Where does unemployment money come from? California EDD explains the funding source

Wait so SDI comes out of MY paycheck but unemployment doesn't? That's actually the opposite of what I assumed. So my employer was paying into this fund on my behalf the whole 11 years?

Exactly right. SDI (State Disability Insurance) is deducted from your wages, but UI (Unemployment Insurance) is paid solely by your employer as a business expense. Think of it like an insurance policy your employer carries - when they lay people off, claims get filed against that policy.

this is actually really good to know i always thought they took it out of my check too

So there's a federal piece AND a state piece? Does that affect how much I get paid each week?

Your weekly benefit amount is calculated solely based on your California earnings history - specifically your highest earning quarter in your base period. The funding structure behind it doesn't change your individual payment amount. California EDD determines your WBA through their formula regardless of whether the trust fund is running high or low.

wow i had no idea there were two separate taxes for this. learned something today lol

The car insurance analogy is perfect actually. I'm totally using that next time my coworker brings it up. And thanks for the Claimyr tip - I've been trying to get through to EDD about something on my claim and keep hitting a wall.

claimyr worked for me too when i needed to ask about my base period wages being calculated wrong. got connected way faster than just calling myself

The insurance analogy really is the best way to explain it. People get so weird about unemployment like it's charity when it's literally a fund you (well your employer) contributed to.

That's a really logical question actually. The reason your benefit is tied to your wages is because the UI system is designed to replace a portion of lost income - not to pay out based on what your employer specifically contributed. Think of it as a pooled insurance system where everyone's premiums go into one big fund, and payouts are based on need (lost wages) rather than individual contribution amounts. Your employer's tax rate does go up after layoffs though, which is the connection between their payments and claim activity.

ohhhh ok that actually makes sense. like health insurance where everyone pays in and gets covered based on what they need not exactly what they paid

Exactly. And to add - California EDD calculates your weekly benefit amount as roughly 60-70% of your average weekly wages up to a maximum. For 2025 the max WBA in California is $450 per week. So higher earners get more up to that cap.

Yes! Log into your UI Online account and look for the 'Claim Summary' section. It should show you your base period, the wages reported for each quarter, and how your WBA was calculated. If anything looks off or you can't make sense of it, that's a good reason to call California EDD directly and ask them to walk through the calculation with you.

I just checked and my base period quarters are showing but I'm confused because one of my quarters shows lower wages than I actually earned. Should I be worried about this?

That could indicate a wage reporting discrepancy - your employer might not have reported all your wages correctly, OR EDD may be looking at a slightly different timeframe than you expect. Definitely worth calling to ask about. If the phone lines are frustrating, Claimyr (claimyr.com) is what I mentioned earlier in this thread - it really does help when you need an actual agent to look at your specific claim details.

Thank you honestly. I've been low key feeling guilty about it even though I know I shouldn't. Hearing this helps.

The guilt is so common and so unnecessary. You worked 11 years, your employer paid into this fund for 11 years of your employment, you were laid off through no fault of your own. This is textbook exactly what UI was designed for.

same honestly i felt so guilty my first week filing. took me a while to realize i earned this

This is accurate. California had one of the largest UI trust fund debts in the country post-COVID. Employers have been dealing with elevated FUTA taxes as a result. It's one reason why some business groups push back against unemployment benefit expansions - their tax rates are directly affected.

wait so employers are still paying back COVID unemployment loans? that seems insane

It's been a slow process. The FUTA credit reduction kicks in when states have outstanding federal loans, which effectively raises the net FUTA tax rate employers pay. California has been working through it but it's a multi-year issue.

This is wild I never thought about the employer side of this at all

No, your benefits are not affected by your former employer's financial situation. Remember the UI fund is a pooled system - all employer contributions go into one collective fund. Your claim is against that fund, not specifically against your former employer's individual account. Even if your employer goes completely under, your UI payments continue uninterrupted as long as you remain eligible and file your weekly certifications on time.

oh thank god. my former company is really struggling and i was lowkey scared about this

The only way your claim would be affected is if your employer successfully contests the reason for your separation - like if they claim you quit or were fired for cause rather than laid off. The financial health of the company itself has no bearing on your ongoing benefits.

