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A summary of CARES Act and unemployment compensation

Apr 10, 2020

As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the federal government has entered into agreements with all 50 states to fund several new unemployment compensation programs.  The signing dates of these agreements triggered eligibility to receive funds.

The benefit eligibility period began Jan. 27, 2020, and ends Dec. 31, 2020 (max benefit amount of 39 weeks). However, for all of the programs except for pandemic unemployment assistance, funds will only be available for weeks of unemployment that begin after the date on which each state signed their agreement with the federal government (all had signed by April 6).

Administrative guidelines are still being prepared and many states are estimating payments to begin sometime in April.

Five main components to this part of the CARES Act

1. Pandemic unemployment compensation
  1. Provides a flat amount of $600 per week for eligible employees who meet standard state eligibility requirements (available and able to work, but job is not available through no fault of their own, including mandated shutdowns like Safer at Home or Shelter in Place), which is in addition to basic state unemployment benefits. This amount is payable starting with the date each state signs its agreement with the federal government, through July 31, 2020.
  2. Is intended to provide full or nearly full wage replacement for the average worker in the United States and is not subject to reduction if it exceeds the wages actually earned by the individual prior to becoming eligible for unemployment benefits. Total maximum eligibility for basic state unemployment compensation is 39 weeks (26 basic + 13 emergency), but the extra $600 per week is only available through July 31, 2020.
  3. The states pay out these benefits to individuals (basic state unemployment + federal $600/week) and the U.S. Treasury reimburses the states monthly.
  4. The $600 per week is not charged to employer accounts and is 100% federally funded from the date a state signs its agreement with the federal government, through July 31, 2020.

2. Pandemic unemployment assistance (PUA)
  1. This is widely available to people who are not typically eligible and are unemployed, partially employed, self-employed, independent contractors, “gig” workers, and those who don’t have long enough work history, or are not otherwise eligible for regular unemployment compensation, as long as their eligibility is due to a COVID-19 reason (*see list below).
  2. May qualify for up to 39 weeks of basic state unemployment, including the additional federal $600 per week which is available until July 31, 2020, and is retroactive to Jan. 27, 2020 (if was unemployed then).
  3. The federal government will fully fund both the state and federal unemployment compensation amounts.
  4. Not charged to employer accounts.

3. Pandemic emergency unemployment compensation

If a person’s 26 weeks of basic state benefits have been exhausted after July 1, applicants may qualify for an additional 13 weeks of emergency unemployment compensation including the additional $600 per week of federal benefits if used before July 31, 2020.

4. Waiting period waiver

Many states provide for a one week waiting period before basic unemployment benefits are paid. If the state agrees to waive this one week waiting period, the federal government will provide the funds to pay for the first week of benefits. Governors must propose legislation to waive the waiting period, so monitor your state’s progress.

5. Short-time compensation plans (a.k.a. work-share)

The CARES Act also provides funding for states that have short-time compensation programs and financial incentives for states to adopt such programs if they do not have one now. Short-time compensation — also known as work-sharing — programs are voluntary agreements between employers and their state’s unemployment office to avoid layoffs by reducing employee hours. The employees, in turn, are eligible for prorated unemployment benefits. The additional $600 per week prior to July 31, 2020, also applies here.

Under these new federal unemployment compensation programs, some employees might receive more benefit money than they normally earn.

For example: In Wisconsin, the maximum weekly benefit is $370 (though employees will likely receive less based on the complex way that most states calculate unemployment compensation benefits). Add $600 to that and the maximum benefit could be up to $970 a week (annualized $50,440), if used before July 31, 2020.

Unemployment benefits are typically taxable, and employees may need to pay COBRA rates for health insurance continuation, depending on what their employers are able to provide.

More unemployment resources

Ways and Means Committee table on unemployment compensation timing

Relief for Workers Affected by Coronavirus Act: What you need to know and do about the CARES Act

Relief for Workers Affected by Coronavirus Act: Flowchart

Author(s)

Deb Marshall
Deborah S. Marshall
Senior Manager
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