The Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed into law on March 27, 2020. This $2.2 trillion package includes various provisions increasing and expanding unemployment insurance benefits available to workers, including individuals who are unemployed, partially unemployed, or unable to work due to COVID-19.
There are two ways in which the CARES Act expands existing unemployment insurance benefits:
- providing for an extra $600 weekly payment, in addition to the weekly benefit amount an eligible employee otherwise receives under state law, and
- increasing the maximum number of weeks an individual may receive benefits.
These new unemployment insurance benefits are funded at the federal level but are administered by the states.
Unemployment Insurance Provisions of the CARES Act
The CARES Act addresses the issues of benefit levels, duration, and eligibility through the following measures:
Federal Pandemic Unemployment Compensation
Under the Federal Pandemic Unemployment Compensation (FPUC) provision of the Act, individuals who are eligible for unemployment insurance benefits receive an extra $600 weekly benefit for all weeks of unemployment between April 5, 2020, and July 31, 2020. This amount is received in addition to the amount the individual otherwise would be entitled to receive under state law.
The $600 supplemental benefit is paid for any week in which an individual receives unemployment insurance benefits under state programs. This additional benefit is taxable, as is the case with all unemployment compensation, but is disregarded for purposes of determining income for Medicaid or Children’s Health Insurance Program (CHIP) eligibility.
Pandemic Emergency Unemployment Compensation
The Pandemic Emergency Unemployment Compensation (PEUC) provision provides for an additional 13 weeks of unemployment insurance benefits for individuals who have exhausted benefits they are otherwise entitled to under state law. Therefore, eligible individuals now may receive unemployment insurance benefits up to a maximum of 39 weeks, whereas previously the maximum stayed at 26 weeks for many states. The extended benefits are available through December 31, 2020. Any of the additional 13 weeks of benefits received prior to July 31, 2020, should include the extra $600 FPUC payment.
Unemployed workers who exhaust their PEUC benefits are then eligible for state Extended Benefits (EB) if unemployment is severe enough in their state. Up to 13 or 20 weeks of EB can be available, depending on its unemployment rate and UI laws. Normally, states are responsible for half the costs of EB, but the Families First Act increased the federal share from 50 percent to 100 percent through the end of the year.Use this detailed guide on unemployment insurance compliance to find out how to reduce unemployment tax expenses while improving the overall management of unemployment insurance claims.
The Pandemic Unemployment Assistance
The Pandemic Unemployment Assistance (PUA) provision of the CARES Act creates new unemployment insurance benefits. It expands coverage to certain workers who traditionally are not eligible for unemployment benefits under state law, have a limited work history, or have exhausted all rights to regular or extended unemployment benefits. This is particularly important for workers such as independent contractors and freelancers.
To be eligible for PUA benefits, individuals have to be unemployed, partially unemployed, or unable to work for certain reasons relating to COVID-19, such as:
- An individual is diagnosed with COVID-19 or is experiencing COVID-19 symptoms and seeking diagnosis;
- A member of the individual’s household is diagnosed with COVID-19;
- An individual is caring for a family or household member is diagnosed with COVID-19;
- An individual is the primary caregiver of a child or household member who is unable to attend a school or another facility that is closed due to COVID-19;
- An individual is unable to reach their place of employment due to an imposed quarantine or was advised by a medical provider to self-quarantine due to COVID-19;
- An individual was scheduled to begin new employment and does not have a job or cannot reach the job as a direct result of COVID-19;
- An individual supports a household because the head of the household died from COVID-19;
- An individual had to leave a job as a direct result of COVID-19; or
- An individual’s place of employment is closed as a direct result of COVID-19.
At the same time, there are both criminal and civil penalties for fraudulent or material misrepresentations in an application for benefits under these federal programs. These penalties include future ineligibility for unemployment insurance benefits, repayment of benefits received, and criminal prosecution.
CARES Act and Employers’ UI Obligations
Although each state is solely responsible for determining eligibility for and the amount of unemployment insurance benefits, employers should understand how employees are financially protected if they become unemployed as a direct result of COVID-19. Moreover, understanding potential unemployment insurance benefits may better inform employers how and when to implement such strategies. Also, given these additions to unemployment insurance benefits due to the COVID-19 pandemic, employers should consider how they may affect their business decisions.
Since the Department of Labor (DOL) is concerned about fraudulent claims being filed and may pursue criminal sanctions against individuals who engage in fraud, employers should make sure that employees are eligible for unemployment insurance benefits. Employers receive a notice that an employee has filed a claim for benefits and are asked to provide basic wage information to the state UI agency. If there is a reason why employees may not be entitled to benefits, such as being involuntarily discharged for willful misconduct, employers can contest the claim. Even though effective management of unemployment insurance claims is exhausting and time-consuming, employers can take specific steps to simplify the process. Outsourcing unemployment claims management ensures timely and detailed responses to state inquiries and support with every aspect of processing claims and hearing representation. This results both in improved compliance and significant cost savings.