The Social Security “Offset’” Rule: What is it and how could it affect you?

In the current economy, with significantly reduced retirement savings, many older individuals on fixed incomes are facing a particularly dire financial situation.  To make matters worse, a state law in Illinois unfairly penalizes older adults who are on Social Security by denying or reducing their unemployment benefits.  It’s called the Social Security unemployment “offset” and AARP will be fighting in 2010 to repeal the law in Illinois.

Older adults receive the Social Security benefits to which they are entitled because they have paid into the Social Security system – unfortunately, many older adults who receive Social Security must continue to work because they cannot financially survive on Social Security alone.  For these individuals, losing a job can be devastating.  In Illinois, this joblessness is made even more devastating by the fact that these workers receive reduced unemployment benefits simply because they are receiving Social Security.

Employers pay unemployment taxes for all of their workers, regardless of the worker’s age. All workers should receive their full unemployment benefit, regardless of their age.

The original Social Security “offset” rule as it relates to unemployment benefits was originally established by federal law.  Since 2002, 19 states have repealed this law and Illinois is now one of only 3 states that have maintained this discriminatory offset rule.

House Bill 293, sponsored by Representative Sidney Mathias in the 2009 legislative session, repeals the unemployment insurance law that classifies one-half of an older adult’s Social Security payment as disqualifying income for purposes of unemployment benefits.  The bill will allow eligible older workers the ability to receive the full unemployment benefit they are due.

The bill will be reintroduced in the 2010 legislative session and AARP will be fighting to make sure the Social Security offset law is repealed.