is not intended to replace lost wages; it is designed to replace a portion of the individual's lost wages with the goal of providing financial support as an individual searches for a new job.[3]
This page provides information about the unemployment insurance program in Alabama.
Background
- See also: Unemployment insurance
The joint federal-state unemployment insurance program provides temporary monetary payments to individuals who have lost employment through no fault of their own. Laid-off workers must actively seek new employment in order to receive unemployment benefits.
The unemployment insurance program was established in 1935 through the Social Security Act (SSA). Congress at the time aimed to develop a means to help mitigate the effects of widespread job losses that had occurred during the Great Depression. Due to concern that the U.S. Supreme Court would find a national unemployment insurance program unconstitutional, Congress designed a federal payroll tax mechanism that incentivized states to set up their own unemployment insurance programs under the direction of broad federal guidelines. According to the program, states deposit unemployment insurance tax funds into the Federal Unemployment Trust Fund, which the federal government then credits to state accounts to pay unemployment benefits.[1][4]
The federal government operates as a general overseer of state unemployment insurance programs in order to ensure proper program administration. States retain control over their specific programs and can determine state-specific conditions, such as eligibility requirements, benefit amounts, and duration of benefits. States with unemployment insurance programs that meet federal standards are eligible for federal grants to assist with administrative costs.[2][4]
The Alabama unemployment insurance program is administered by the Alabama Department of Labor.
Timeline of unemployment insurance program in Alabama
The following timeline features selected key events in the history of Alabama's unemployment insurance program. The timeline is not a comprehensive history of the state unemployment insurance program.
- 1938: As of May 1, 1938, Alabama's unemployment insurance program offered a maximum weekly benefit amount (WBA) of $15 for up to 20 weeks.[5]
- 1985: As of January 1, 1985, Alabama's unemployment insurance program offered a maximum WBA of $120 for up to 26 weeks.[5]
- 2015: Gov. Robert Bentley (R) signed legislation allowing partially unemployed workers to earn up to one-third of their weekly benefit amount (WBA) through employment without reducing their unemployment benefit. Previously, all earnings above $15 were deducted from the WBA.[6]
- 2021: A March 2021 report from the U.S. Department of Labor found that the trust funds in 40 states and territories, including Alabama, had dropped below the recommended minimum solvency standard as of January 1, 2021.[7]
- 2022: The Alabama Legislature passed a plan for spending American Rescue Plan Act (ARPA) funds on January 27, 2022, directing $79.5 million of the state's $2.1 billion ARPA allocation to replenish the state's unemployment trust fund. Following the bill's passage, Alabama Department of Labor Secretary Fitzgerald Washington announced the state dropped to a lower tax schedule and estimated employers' state unemployment insurance tax burden would decrease 29%. Without the $79.5 million allocation, unemployment taxes would have increased by about 3% in 2022.[8]
- 2022: A March 2022 report from the U.S. Department of Labor found that Alabama had an AHCM value of 0.08.[9]
- 2024: A March 2024 report from the U.S. Department of Labor found that Alabama had an AHCM value of 1.02.[10]
Funding
The unemployment insurance program is funded by state and federal taxes on employers, or unemployment taxes.
While state tax amounts vary, the Federal Unemployment Tax Act (FUTA) tax is 6% of the first $7,000 of an employee's wages. Employers can receive an offset of up to 5.4% of their FUTA tax when they pay state unemployment taxes on time. An employer that receives the full 5.4% FUTA credit, therefore, pays 0.6% of the first $7,000 of an employee's wages, or $42, in FUTA tax per qualifying employee.[11][2]
New employers begin paying into the unemployment insurance system at the new employer rate. Depending on state laws, employers that have paid unemployment insurance taxes for a set time period (usually a few years) receive an experience rating. The more unemployment claims an employer has, the higher their tax rate.[2]
States that exhaust their unemployment insurance program reserves can borrow from the federal Treasury through the Title XII program. States must repay their unemployment insurance program debts within two to three years or the federal taxes on employers in the state automatically increase until the debt is paid. In states that are overdue in repaying unemployment insurance debt to the federal Treasury, the FUTA tax offset is reduced.[11][2]
Benefits
The standard term of unemployment benefits is 26 weeks, but specific terms vary by state. For example, Arkansas paid 16 weeks of benefits as of 2022. Massachusetts, on the other hand, paid 30 weeks of benefits and Montana paid 28 weeks of benefits.[11][12]
The following sections provide information about specific benefits available through Alabama's unemployment insurance program.
