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  • James Robinson CFP

Unemployment Benefits?

Updated: Jan 20, 2019


Can a 'Transitioning' Servicemember or Retiring Veteran Be Eligible for Unemployment Benefits?

The following question is asked quite a bit by retiring servicemembers. “Can I collect unemployment benefits if I'm receiving Social Security payments?”


The answer is Yes…and No.


Years ago, Congress passed a law that required that states offset unemployment compensation benefits in part, or in full, for individuals receiving Social Security retirement payments. Major advocacy groups considered this a hostile act. Groups such as the American Association of Retired Persons (AARP) appealed to Congress ‘better judgment’ to void the ‘Social Security offset’ rule.


Today, only four states, Colorado, Illinois, Louisiana, and Utah, retain the "offset" rule. The servicemembers taking up residence or returning to these states should check as this rule may have evolved.

 

Severance pay, unused vacation pays, workers' compensation or pension payouts can potentially block unemployment benefits for a certain time while you're receiving unemployment income. It really depends on how the state chose to identify and treat the type of payout you're receiving and the amount.


Typically, the Social Security Administration does not count unemployment benefits as earnings, so the unemployment benefit will not affect your Social Security benefit. However, income from Social Security benefits may reduce your unemployment compensation. You should contact your state unemployment office for information on how your state applies the reduction.

 

The servicemember should keep in mind that to qualify for unemployment insurance compensation, you must have a sufficient amount of earned income during your base period. The state typically will not include unearned income in this calculation, so your retirement income cannot be used to qualify for unemployment insurance compensation, nor will it increase the amount of benefit you can receive each week.


It would be a very “SMART GOAL’ to work with your Financial Counselor on these issues and most important…do not hesitant to ask questions. With that in mind...let's take a deeper dive into the question, "Can I Get Unemployment Checks if I am getting Military Retirement Checks?"


So let start here. Approximately 8% to 9% of America’s populations have served in the United States Armed Forces. The Statistics Portal forecast the number of military retirees in the U.S. from the year 2017 to 2018 to be approximately 2.15. The estimated number of military retirees in the U.S. in 2027 will stand at approximately 2.21 million.

Americans working in the civilian sectors usually retire around the age of 66. For those fortunate enough to serve in the United States Military can retire as early as age 37. Servicemembers have a choice to start to collecting pension checks in their late thirties (Some will delay) and still work a traditional private sector job with the ability to amass additional retirement assets in 401(k)s and other retirement plans. How awesome is that? For some, the prospects upon leaving the military may not be that bright. They may receive a military retirement check but their current lifestyle or personal situation may demand a higher level of income. Some servicemembers faced with poorer job prospects in the first months after leaving the military may attempt to draw unemployment to help them through a rough patch.

UCX Military veterans in good standing are entitled to a special type of unemployment, known as Unemployment Compensation for Ex-service Members, or UCX. Like most unemployment benefits, the actual amount that is paid out is weighed against residual income such as separation or retirement pay, and whether the claimant is available for full-time work. Any soldier with an honorable discharge who formerly served in an active-duty role is eligible. Civilians unemployment insurance is funded by the employer whereas the Unemployment Compensation for Ex-servicemembers (UCX) programs administered by the States as agents of the Federal government.

General Rule of Thumb Unemployment Compensation for Ex-servicemembers (UCX) is based on active duty service. Its intent is to provide weekly income to servicemembers as they look for work, including those who can find only part-time work. Again…the individual States are in control. Some rules may vary but in general, you must meet these rules: Active duty military service: You were on active duty in the Armed Forces, or you served on active duty in a reserve status. You served for a continuous period of 90 days or more. Honorable discharge. You were discharged or released under honorable conditions. (And, if you were an officer, you did not resign for the good of the service.)

You cannot get UCX benefits with:

  • a discharge condition of ‘other than honorable.’

  • a “bad conduct” discharge, or a dishonorable discharge, including a general court-martial.

  • The full term of active service or discharge for an allowable reason. You were discharged or released after completing the first full term of active service which you initially agreed to serve, or you were discharged earlier:

    • For the convenience of the Government under an early release program

    • Because of medical disqualification, pregnancy, parenthood, or any service-incurred injury or disability

    • Because of hardship, or Because of personality disorders or inaptitude, but only if the service was continuous for 365 days or more.