Because employer UI tax rates are experience-rated - meaning the more successful claims are filed against a company, the higher their future tax rate goes up. Employers have a direct financial incentive to contest claims they believe are ineligible. If they can get a claim denied (for example by arguing misconduct or voluntary quit), their experience rating doesn't take the hit. This is why even companies that are struggling will sometimes fight unemployment claims.

ok so they're disputing it to keep their tax rate lower. that feels really crappy when i was just laid off

It IS crappy but it's also the reality of the system. If they dispute it you have the right to appeal and present your side. Make sure you respond to any California EDD notices within the deadline - usually 10 calendar days. Don't let the dispute just sit there unanswered.

i need to call edd about this but cannot get anyone on the phone. been trying for 3 days

just looked at the video, going to try this today. i really need to get someone on the phone before whatever deadline they set passes

Good luck! The employer dispute situation sounds stressful. Definitely prioritize getting that call in.

I used it too last week - actually got through and the agent explained my base period calculation. Would have taken me days of calling otherwise.

Ohhh that explains why my payments usually hit my Bank of America within 3 days of certifying. I always wondered why it was so fast.

yeah exactly. the system is pretty automated for straightforward claims. its only when something flags - like an employer dispute or an earnings question - that things slow down and go to adjudication

wish someone had explained all this to me when i first filed. the california edd website is not exactly user friendly for understanding the big picture

This is actually the Keynesian argument for automatic stabilizers and it's well supported by economic research. UI benefits have one of the highest 'multiplier effects' of any government program because recipients spend almost immediately out of necessity, which supports local businesses and employment.

Exactly. So anyone giving you grief about collecting UI is essentially arguing against economic policy that benefits them too, whether they realize it or not.

love this framing. going to use this next time someone has opinions about me filing

Really glad you got that resolved! Yes, employer wage reporting errors are surprisingly common and they absolutely affect your WBA calculation. Good call getting it corrected - depending on the difference it could increase your weekly payment amount, sometimes significantly.

This is super helpful to know. I'm going back to look at my quarterly wages more carefully now.

Also worth noting - if the corrected wages result in a higher WBA, California EDD should retroactively pay you the difference for the weeks you already collected at the lower amount. Make sure to ask about that when the correction goes through.

The agent mentioned that too! Said it would take a few weeks to process but I should see a supplemental payment. Really glad I pushed on this instead of just accepting the lower amount.

Theoretically yes - state UI trust funds can and do run low or become insolvent during severe recessions. As I mentioned earlier this happened to California during COVID. When a state's fund runs out they borrow from the federal government through what's called Title XII advances. So benefits continue - they're essentially backstopped by federal funds - but the state ends up with debt it has to repay, usually through higher employer taxes over time.

The federal government acts as a lender of last resort for state UI systems. This is why there's both state AND federal unemployment tax components - the federal piece exists partly to fund that backstop mechanism. Individual claimants don't need to worry about their benefits stopping because of fund insolvency - there are federal safeguards in place.

ok that's reassuring. i was imagining like california just running out of money and everyone's checks stopping. good to know theres a federal backup

facts the edd website feels like it was designed to confuse people on purpose lol

The California EDD website does have a lot of the information but it's scattered and written in bureaucratic language. Their FAQ section is probably the most accessible part. But threads like this where people ask real questions and get real answers are honestly more useful for most people.

Agreed - I came here with one very specific question because I was embarrassed at work and I'm leaving with a way better understanding of the whole system. Thanks everyone.

That's a really interesting historical context I never knew. So the experience rating system was designed as a behavioral nudge for employers essentially.

Exactly. The 'experience rating' concept - where your layoff history affects your tax rate - was specifically designed so employers internalize the cost of laying people off rather than treating it as free. In practice it varies in effectiveness but the intent was to stabilize employment.

The political history of UI is fascinating honestly. It was a compromise design - some advocates wanted worker contributions too (like SS) but the employer-only model won out partly because of this stabilization argument.

I hadn't thought about it from the employer perspective like that. My company did a 'temporary' restructuring that became permanent but I can see how in other situations UI would help employers too.

yep this is why some companies actually encourage workers to file when theyre doing temporary shutdowns. they want their experienced workers to be able to come back

So glad you got through! Employer disputes are really stressful but totally winnable if you have documentation showing the real reason for your separation. What kind of documentation are they asking for?

they want any written communication about the layoff, my termination letter if i have one, and a written statement from me explaining the circumstances. the agent was actually really helpful once i got through to one

That's exactly the kind of situation where having a real conversation with an agent makes all the difference. Good luck with your appeal - sounds like you're on the right track now.

This is a good reminder that the California EDD phone system is hard to reach but the actual agents are often really helpful once you get through. The barrier is just getting to them.

This is the summary I needed from the beginning lol. Bookmarking this entire thread.

seriously perfect summary. going to screenshot this for future arguments

the SDI vs UI distinction tripped me up for so long. helpful to see it spelled out clearly

Great thread all around. OP asked a simple question and got a really thorough education. This is what forums are supposed to be for.