Length and amount of standard benefits
The Alabama unemployment insurance program provided up to 14 weeks of benefits with an additional five-week extension for those enrolled in a state-approved training program as of July 2024. Benefit amounts ranged from a minimum of $45 a week to a maximum of $275 a week.[13]
Extended benefits
During periods of high unemployment, extended benefits up to 13 weeks, depending on the state, are available to workers who have otherwise exhausted their unemployment insurance benefits. Extended benefits up to 20 weeks may also be available in some states during periods of extremely high unemployment.[14]
The Alabama unemployment insurance program does not provide extended benefits as of February 2023.[15]
Eligibility requirements
The following sections provide general information about unemployment insurance program eligibility as well as specific eligibility information for Alabama's unemployment insurance program.
Background
Eligibility criteria for unemployment insurance recipients vary by state. In general, recipients must have lost employment through no fault of their own. The unemployment insurance program does not cover individuals who voluntarily leave their positions, who are fired for just cause, or who are seeking to reenter the workforce after a voluntary exit. Nor do unemployment insurance programs generally cover first-time job seekers, students, self-employed individuals, gig workers, or undocumented workers.[1][11]
States also require that recipients meet certain work and wage thresholds. Unemployed workers in most states must have worked for a minimum amount of time or must have received a minimum amount of earnings from their employer (between $1,000 to $5,000 in 2019) in order to be eligible to receive benefits.[11]
States generally require individuals to perform the following tasks in order to maintain weekly eligibility, according to the U.S. Department of Labor:
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Recipients must report their unemployment insurance benefits as part of their gross income on their tax returns.[18]
Alabama eligibility requirements
Unemployment insurance recipients in Alabama must meet the following criteria in order to qualify for benefits:[19]
- Recipients must have lost employment through no fault of their own.
- Recipients must have earned wages in two of more calendar quarters during the base period—the first 12 months of the 15 months prior to filing a claim. Total base period wages must equal or exceed one and a half times a claimant's high quarter earnings.
- Recipients must be unemployed or partially employed and earning less than their weekly unemployment insurance benefits.
- Recipients must be able and available to work.
Unemployment insurance program solvency
The following sections provide general information about unemployment insurance program solvency as well as specific information about the solvency of Alabama's unemployment insurance program.