State Rules May Apply

Every state program has its own specific rules. But here are some general requirements:

  • You have earned a certain minimum amount during the State’s ‘base period.’

  • Your Federal military service and wages count toward this requirement.

  • You file weekly claims.

  • You are totally or partially unemployed.

  • You can work, available for work, and seek work.


Self Employed…be careful Under many State laws, you may not be eligible if you are trying to set up your own business or want to be self-employed. This is true even if you were self-employed before entering the military.

Where and how do I apply? Apply for benefits in the State where you are searching for work as soon as you can after you are discharged. The most important form you will need is the DD214. This form contains the information needed to establish your claim. Each State should have a clear process for applying for UCX. You should contact your State Unemployment Insurance agency as soon as possible after leaving the service. In some States, you can now file a claim by telephone or over the Internet.

How much will my UCX benefits be? As mentioned earlier, the guidelines of the State where you file the claim will determine your weekly benefit amount, the number of weeks paid, and other program rules. Your federal military service and wages are treated as though they were civilian employment. This includes all pay and allowances in cash and in-kind for federal military service. The amount is based on your pay grade when you left military service. The State will base its calculation on a “Schedule of Remuneration” for various pay grades. This Schedule is set by the U.S. Department of Labor.

As with civilians’ unemployment compensation, the actual amount paid out every week varies from state to state. In general, benefits are based on a percentage of your earnings over a recent 52-week period, and each state sets a maximum amount. Benefits are subject to federal and most state income taxes and must be reported on your income tax return. You may choose to have the tax withheld from your payment. Claimants must provide a copy of their social security card, DD214 release documents, and resume. Former soldiers requiring this assistance should schedule a meeting with their local unemployment office to determine the required job search reporting method, amount and duration of benefits. In most cases, the amount, prior to considering other forms of income, is based on the soldier's last pay grade prior to discharge.

Income That Reduces UCX

Depending on the State, these other types of income may reduce weekly UCX:

  • Wages from a job

  • Severance pay

  • Social Security payments

  • Workers compensation

  • Training allowances


Can I Get Unemployment Benefits While Receiving GI Bill benefits? The 2016 National Defense Authorization Act (NDAA) was signed into law by President Obama on November 25, 2015. They contained many education and GI Bill changes. Here’s the deal. Congress inserted language into the law prohibiting the receipt of unemployment benefits while receiving the Post-9/11 GI Bill. That has made it a bit tougher to receive unemployment benefits as you must be able to prove to your state that you still qualify for the unemployment benefits while you are attending a university or technical school. For some states that may mean you need to show that you are seeking work. This will be challenging to full-time college students. To be perfectly warned…some states do not allow any students to receive unemployment benefits. If you are in a state which does not allow students to receive unemployment benefits, you may not be able to receive any unemployment benefits while receiving GI Bill benefits. The Montgomery GI bill may provide relief.

College Students If the State where you are applying for benefits allows students to get unemployment compensation, you may be able to get Unemployment Compensation for Ex-Servicemembers if you are getting help from the Montgomery GI bill. However, most States do not allow any students to get unemployment compensation. Again…check in with your State Unemployment Insurance agency.

UCX and other Programs You cannot get UCX while you are getting benefits from:

  • The Survivors and Dependents Educational Assistance Program

  • The VA “Vocational Rehabilitation and Education Program


Taxation of UCX benefits The IRS does consider unemployment income as federal taxable income.

Unfortunately, the states do so as well. To be clear, Unemployment income is considered state taxable income. Yes...they giveth and taketh away. Unemployment income is reported on Form 1099-G. The Tax Foundation has a nifty chart that shows: Which States Tax Unemployment Benefits


References and Resources

Source: 11 Things That Affect Unemployment Eligibility - Here's why your benefits could be denied. by Kerry Hannon, AARP Online magazine


For more information about unemployment compensation, visit: www.ows.doleta.gov. You can also call the Department of Labor at: 1-877-US-2JOBS.


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