What is Unemployment Insurance?

The unemployment insurance (UI) system was designed by President Franklin Roosevelt’s Secretary of Labor Frances Perkins and enacted by Congress in 1935 as part of the Social Security Act, 42 U.S.C. §§ 501 et seq., to stabilize the economy and to provide short-term relief to displaced workers. UI provides temporary cash benefits to workers with a recent attachment to the workforce who have become unemployed through no fault of their own and are currently capable of, available for, and actively seeking work. G.L. c. 151A, §§ 24, 25.

UI is administered by state agencies. The federal Department of Labor sets up certain guidelines and funds the states' administrative costs. In times of high unemployment, the federal government may also supplement state UI benefits with a federally funded extension. Individual states have wide discretion to determine UI benefit levels, the maximum duration of benefits, and the reasons for disqualification. The Department of Unemployment Assistance (DUA) administers the UI program in Massachusetts.

As of October 1, 2022 (and effective for new benefit years beginning October 3, 2022), the maximum benefit rate in Massachusetts is $1,015 per week (not including an additional allowance of $25 per dependent; the maximum benefit is adjusted annually on October 1, with an effective date for claimants whose benefit year begins on or after the 1st Sunday in October. G.L. c. 151A, § 29(a). Generally, the benefit rate paid to qualified workers is one-half of the claimant's average weekly gross wages up to the weekly maximum, plus any dependency allowance to which the claimant is entitled. Massachusetts currently provides up to 30 weeks of coverage to each eligible claimant (reduced to 26 weeks when, as now, the insured unemployment rate in each of the state's 10 regions of the state is 5.1% or less, or when there is a federal extension in effect. G.L. c. 151A, § 30(a)). Claimants who are in a DUA-approved training program, who have been laid off because of a plant closing, or who have lost their jobs due to NAFTA and other foreign competition may also be entitled to additional federal or state benefits. (See Question 53.)

Unemployment insurance benefits are generally taxable income for both federal and Massachusetts tax purposes. Claimants can choose to have federal and/or state taxes automatically withheld from weekly benefits by so indicating on UI Online or by choosing that option by telephone. In January of each year, DUA provides claimants with tax related information based on the amount of UI received in the prior year on a 1099-G-Form, usually available on UI Online by the end of January along with copies of a claimant's 1099-G for the prior 6 years. Claimants needing information and assistance about their taxes can call the 1099-G Helpline at (617) 626-5647.