Extended Unemployment Compensation 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 Extended Unemployment Compensation Account (EUCA) is an account within the federal Unemployment Trust Fund that pays for the federal government's share of extended benefits for the joint federal-state unemployment insurance program. The account is funded with Federal Unemployment Tax Act (FUTA) tax revenues.[1][2]
Extended Unemployment Compensation Account: Background
The EUCA was established in 1972 under Title 42, Section 1105, of the U.S. Code. The law states:
| “ | (1) Except as provided in paragraph (3), the Secretary of the Treasury shall transfer (as of the close of each month) from the employment security administration account to the extended unemployment compensation account established by subsection (a), an amount (determined by such Secretary) equal to 20 percent of the amount by which—
(B) the payments during such month from the employment security administration account pursuant to section 1101(b)(3) and (d) of this title.[3][4] |
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Extended Unemployment Compensation 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 § 1105 - Extended unemployment compensation 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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