Unemployment Compensation for Former Federal Employees and Military Servicemembers

February 7, 2025

Unemployment Compensation for Former Federal Employees

and Military Servicemembers

Background

Unemployment Insurance (UI) is a joint federal-state

system that provides income support through weekly

benefit payments. The UI system’s two main objectives are

to provide temporary and partial wage replacement to

involuntarily unemployed workers and to stabilize the

economy during recessions (i.e., by providing income

support to unemployed workers, who spend this income,

maintaining a certain level of economic activity).

The Unemployment Compensation (UC) program provides

unemployment benefits to eligible individuals who become

involuntarily unemployed for economic reasons and meet

state-established eligibility rules. This In Focus provides

information specifically about UC benefits for former

federal employees (Unemployment Compensation for

Federal Employees [UCFE]) and former military

servicemembers (Unemployment Compensation for ExServicemembers [UCX]), which are authorized under

federal law to provide income replacement similar to UC to

these particular populations. Below is a brief discussion of

the UC, UCFE, and UCX programs and benefit eligibility.

This In Focus also provides summary information on

selected policy considerations related to UCFE and UCX.

Unemployment Compensation

The Social Security Act of 1935 (P.L. 74-271) authorizes

the joint federal-state UC program to provide

unemployment benefits. The UC program provides income

support through weekly UC benefit payments. Federal laws

and regulations provide broad guidelines on UC benefit

coverage, eligibility, and benefit determination, but the

specifics are determined by the 50 states, the District of

Columbia, Puerto Rico, and the U.S. Virgin Islands. Most

states provide up to a maximum of 26 weeks of UC

benefits. The U.S. Department of Labor (DOL) provides

oversight of state UC programs and state administration of

all UI benefits. DOL provides contact information for each

state UC agency.

The UC program generally provides benefits to both

eligible individuals who are on temporary layoff (furlough)

as well as those who experience a permanent job loss.

Among other requirements, to receive UC benefits

claimants must be able, available, and actively searching for

work. UC claimants generally may not refuse suitable work,

as defined under state laws, in order to maintain their UC

eligibility.

UC for Former Federal Employees

A federal employee who is furloughed or laid off may be

eligible for UCFE (U.S.C. §§8501-8509). States are

required to operate the UCFE program under the same

terms and conditions that apply to regular state UC. UCFE

eligibility, like regular UC eligibility, is determined under

the laws of the state in which an individual’s official

workplace is located. Thus, two former federal employees

with the same earnings and work history may qualify for

different amounts of benefits if they file for UCFE based on

employment in different states. Employees in a

probationary period who are separated from federal service

may be eligible for UCFE and/or UC if their earnings

history meets the state’s minimum earnings requirements

and other state eligibility requirements.

UC for Former Military Servicemembers

Individuals who served on active duty in the U.S. Armed

Forces or the Commissioned Corps of the National Oceanic

and Atmospheric Administration (NOAA) may be eligible

for unemployment benefits through the UCX program (5

U.S.C. §§8521-8525) after they voluntarily separate from

service. The Emergency Unemployment Compensation Act

of 1991 (P.L. 102-164) provides that ex-servicemembers be

treated the same as other unemployed workers with respect

to benefit levels, waiting periods for benefits, and benefit

durations. If a former servicemember was serving in the

active component, in order to be eligible for UCX he or she

must have left military service under honorable conditions

and either have completed a full term of service or have

been released early under a qualifying reason. If the former

servicemember was a reservist, he or she must have been on

active duty (or Space Force active status) for at least 180

continuous days.

Unlike the regular UC program, the state laws that

determine the UCX benefit are based on where the

applicant is physically present when filing the claim (rather

than the last duty station). Therefore, UCX applicants

would contact the state where they are physically located

when filing for UCX benefits. UC eligibility criteria and

benefits vary by state. Former servicemembers must meet

the same criteria that civilian workers are required to meet

for their UC benefit eligibility. Thus, two former

servicemembers with the same earnings and work history

may qualify for different amounts of benefits if they file for

UCX in different states. The equivalent military

measurement of wages and time in service are used to

determine eligibility and benefit levels.

Policy Considerations

Congress may be interested in several policy issues related

to UCFE and UCX benefits, including Extended Benefits

(EB), financing, combined claims, the effect of any

retirement payments, the availability of these

unemployment benefits for affected employees during a

government shutdown, and UCX and the role of training.

