Unemployment Compensation (Insurance) and Military Service
Released: 2016-06-07T00:00:00

Unemployment Compensation Benefit Eligibility for Former Military Personnel

Unemployment Compensation for Ex-Servicemembers (UCX) provides income support to former active duty military personnel or reservists, who were recently released from active duty, while they search for work. The Emergency Unemployment Compensation Act of 1991 ( P.L. 102-164 ) provides that former servicemembers be treated the same as other unemployed workers with respect to benefit levels, the waiting period for benefits, and benefit duration.

Once entitlement to regular unemployment benefits is exhausted, former servicemembers may qualify the Extended Benefit (EB) payments if the program is active and available in their states. From July 2008 through December 2013, the temporary Emergency Unemployment Compensation (EUC08) benefit might have been available for additional weeks of unemployment benefits. The EUC08 program's authorization terminated on December 28, 2013, for all unemployed persons.

UCX Financing: Reimbursable Employer

Unlike regular unemployment compensation (UC) benefits, UCX benefits and any subsequent EB benefits based on military service are not paid for by state unemployment taxes. Instead, the state submits the amount of benefits paid by the state to the former employing service (for example, the Air Force). Then, the service reimburses the state for the UCX benefits out of the service's operating budget.

These UCX reimbursements flow as transfers from the appropriate military services' appropriated operating funds into the Unemployment Trust Fund (UTF) account for such reimbursements (the Federal Employees Compensation Account, FECA). Then, FECA transfers funds to the proper state account within the UTF.

For example, if a former naval officer living in California claimed UCX benefits, the Navy would transfer funds from its operating budget into FECA. The funds would then be transferred to California's account within the UTF to reimburse California for those UCX benefit expenditures.

A former servicemember may receive a combined unemployment benefit (UC and UCX) if the unemployment benefit is based upon a period that included military service as well as other employment. In general, based upon each state's law, only the amount of the benefit that is attributable to military service would be charged to the agency.

For FY2015, approximately $474 billion in unemployment benefits were distributed to former military personnel based upon military service. (See Table 1 for details.) All of the $474 billion was for UCX and EB benefits (and thus, paid by the former employing service).

UCX Eligibility and Benefit Level

Former servicemembers may apply for UCX benefits in any state. Generally they would apply in the state where they are searching for employment. (This is different than in the regular UC program, where benefits are required to be filed based on the work location of the unemployed worker's previous employment.) UC eligibility criteria and benefits vary by state. Former servicemembers must meet the same criteria that civilian workers are required to meet for their UC benefit eligibility. Thus, two former servicemembers with the same earnings and work history may qualify for different amounts of benefits if they file for UCX in different states. The equivalent military measurement of wages and time in service are used to determine eligibility and benefit levels.

Active Duty and UCX

Active military personnel are considered to be working and thus cannot qualify for UCX or regular state UC benefits.

Conditions for UCX Eligibility

If the former servicemember was originally in the active duty military, he or she must have left military service under honorable conditions and either completed a full term of service or have been released early under a qualifying reason.

If the former servicemember was a reservist formerly on active duty, he or she must have been on active duty for at least 180 continuous days.

UCX and Training/Education

UCX benefits are not payable during periods in which the former servicemember is eligible to receive certain allowances or educational assistance allowances from the Survivors' and Dependents' Educational Assistance Program, the Department of Veterans' Affairs Vocational Rehabilitation and Education Program, or Post-9/11 Veterans Educational Assistance. Participation in the Montgomery GI bill does not preclude receipt of UCX benefits; however, having student status does limit UC benefit eligibility in most states, and these limitations would extend to those workers receiving UCX benefits. Many states exclude workers while they attend school, and some states include vacation periods in that exclusion.

Self-Employed and Sole Proprietor Ex-Servicemembers

When a former servicemember was previously self-employed or was a sole-proprietor, the worker would have been excluded from receiving UC benefits. After active duty, if the former servicemember is unemployed, the former servicemember would qualify for UCX benefits based on military service. However, most states require that the worker be searching for employment and would not pau benefits to a worker who was reestablishing self-employment or a small business.

Expenditures Associated with UCX

Table 1 contains the total unemployment benefit expenditures associated with former military service from FY2000 through FY2015. In addition, the expenditures are separated into benefits that were charged back to the service unit and those (temporary) unemployment benefits that were paid directly out of the General Fund of the Treasury.

The years of high of unemployment during the most recent recession rapidly increased expenditures associated with former military servicemembers from 2009 through 2011. In addition, in the Army and Marine Corps began to increase separations from the services as part of the drawdown efforts that began in 2011.

In 2007, approximately $462 million in UCX benefits were paid to former servicmembers. With the authorization and subsequent expansions of the temporary Emergency Unemployment Compensation of 2008 (EUC08; first authorized by P.L. 110-252 , expired December 28, 2013), the temporary provisions allowing more states the option to provide EB, and an additional $25/week payment (Federal Additional Compensation, FAC; first authorized by P.L. 111-5 , expired June 2, 2010), the unemployment expenditures associated with former military service rapidly increased.

