Unemployment Insurance Introduction and Overview


A variety of benefits may be available to unemployed workers to provide them with income support during a spell of involuntary unemployment.  The primary source of this support is the joint federal-state Unemployment Compensation (UC) program, which may provide income through the payment of state UC benefits for up to a maximum of 26 weeks in most states.[1]  Other programs that may provide workers with income are more specialized.  They may target special groups of workers, be automatically triggered by certain economic conditions, be temporarily created by Congress with a set expiration date, or target typically ineligible workers through a disaster declaration.

Originally, one purpose of the UC program, among other things, was to help counter economic fluctuations such as recessions.[2]  This intent is reflected in the current UC program’s funding and benefit structure.  When the economy grows, UC program revenue rises through increased tax revenues while UC program spending falls as fewer workers are unemployed.  The effect of collecting more taxes than are spent dampens demand in the economy.  This also creates a surplus of funds or a “cushion” of available funds for the UC program to draw upon during a recession.  In a recession, UC tax revenue falls and UC program spending rises as more workers lose their jobs and receive UC benefits.  The increased amount of UC payments to unemployed workers dampens the economic effect of earnings losses by injecting additional funds into the economy.

UC benefits may be extended at the state level by the permanent Extended Benefit (EB) program if high unemployment exists within the state.  Once regular unemployment benefits are exhausted, the EB program may provide up to an additional 13 or 20 weeks of benefits, depending on worker eligibility, optional state laws, and economic conditions in the state.  The EB program is funded 50% by the federal government and 50% by the states, although the 2009 stimulus package (P.L. 111-5, as amended) and subsequent law temporarily provided for 100% federal funding of the EB program from February 2009 through December 2013.

In addition, Congress can authorize temporary unemployment insurance programs: most recently, the Emergency Unemployment Compensation (EUC08) program, which began in July 2008 and expired at the end of December 2013.  The EUC08 benefit was 100% federally funded. State UC agencies administered the EUC08 benefit along with regular UC benefits and the EB program. The creation of the EUC08 program was the eighth time Congress created a federal temporary program to extend unemployment compensation during an economic slowdown.[3]


The underlying framework of the UC system is contained in the Social Security Act (the Act).  Title III of the Act authorizes grants to states for the administration of state UC laws, Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF), and Title XII authorizes advances or loans to insolvent state UC programs.  The EB program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. 3304, note).  The EUC08 program was temporarily authorized by the Supplemental Appropriations Act of 2008 (P.L. 110-252), as amended.

Appropriation and Outlays

The federal government appropriates funds for federal and state UC program administration, the federal share of EB payments, EUC08 benefits, and federal loans to insolvent state UC programs.  In FY2013, states received $4.8 billion from the federal government for the administration of their UC programs, $0.1 billion for the federal share of EB payments, and $25.4 billion for the temporary, federally financed EUC08 program.  In FY2014, states will receive a projected $4.3 billion from the federal government for the administration of their UC programs, $0.01 billion for the federal share of EB payments, and $5.4 billion for the temporary EUC08 program, which was authorized through December 2013.


The U.S. Department of Labor (DOL) administers the federal portion of the UC system, which operates in each state, the District of Columbia, Puerto Rico, and the Virgin Islands.  Federal law sets broad rules that the 53 state programs must follow.  These include the broad categories of workers that must be covered by the program, the method for triggering the EB program, the floor on the highest state unemployment tax rate to be imposed on employers (5.4%), and how the states will repay UTF loans.  If the states do not follow these rules, their employers may lose a portion or all of their state unemployment tax credit when their federal unemployment tax is calculated – potentially increasing the net federal tax from the current 0.6% tax faced by employers in most states by up to an additional 5.4% in certain situations.  The federal tax pays for both federal and state administrative costs, the federal share of the EB program, loans to insolvent state UC accounts, and state employment services.

Chapter Overview

This chapter of the Green Book includes a series of Congressional Research Service (CRS) Reports organized under the following general headings.

·         Unemployment Insurance: Programs and Benefits

·         Unemployment Trust Fund and Financing

·         Other Unemployment Benefits and Alternative Programs

Readers should consult the reports listed under each of these headings for information and data related to these topics. Separate sections identify Tables and Figures included in the CRS reports and also provide Additional Tables and Figures related to the UI program. Additional sections include Legislative History and Links to Additional Resources.

This page was prepared on August 29, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

[1] Other exceptions include: up to 30 weeks in Massachusetts; up to 28 weeks in Montana; up to 25 weeks in Arkansas and Illinois; up to 20 weeks in Michigan, Missouri, and South Carolina; a maximum of 12-23 weeks in Florida, depending on the state unemployment rate; a maximum of 14-20 weeks in Georgia, depending on the state unemployment rate; a maximum of 16 weeks, 20 weeks, or 26 weeks in Kansas, depending on the state unemployment rate; and a maximum of 12-20 weeks in North Carolina, depending on the state unemployment rate. For more details, see CRS Report R41859, Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws, by Katelin P. Isaacs.

[2] See, for example, President Franklin Roosevelt’s remarks at the signing of the Social Security Act at https://www.ssa.gov/​history/​fdrstmts.html#signing.

[3] The other temporary programs became effective in 1958, 1961, 1972, 1975, 1982, 1991, and 2002. For details on these programs, see RL34340, Extending Unemployment Compensation Benefits During Recessions.