Building on the momentum from his final State of the Union, President Obama is now following through on his promise to rally for a progressive agenda throughout his last year in office.

In his weekly address of January 16, 2016, the President unveiled his plan to "modernize" the unemployment insurance system in an effort "to help more hardworking Americans get unemployment insurance, find a new job, and have some assurance that even if a new job pays less than their old one, they will have some help paying the bills."

Wage insurance for low-income displaced workers

The most significant of the Administration's new proposals is a wage insurance that would be available to displaced workers making less than $50,000. Provided these employees remained with their previous employer for at least three years prior to displacement, they would be eligible for replacement wages up to $10,000 over a two-year period.

The wage insurance would theoretically bridge the income gap that often occurs when laid off workers are forced to take new jobs with lower pay.

The White House Fact Sheet states that this new benefit would be fully funded through the President's broader fiscal year 2017 budget.

The Fact Sheet does not offer details as to how workers would claim these benefits; however, it is highly likely the new program would be administered through the state unemployment insurance agencies.

Mandate maximum 26 weeks of state unemployment insurance benefits

The President proposes to reverse what he terms the "damaging erosion of state unemployment benefit duration" by mandating that states provide at least 26 weeks of coverage to eligible workers.

When state unemployment insurance trust funds reached crisis lows in the throes of the Great Recession, some of them avoided excessive tax increases on businesses by lowering the maximum weeks of workers' coverage.

While historically states have uniformly provided for a maximum of 26 benefits weeks, there is no federal requirement to do so. Consequently, nine states now set the maximum benefit at less than 26 weeks, in some cases, to just 13 weeks.

The President's proposal would also create a permanent program of extended UI benefits providing up to 52 additional weeks of federally-funded unemployment insurance benefits for states experiencing rapid job-losses or high unemployment.

Ernst & Young LLP insights

Should federal law require a state maximum of 26 benefit weeks, employers in the states below can expect increases in their unemployment insurance costs. Additionally, states will not be able to avoid or reduce future employer cost increases by lowering the unemployment insurance payout rate in this manner.

States with less than 26 unemployment insurance benefit weeks

More details concerning these and other proposals impacting employers will be available in the President's fiscal year 2017 budget proposal expected early in February.

Focus will continue on ensuring healthy state trust funds

In the President's fiscal year 2016 budget proposal, two provisions were suggested that would force states to maintain larger reserves in their unemployment insurance trust funds.

1. Raise the federal wage base from $7,000 to $40,000. This would result in an increase in the state unemployment insurance wage base for all states except Hawaii and Washington.

2. Impose a state unemployment minimum tax of $70 per employee per year, thereby eliminating the possibility of a zero rate that applies in some states, or a rate that would result in employer contributions of less than $70 per year.

Our analysis of the President's fiscal year 2016 budget is here.

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