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Unemployment Compensation for Former Federal Employees and Military Servicemembers

Extended Benefits

The Federal-State Extended Unemployment Compensation

Act of 1970 (P.L. 91-373) established the EB program to

provide additional weeks of unemployment benefits if high

unemployment exists within a state. After entitlement to

UC, UCFE, or UCX is exhausted, unemployed workers—

including former federal employees and former military

servicemembers—may qualify for additional weeks of EB.

The EB program, also administered by states, may provide

up to an additional 13 or 20 weeks of benefits, depending

on worker eligibility, state law, and economic conditions.

Financing

With the exception of UCFE and UCX, UC benefits are

funded through employer payroll taxes and the EB program

is funded 50% by the federal government and 50% by the

states through employer payroll taxes.

Unlike UC benefits, UCFE and UCX benefits and any

subsequent EB benefits based on prior federal or military

service are not paid for by employer payroll taxes. Instead,

a state submits the amount of UI benefits paid by the state

to the former employing agency for reimbursement. For

example, any UCX benefit payments to a former Air Force

servicemember would be charged to the Air Force. That

service branch then would reimburse the state for the UCX

benefits out of its operating budget. Likewise, any UCFE

benefit paid to a former civilian employee of the

Department of Defense (DOD) would be paid from a

transfer of funds from DOD’s operating budget.

These UCFE and UCX reimbursements (as well as any EB

payments based on federal or military service) flow as

transfers from the appropriate service branch’s or federal

agency’s appropriated funds into the Unemployment Trust

Fund (UTF) account for such reimbursements: the Federal

Employees Compensation Account (FECA). These FECA

amounts subsequently provide transfers of the funds to the

proper state account within the UTF.

Combined Claims

A former federal employee or former military

servicemember may receive a combined UI benefit (e.g., a

combination of UC and UCFE or UC and UCX) if the

unemployment benefit is based on a period that included

federal or military service as well as other employment.

This situation is generally referred to as a combined claim.

In general, based upon each state’s law, only the amount of

the benefit that is attributable to federal or military service

would be charged to the agency for the purposes of

financing UCFE or UCX.

Retirement Payments

Program guidance interpreting federal tax law requires all

states to reduce unemployment benefits (UC, UCX, UCFE)

by the amount of any pension or similar payment if that

retirement payment and unemployment benefit are based on

work with the same employer and the retirement payment is

100% employer funded and not made as a lump sum.

(Military retired pay is 100% employer funded.) States may

implement additional retirement pay provisions. Most states

deduct pension and retirement payments proportionally

based on the rate of contributions made by the former

employee and the employer (civilian federal retirement

benefits include an employee contribution).

Availability of UI Benefits During a Government

Shutdown

UC, UCFE, and UCX are classified as mandatory

entitlements and are not funded through annual

appropriations. Thus, all UI benefits, including UCFE and

UCX, must be paid to eligible individuals.

During a government shutdown due to a lapse in

appropriations, an affected federal agency may except

certain workers from furlough based on the Office of

Management and Budget’s guidance. These excepted

workers are required to report for work and perform duties,

but their pay is delayed until appropriations are enacted.

According to guidance issued by DOL on November 22,

2021, excepted federal employees who are performing

services (but whose payment for that work is delayed)

would generally be ineligible for UCFE benefits based on

states’ definitions of unemployment.

However, retroactive pay for furloughed federal employees

and federal employees excepted from furlough was

permanently authorized under P.L. 116-1, the Government

Employee Fair Treatment Act of 2019 (enacted January 16,

2019). Therefore, under current law, UCFE payments made

to a former federal employee during a shutdown may be (1)

deemed an overpayment once that federal employee is

retroactively paid and (2) subject to state laws regarding

UC overpayment recovery.

Active-duty military personnel are considered to be

working even if their pay is unavailable, and thus are

ineligible for UCX or regular state UC benefits during a

government shutdown.

UCX and Training/Education

UCX benefits are not payable during periods in which the

former servicemember is eligible to receive certain

allowances or educational assistance allowances from the

Department of Veterans Affairs, including the Survivors’

and Dependents’ Educational Assistance Program, the

Vocational Rehabilitation and Education Program, and

Post-9/11 Veterans Educational Assistance. Participation in

the Montgomery GI bill does not preclude receipt of UCX

benefits; however, status as a student does limit UC benefit

eligibility in most states, and these limitations would extend

to workers receiving UCX benefits. Many states exclude

workers while they attend school, and some states include

vacation periods in that exclusion.

Julie M. Whittaker, Specialist in Income Security

Katelin P. Isaacs, Specialist in Income Security

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IF12901

Unemployment Compensation for Former Federal Employees and Military Servicemembers

Disclaimer

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