A Comparative Analysis of Unemployment Insurance Financing Methods Final Report

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Release Date: January 01, 2018

A Comparative Analysis of Unemployment Insurance Financing Methods Final Report

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About the Report

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The state-Federal system of Unemployment Insurance (UI) programs has existed for 80 years. The programs in the states are financed by employer payroll taxes paid into state trust fund accounts maintained at the U.S. Treasury. These accounts are the source for benefit payments made to eligible unemployed workers.

The report was prepared for use by states interested in assessing their current system of unemployment insurance (UI) program financing and understanding, exploring and modeling alternative financing arrangements. This Financing Guide has been developed with two primary goals in mind. The first goal is to serve as a “how to” document, with a significant focus on demonstrating for the reader how to implement common and alternative benefit financing mechanisms. The second goal is to describe current practices, review recent state financing experiences and identify detailed tax provisions and administrative procedures associated with adequate levels of financing.

This report provides state analysts the tools to design sound financing systems so that loans can be repaid and strong solvency positions established in preparation for the next recession. It is structured to provide a how-to manual in the evaluation and construction of a state UI tax structure. The early chapters provide important context for the core elements of benefit financing: understanding the levels of benefits the system will need to provide for, and general approaches to developing and maintaining systems that cover those costs. Subsequent chapters provide detailed descriptions of alternative financing mechanisms. Throughout these chapters, the emphasis is on providing basic guidance for implementing and evaluating these techniques, as well as providing important context to understand the relative advantages, and disadvantages, of specific approaches.

Citation

Vroman, W., Maag, E., O’Leary, C., Woodbury, S. (2017). Urban Institute. A Comparative Analysis of Unemployment Insurance Financing Methods: Final Report. Chief Evaluation Office, U.S. Department of Labor.

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The Department of Labor’s (DOL) Chief Evaluation Office (CEO) sponsors independent evaluations and research, primarily conducted by external, third-party contractors in accordance with the Department of Labor Evaluation Policy and CEO’s research development process.