smart spending

Underemployed? File for benefits

If you multiply your WBA by 26 weeks (the average unemployment benefit period in most states), you arrive at the fund pool available to you during your benefit year, which starts when you file.

If you were to collect full unemployment, you would blow through your state benefits (or continue under federal unemployment insurance extensions) after 26 weeks. But because you're working part-time or reduced hours, and a portion of those earnings will be used to reduce your WBA, your partial benefits could extend beyond the 26 weeks.

For partial unemployment filers, the states use widely varying formulas to subtract your part-time earnings from your weekly benefit amount, plus a little extra as an incentive to nudge you toward a new and better job.

"The formula in Connecticut is: If you have the maximum weekly benefit of $555 and take a part-time job that pays you $300 a week, Connecticut law would deduct two-thirds of what you earn from your weekly benefit. Two-thirds of $300 is $200, so they would deduct $200 from the $555, which leaves you with a benefit check of $355 plus the $300 that you earned," says Wentworth.

The good news is, most states allow for some flexibility in partial unemployment, a lifesaver for many jobseekers who need part-time work to stay afloat. "It's a week-by-week determination," says Wentworth. "You can collect a partial benefit one week and then go back to working. Any week that you are unemployed during the benefit year, your WBA is set at that rate."

The bad news is, too much part-time work could cost you your underemployment benefits. "In most states, you can probably work one or two days part time, maybe even three, and probably still get some kind of partial unemployment benefits," he says. "But generally, if you're working much more than that, the likelihood of you qualifying drops substantially."

Collecting underemployment benefits may not be advisable in all cases, especially if you hope to return to your old job one day.

"In some industries, we do see workers who are reluctant to do it because they know that the costs of the benefits are going back to the employer and they're concerned that their employer is going to hold it against them. And that does happen," Wentworth says.

During periods of high unemployment, Wentworth says underemployment insurance can play a vital role in putting America back to work.

"You don't want workers to be financially penalized in a big way because they decide to take a job for one or two days a week in a new field that they're just trying out. You don't want policies that basically tell a worker that they're better off staying on unemployment insurance."

Bottom line: Contact your state unemployment office to find out if you qualify for underemployment insurance.

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