Background
Federal unemployment insurance program guidelines recommend that states hold at least one year of projected benefit payments in reserves. States base the year of projected benefit payments on the highest level of unemployment insurance payments experienced during the last 20 years.[20]
States determine their program solvency by using the Average High Cost Multiple (AHCM)—the ratio of the state's trust fund balance to the average of its three highest years of unemployment insurance payments. States with an AHCM below 1.0 risk insolvency.[20]
As of a January 2024 report, 18 states had trust funds operating at or above the minimum solvency standard. Two states had trust funds with the lowest (least solvent) AHCM value of 0.00.[21]
The map below identifies AHCM values by state as of January 2024. States shaded green have AHCM values above 1.0, while red states have AHCM values of 0.00. Gray states have AHCM values above 0.00 but below 1.0.[21]
| AHCM values by state, January 2024 | |
|---|---|
| State | AHCM value |
| Alabama | 1.02 |
| Alaska | 2.16 |
| Arizona | 0.87 |
| Arkansas | 1.09 |
| California | 0.00 |
| Colorado | 0.10 |
| Connecticut | 0.01 |
| Delaware | 1.13 |
| Florida | 0.70 |
| Georgia | 0.45 |
| Hawaii | 0.44 |
| Idaho | 1.42 |
| Illinois | 0.23 |
| Indiana | 0.68 |
| Iowa | 1.40 |
| Kansas | 1.63 |
| Kentucky | 0.44 |
| Louisiana | 0.72 |
| Maine | 1.80 |
| Maryland | 1.09 |
| Massachusetts | 0.53 |
| Michigan | 0.41 |
| Minnesota | 0.51 |
| Mississippi | 1.24 |
| Missouri | 0.61 |
| Montana | 1.44 |
| Nebraska | 1.39 |
| Nevada | 0.58 |
| New Hampshire | 0.97 |
| New Jersey | 0.21 |
| New Mexico | 0.58 |
| New York | 0.00 |
| North Carolina | 1.06 |
| North Dakota | 1.07 |
| Ohio | 0.41 |
| Oklahoma | 0.57 |
| Oregon | 2.12 |
| Pennsylvania | 0.13 |
| Rhode Island | 0.77 |
| South Carolina | 1.07 |
| South Dakota | 1.86 |
| Tennessee | 0.72 |
| Texas | 0.19 |
| Utah | 1.18 |
| Vermont | 0.83 |
| Virginia | 0.79 |
| Washington | 0.64 |
| Washington, D.C. | 0.72 |
| West Virginia | 0.81 |
| Wisconsin | 0.64 |
| Wyoming | 2.17 |
Unemployment insurance program solvency in Alabama
Alabama had an AHCM value of 1.02 as of March 2024.[7]
The federal government expanded unemployment insurance benefits during the coronavirus (COVID-19) pandemic in order to provide financial support to affected individuals and businesses.
The U.S. House of Representatives on March 27, 2020, passed the Coronavirus Aid Relief and Economic Security (CARES) Act to provide financial relief to individuals and businesses impacted by the coronavirus pandemic.[22] President Donald Trump (R) signed the legislation on March 27.[23] Among the provisions in the act, Congress earmarked roughly $260 billion to expand unemployment insurance benefits across the country.[24] The act supplemented state unemployment insurance payments by increasing the number of weeks an individual could receive benefits and by providing individuals with an additional $600 per week on top of what they would normally receive.[25]
American Rescue Plan
The American Rescue Plan, signed by President Joe Biden (D) on March 11, 2021, extended federal unemployment insurance programs related to the coronavirus (COVID-19) pandemic, including the federal government's $300 per week add-on to state unemployment benefits, through September 6, 2021.[26] The legislation also extended unemployment benefits for self-employed and gig workers, extended benefits for unemployed mixed earners (people who earned money through employment and self-employment), and extended the number of weeks individuals could receive unemployment.
The CARES Act and the American Rescue Plan established the following supplemental unemployment insurance programs during the coronavirus (COVID-19) pandemic:
- Federal Pandemic Unemployment Compensation (FPUC)
The Federal Pandemic Unemployment Compensation (FPUC) program aimed to provide qualifying unemployment insurance claimants with a supplemental $300-$600 per week in addition to their state unemployment insurance benefits. The program expired on September 6, 2021.[27]
- Pandemic Emergency Unemployment Compensation (PEUC)
