Retirement Benefits and Unemployment Insurance: What Creating Offsets for Social Security Retired-Worker Benefits Would Mean for Trust Fund Balances and Older Workers

Abstract

In response to the strain on Unemployment Insurance (UI) systems during the economic recession of 1973-1975, some states began reducing an otherwise eligible worker?s UI benefits if that worker was simultaneously receiving Social Security retired-worker benefits. However, the national trend over the past 20 years is one of states steadily eliminating the use of these UI offsets. The analysis finds that offset implementation has a negligible impact on states? trust fund solvency, hurts workers older than 62 who are eligible for both UI and Social Security retired-worker benefits, and has uncertain effects on employers. To improve trust fund solvency, policymakers might consider moving states to counter-cyclical UI financing systems, implementing a solvency tax surcharge, or indexing the UI taxable wage base to states? average weekly wages rather than implementing offsets.