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Unemployment Insurance--Alternative Base Period




A Legislative Brief for the Center for State Innovation


Model Legislation for Unemployment Insurance 
Only 37 percent of all unemployed workers collected benefits in 2008, and the percentage is even smaller for low-wage workers.
The unemployment insurance (UI) program, created in 1935, is based on a Depression-era model of factory employment. Over the past six decades, changes in the labor market—such as increased use of part-time and temporary employment, and rapid job turnover—have eroded the UI safety net so that less than half of the unemployed receive UI benefits.
  
All states use a base period, or a base year, to determine whether unemployed workers have earned enough wages to qualify for unemployment insurance (UI) benefits.
 
A base period is typically four calendar quarters—January through March, April through June, July through September, and October through December. Most states define their base periods as the first four of the last five completed calendar quarters. In other words, workers who file UI claims cannot use wages earned in the current quarter (the “filing quarter”) or the most recently completed quarter (the “lag quarter”) to calculate eligibility or benefit amounts[1].
  
A critical reform—the alternative base period (ABP)—would bring more low-wage workers into the UI system.
Some workers do not qualify for UI because they lack sufficient qualifying weeks of wages under the traditional base period. The ABP allows workers to include the wages they receive in more recent months in order to meet state thresholds for number of weeks worked, and wages earned.
 
Among the workers who do not meet eligibility requirements for UI benefits, one in five would qualify through ABPs.
 
Calculating eligibility requirements with the ABP expands UI coverage to low-wage and part-time workers—especially women, new entrants to the labor market (including former welfare recipients), and re-entrants to the workforce. Seasonal workers, including those in the building and construction trades, also benefit from ABPs. These workers often earn wages concentrated in fewer quarters of their base periods. In addition, because more recent wages are used, ABPs sometimes result in higher weekly UI benefits. One study concluded that in 2003, 211,000 additional jobless workers received unemployment benefits as a result of ABPs. Another 439,000 could have benefited if ABPs were adopted in all states[2].
  
The adoption ABPs does not significantly deplete UI trust funds.
On average, the benefits paid out of UI trust funds have increased by four to six percent in states with ABPs. Given the comparably large numbers of workers who benefit from ABPs, this cost is justified. Furthermore, the cost estimates do not take into account that a fair proportion of newly-included recipients would have remained unemployed and filed valid UI claims at a later date, when their wages fell into the traditionally defined base period.
  
Eighteen states and the District of Columbia have adopted ABPs to promote UI eligibility expansion.
A total of 19 states (CT, GA, HI, IL, ME, MA, MI, NH, NJ, NM, NY, NC, OH, OK, RI, VT, VA, WA, WI) and the District of Columbia—representing one-third of the nation’s UI claims—have adopted ABPs.
  
This policy summary relies in large part on information from the National Employment Law Project.
 

Model Legislation

Alternative Base Period Act
 
SECTION 1. SHORT TITLE
This Act shall be called the “Alternative Base Period Act.”
  
SECTION 2. ALTERNATIVE BASE PERIOD
After section XXX, the following new section XXX shall be inserted:
1. If an individual does not have sufficient qualifying weeks or wages in the base period to qualify for unemployment insurance benefits, the individual shall have the option of designating that the base period shall be the “alternative base period,” which means:
a. The last four completed calendar quarters immediately preceding the individual’s benefit period, or
b. The last three completed calendar quarters immediately preceding the benefit period and, of the calendar quarter in which the benefit period commences, the portion of the quarter which occurs before the commencing of the benefit period.
2. The [unemployment insurance agency] shall inform the individual of the option under this section.
3. If information regarding weeks and wages for the calendar quarter or quarters immediately preceding the benefit period is not available from the regular quarterly reports of wage information, and the [unemployment insurance agency] is not able to obtain the information using other means pursuant to state or federal law, the [unemployment insurance agency] may base the determination of eligibility for unemployment insurance benefits on the affidavit of an individual with respect to weeks and wages for that calendar quarter. The individual shall furnish payroll documentation, if available, in support of the affidavit. A determination of unemployment insurance benefits based on an alternative base period shall be adjusted when the quarterly report of wage information from the employer is received, if that information causes a change in the determination.
  
SECTION 3. EFFECTIVE DATE
This act shall take effect on July 1, 2004.
 

Further Information 

  • National Employment Law Project http://www.nelp.org/ui/state/access/abpfactsheet041003.cfm
 

[1] National Employment Law Project, “What Is An Alternative Base Period and Why Does My State Need One?” 2003.
[2] National Employment Law Project and Center for Economic and Policy Research, “Clearing the Path to UI Eligibility for Low-Wage Workers,” August 2005.