The Pandemic Emergency Unemployment Compensation (PEUC) sought to provide 24 weeks of extended unemployment insurance benefits to recipients who have exhausted their standard benefits. The program expired on September 6, 2021.[27][28]
- Pandemic Unemployment Assistance (PUA)
The federal Pandemic Unemployment Assistance (PUA) program aimed to provide individuals who are out of work but ineligible for standard unemployment insurance benefits with $300-$600 in weekly compensation. Qualifying individuals included workers who are not eligible for standard benefits, such as independent contractors and self-employed workers, as well as individuals who have exhausted their standard benefits, extended benefits, or PEUC benefits. The program expired on September 6, 2021.[28]
- Lost Wages Assistance (LWA)
The Lost Wages Assistance (LWA) program aimed to provide individuals receiving at least $100 per week in standard unemployment insurance benefits, PEUC benefits, or PUA benefits with an additional $300 per week. The federal government paid $300 per week in LWA benefits to qualifying individuals while state governments contributed $100 per week, either in the form of standard or supplemental benefits. The program aimed to provide benefits from August 1, 2020, to December 27, 2020, but funding was depleted by September 5, 2020.[29][28]
- Mixed Earners Unemployment Compensation (MEUC)
The federal Mixed Earners Unemployment Compensation (MEUC) program sought to provide an additional $100 per week to individuals receiving unemployment insurance benefits who earned at least $5,000 through self-employment in the tax year prior to their claim. Claimants receiving PUA benefits were ineligible for MEUC benefits. The program expired on September 6, 2021.[30]
Eligible Alabama residents could qualify for the following supplemental unemployment insurance benefits made available during the coronavirus (COVID-19) pandemic:
| Supplemental unemployment insurance program benefits in Alabama during the coronavirus (COVID-19) pandemic | |
|---|---|
| Program | Benefits |
| Federal Pandemic Unemployment Compensation (FPUC) | *$600 per week (weeks ending April 4 through July 31, 2020) *$300 per week (weeks ending January 2 - June 19, 2021) |
| Pandemic Emergency Unemployment Compensation (PEUC) | *$600 per week (weeks ending April 4 - July 25, 2020) *$300 per week (weeks ending January 2 - September 6, 2021) |
| Pandemic Unemployment Assistance (PUA) | *$600 per week (weeks ending April 4 through July 31, 2020) *$300 per week (weeks ending January 2 - September 6, 2021) |
| Lost Wages Assistance (LWA) | *$300 per week if an individual's standard or PEUC benefits totaled at least $100 per week |
| Mixed Earners Unemployment Compensation (MEUC) | *$100 per week (weeks ending January 2 - September 6, 2021) |
Noteworthy events
Alabama adds requirement for unemployment insurance eligibility (2022)
Alabama Governor Kay Ivey (R) signed Senate Bill 224 on April 12, 2022 requiring unemployment insurance claimants to contact at least three prospective employers each week during their benefits period to remain eligible for payments. The bill defined a contact as an application or other genuine solicitation for an open job and required the Alabama Department of Labor to audit about 5% of the contacts to ensure compliance with regulations under the law. SB 224 was scheduled to take effect January 2023.[31]
Alabama withdraws from Federal Pandemic Unemployment Compensation Program (2021)
Gov. Kay Ivey (R) on May 10, 2021, announced the state would end its participation in the Federal Pandemic Unemployment Compensation Program (FPUC) prior to its September 6, 2021, expiration. FPUC provided an extra $300 of weekly federal benefits under the American Rescue Plan, signed on March 11, 2021. FPUC benefits ended on June 19, 2021.[32]
For more information on states that ended FPUC benefits early, click here
Alabama enacts law requiring unemployment insurance overpayment recovery (2021)
The Alabama Legislature enacted a law May 4, 2021, requiring the Department of Labor (DOL) to recover unemployment insurance overpayments unless doing so would violate state or federal laws. The law also required the DOL to maintain a record of any excepting cases in which overpayment recovery was not possible or not attempted.[33]
