Meltdown 101: How are jobless benefits funded?

[Omaha Steve]

http://www.google.com/hostednews/ap/article/ALeqM5jmhy7o9PmAUHR9ysy1bvuGABIrtwD94UQBE85

By DENNIS CONRAD –

WASHINGTON (AP) — Joblessness has reached new heights that would have been shocking just a few months ago, and all signs point to more layoffs as the recession drags on. That means more and more Americans are relying on unemployment benefits to get by.

What's the source of funding for these payments — and is there any chance the coffers might dry up?

Here are some questions and answers about the money that's distributed in unemployment benefits.

Q: Where does the money come from?

A: It's raised through state and federal unemployment insurance taxes on employers. The federal tax is 6.2 percent on the first $7,000 in annual wages to each employee. State tax rates vary from state to state, as does the amount of each worker's income that's subject to the tax — which ranges from $7,000 to $34,000.

Q: Do all employers in a given state pay the same?

A: No. The rate they pay depends on how many former employees have drawn jobless benefits — the more such workers an employer has, the higher the tax rate it must pay the state.

The irony is that employers responsible for the most joblessness as a percentage of their work force — the ones that have gone out of business — cannot pay their share of unemployment taxes because they've gone under.

FULL story at link.