By 2011, almost $1.9 billion of unemployment benefits were spent on former servicemembers based upon their service records. Just over half ($948 million) was spent on UCX and EB for former servicemembers. An additional $920 million was paid out as EUC08 and FAC benefits.

Beginning in 2012, the expenditures began to decline (partially attributable to changes in the EUC08 program, which was legislatively reduced in size by P.L. 112-96 in three phases) but remained substantially above pre-recessionary levels. By FY2014, EUC08 benefits were only available for the first quarter of the fiscal year and total unemployment benefit expenditures attributable to military service decreased to just over $700 million. In FY2015, total UCX expenditures had dropped to $474 million.

Civilian Spouses Who Quit Employment Because of Military Spouse Transfers

Treatment of civilian spouses who quit their employment because their military spouse was transferred varies greatly among the states. In the majority of states, a quit to follow a transferred spouse may be deemed a "good personal" cause and the newly unemployed worker may receive UC benefits. However, some state UC programs do not award UC benefits to workers who quit their jobs because a spouse was transferred, deeming this as a "voluntary quit." The laws of the state may go further and include a specific disqualification for claimants who quit work to relocate with a spouse until certain additional income is generated.

The disqualification following a "voluntary quit" continues until the claimant returns to work, completes a specified duration of work, and earns wages of a specified amount. In other states, the disqualification is time-limited. These states penalize the worker for quitting, but recognize that economic conditions may be such that even a person who diligently seeks work may find none. The reasoning is that beyond a certain point, if a diligent job seeker is still unemployed, such continuing unemployment is attributable to labor market conditions rather than their decision to quit. Thus, spouses relocating to areas of high unemployment or limited opportunities may become eligible for benefits even if initially disqualified.

Twenty-seven states and the District of Columbia allow UC benefits if a worker quits to accompany a spouse who has been transferred regardless of military status (labeled "Y" in Table 2 ). In addition, another 20 states have special exceptions for workers who quit to follow their transferred military spouse (labeled as "Military only"). Only Idaho, Louisiana, and North Dakota do not consider quitting to follow a military spouse a voluntary quit "good cause."

Impact of Military Service on Employers' State Unemployment Taxes

State unemployment taxes are levied on employers based on a combination of established rates and the employer's past history of its workers using the UC system. Generally, employers with a greater history of unemployed workers would have a worse experience rating and would pay higher state unemployment taxes. Military service of business owners or employees may impact the tax rate that certain employers face. Furthermore, if workers who quit to join a transferred military spouse receive UC benefits, this may impact the overall state unemployment tax burden of most, if not all, of the state's employers. Below are some examples of these situations:

A business owner, if called up for active military service, may need to lay off some or all of the business's workers. Once the business owner returns from military service, the revival of the business may mean that the small business may face a new, higher state unemployment tax rate. If the servicemember serves for less than two years, some of the worker's UCX benefit may be based on nonmilitary work. (These workers receive a hybrid UC/UCX benefit.) In some states, their former (civilian) employers may face a state unemployment tax increase as a result. Workers who quit their jobs and move to accompany their military spouse may receive UC benefits in many states as listed in Table 2 . These states do not charge UC benefits to employer accounts when workers voluntarily quit their jobs to accompany a transferred military spouse. The benefits paid to a worker accompanying a military spouse generally would not increase the state unemployment taxes of the worker's former employer. However, these benefits are still charged to the state's account within the UTF. As a result, the cost of benefits is passed on to the state's employers as a socialized cost and may increase the overall state unemployment tax rate.

States may choose to create provisions that remove or limit these tax increases in certain situations. For example:

In Illinois, business owners who are called to active duty from the reserves and had to close their firms are not charged for the increases attributable to UC benefits for the workers who lose their jobs on account of the closure. When the business owner returns and reopens his or her business, the business's state unemployment tax rate is not increased. Some states provide for the non-charging of benefits for unemployment directly resulting from reinstatement of another employee upon his or her completion of uniformed service duty.

Legislative Activity

Senator Ron Johnson sponsored S. 1356 , which was enacted as the National Defense Authorization Act for Fiscal Year 2016, P.L. 114-92 . In addition to many other actions, the law altered certain conditions for individuals to receive UCX. The law generally prohibits the concurrent receipt of UCX and Post-9/11 Veterans Educational Assistance but did provide exceptions. In addition, the law doubled the number of days (from 90 to 180 continuous days) a reserve member of the Armed Forces would have to be on active duty to qualify for UCX.

Two earlier proposals had similar provisions, but did not include exceptions to the prohibition of concurrent receipt. Representative Mac Thornberry sponsored H.R. 1735 , the National Defense Authorization Act for Fiscal Year 2016 (vetoed by President Obama on October 22, 2015). The bill contained two provisions regarding unemployment compensation for former servicemembers. Section 535 of S. 1376 includes a provision that would prohibit the concurrent receipt of unemployment benefits for former military servicemembers (UCX) and Post-9/11 Veterans Educational Assistance. Section 592 of the bill would double the number of days a reserve member of the armed forces would have to be on active duty to qualify for UCX (from 90 to 180). Senator John McCain sponsored an identically named bill ( S. 1376 ) that contained similar provisions.