Alabama legislature enacts law requiring state participation with Integrity Data Hub (2021)
The Alabama Legislature enacted a law May 4, 2021, requiring the Department of Labor (DOL) to use the Integrity Data Hub's databases and cross-check tools to help identify fraudulent unemployment insurance claims.[33]
See also
- Unemployment insurance
- Unemployment insurance fraud in Alabama
- History of unemployment insurance fraud in Alabama
Footnotes
- ↑ 1.0 1.1 1.2 The Wall Street Journal, "How Does Unemployment Work?" February 22, 2021
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 Employment Law Firms, "How Unemployment Works," accessed May 18, 2021
- ↑ Foundation for Government Accountability, "What is 'Unemployment Insurance?'" December 30, 2020
- ↑ 4.0 4.1 Social Security Administration, "Unemployment Insurance, Then and Now 1935-1985," accessed May 19, 2021
- ↑ 5.0 5.1 Social Security Administration, "Unemployment Insurance, Then and Now, 1935–85," October 1918
- ↑ National Employment Law Project, "NEW ALABAMA UNEMPLOYMENT INSURANCE LAW MAKES PART-TIME WORK PAY," May 13, 2015
- ↑ 7.0 7.1 U.S. Department of Labor, "STATE UNEMPLOYMENT INSURANCE TRUST FUND SOLVENCY REPORT 2021," March 2021
- ↑ Alabama Department of Labor, "ALABAMA EMPLOYERS TO SEE 29% UNEMPLOYMENT INSURANCE TAX CUT," accessed February 28, 2023
- ↑ U.S. Department of Labor, "Regular Benefits Information by State for CYQ - 2022.3," March 2022
- ↑ U.S. Department of Labor, "State Unemployment Insurance Trust Fund Solvency Report," March 2024
- ↑ 11.0 11.1 11.2 11.3 11.4 Brookings, "How does unemployment insurance work? And how is it changing during the coronavirus pandemic?" July 20, 2020
- ↑ Forbes, "The States With The Best And Worst Unemployment Benefits—And Why They’re So Different," March 17, 2021
- ↑ Center for Budget and Policy, "Policy Basics: How Many Weeks of Unemployment Compensation Are Available?," July 29, 2024
- ↑ United States Department of Labor, "Unemployment Insurance Extended Benefits," accessed May 19, 2021
- ↑ Center on Budget and Policy Priorities, "Policy Basics: How Many Weeks of Unemployment Compensation Are Available?" accessed February 28, 2023
- ↑ United States Department of Labor, "Unemployment Insurance Fact Sheet," accessed May 18, 2021
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Internal Revenue Service, "Topic No. 418 Unemployment Compensation," accessed May 18, 2021
- ↑ Alabama Department of Labor, "ALABAMA UNEMPLOYMENT COMPENSATION," accessed February 28, 2023
- ↑ 20.0 20.1 Cite error: Invalid
<ref>tag; no text was provided for refs namedmerc - ↑ 21.0 21.1 U.S. Department of Labor, "State Unemployment Insurance Trust Fund Solvency Report 2023," March 2024
- ↑ The Hill, "House passes $2 trillion coronavirus relief bill, with Trump to sign quickly," March 27, 2020
- ↑ The Hill, "Trump signs $2T coronavirus relief package," March 27, 2020
- ↑ NPR, "What's Inside The Senate's $2 Trillion Coronavirus Aid Package," March 26, 2020
- ↑ The National Law Review, "CARES Act Expands Unemployment Insurance Benefits," April 5, 2020
- ↑ Forbes, "New Stimulus Package: Unemployment Benefits, $300 Per Week Extended Until September," accessed May 11, 2021
- ↑ 27.0 27.1 Investopedia, "Federal Pandemic Unemployment Compensation (FPUC) and How to Apply," June 20, 2021
- ↑ 28.0 28.1 28.2 Florida Department of Economic Opportunity, "Florida Reemployment Assistance Benefit Programs," accessed July 28, 2021
- ↑ Investopedia, "Lost Wages Assistance (LWA) Program," June 23, 2021
- ↑ Florida Department of Economic Opportunity, "Important information and updates," accessed July 29, 2021
- ↑ WTVY, "New requirement added for Alabama residents to maintain unemployment benefits," accessed February 28, 2023
- ↑ Alabama Office of the Governor, "Governor Kay Ivey Announces End of Participation in All Federal Pandemic Unemployment Compensation Programs," accessed February 28, 2023
- ↑ 33.0 33.1 Legiscan, "Alabama Senate Bill 373 (Prior Session Legislation)," accessed February 28, 2023
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