Unemployment and Social Security

RetirementJobs.com Staff Writers

We receive a steady stream of questions about collecting unemployment benefits and Social Security retirement income.

This comes as no surprise, since unemployment has increased dramatically at a time when more and more age 62+ Social Security recipients continue to work - and, unfortunately, lose their jobs due to a poor economy.

Below we answer a number of your important questions related to unemployment benefits and how they would affect your Social Security payments.

Q: Can I collect unemployment benefits if I'm receiving Social Security payments? - Anthony, San Antonio, Texas

A: The short answer is "yes," in 45 states. Not so many years ago, a federal law required that states offset unemployment compensation benefits in part, or in full, for individuals receiving Social Security retirement payments. A subsequent federal law then permitted states to decide on such "Social Security offsets" through legislation - and thank goodness they did.

Today, only four states, Colorado, Illinois, Louisiana, and Utah,retain the "offset" rule. South Dakota has repealed the rule but not yet implemented the change. Colorado is considering a repeal of its offset. In these states, unemployment compensation benefits are reduced by 50 percent of your Social Security payment. This can reduce unemployment benefits to near zero for most workers.

In 2002, 22 states still had offset rules, with five of those requiring a 100 percent offset. That meant that if you received Social Security retirement payments and lost your job, you received no unemployment compensation. With the combined efforts of major advocacy groups, including the National Employment Law Project and AARP, most offset laws have been repealed.

"In 2002, we could not have foreseen how radically the economy would change within a few years," said Clare Hushbeck, who led the advocacy effort for AARP. "The drive to repeal unemployment compensation offsets permits countless Social Security recipients to benefit from employer-paid unemployment benefits free of offsets and allowing them a stronger safety net in the event of job loss."

Q: I am really confused about whether or not I'm eligible for unemployment because of my work history and a recent move from another state. Where can I start to get some help? - Albert, Tulsa, Oklahoma

A: Unemployment compensation eligibility and determinations can be very complex. Each state has different rules and policies. Your eligibility for unemployment is principally determined by your new state of residence. You can find out more by visiting the U.S. Department of Labor's website. Just click on the state to find the agency that manages unemployment compensation.

Be aware, these offices are very busy. You may have to wait a considerable time on the phone. You can also visit the nearest office, but be prepared to wait there as well. You will find the answer to many of your questions at the state agency's Web site. You may be best off by simply applying for unemployment compensation and waiting for the state's determination. This can take several weeks if your situation involves several employers or several home states. Remember that your application may be declined. You have a right to appeal the decision, and you should exercise that right.

Q: I'm on Social Security disability benefits and recently lost my job after two years. Can I collect unemployment compensation? - Alice, Albany, N.Y.

A: To be eligible for unemployment compensation, you have to be actively looking for a job and able to work. Receiving Social Security disability suggests you may not be available or able to work. Often, claims for unemployment compensation in this situation are declined.

Q: My employer is requiring we take a "furlough" day, without pay, twice a month. That's 24 days this year, or about a month's pay lost. Can I file for unemployment compensation? - Berkley, Charles Town, West Virginia

A: If your work hours are reduced, or if you are told to take days off without pay, you may qualify for "partial unemployment compensation" in most states as a result of your pay loss. Promptly apply for benefits to determine if you qualify.

Q: I've been successfully self-employed for six years, but my major customer just went out of business, and I have no work from other smaller clients. I've been paying my self-employment tax all these years. Can I file for benefits from the company that employed me before I became self-employed? - Harrison, Chicago, Illinois

A: Self-employed people do not qualify for unemployment compensation. Your federal self-employment tax payments are essentially your FICA taxes for Social Security and Medicare. Self-employed individuals do not pay unemployment tax to their state of residence.

Unfortunately, you can't make a claim from employment years ago. Eligibility and benefit determination rules place limits on what income qualifies and how recently you worked with an employer.

Click subject to view articles