Summary of Unemployment Benefits and Changes in the CARES Act
The combine impact of several sections from the CARES Act will provide unemployment benefits unlike any we have ever seen. For many Americans, the majority of the assistance they will get during these difficult times will come through unemployment benefits.
We specifically encourage our TMHA community owners to consider taking an active, yet socially distant, role in not only informing residents, but making sure they can apply and receive all the various state and federal benefits that are now available.
Most of the media coverage has been given to the individual direct cash payments, which we also address, but we cannot impress enough just how significant the changes to unemployment benefits are. As Sen. Chuck Schumer called them, "unemployment on steroids."
One of the better guides and summary documents is the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Summary of Key Unemployment Insurance (UI) Provisions and Guidance provided by the Department of Labor.
This all said, our current assumption is that patience and persistence are going to be necessary dealing with the unemployment process. These programs are going through the state system, which is scaling up to deal with the demand, but this will take time (Texas Workforce is hiring 100 more employees). The volume the state is trying to manage is in an order of magnitude of at least 10-times higher than anything they have ever had to deal with. But once processed and approved beneficiaries will receive benefits, some of which can be back dated all the way to January 27, 2020.
Purpose:
Similar to other relief provisions in the CARES Act, Congress looked to existing assistance programs to enhance on top of programs that were at least somewhat familiar to providers and recipients. This is particularly true for the historic boost provided to unemployment benefits.
Unemployment benefits are administered at a state level. We think we should all expect some rapid growing-pains with this process at first for the states, therefore, again, patience and persistence cannot be stressed enough. For example, prior to COVID-19, it would take about 21 days to receive benefits after applying (expect longer now).
They will get there; the money will eventually come; and for many Americans this will be their lifeline for nearly the next year.
Highlights:
- Three main provisions, working in concert, to provide more money, for longer, and to more types of workers who were previously ineligible for unemployment benefits
- The three provisions are called:
- 2102. Pandemic Unemployment Assistance. (PUA)
- 2104. Emergency increase in unemployment compensation benefits. (PEUC)
- 2107. Pandemic emergency unemployment compensation. (PUC)
Summary of Three Programs Combined Benefits:
- Expanded Eligibility/Coverage Provisions:
- Traditional state-based UE eligibility; PLUS additional people now eligible to include – self-employed, gig workers, contractors, part time, workers who do not have a long enough work history to qualify for state UI benefits (PUA Program adds this)
- Coverage also includes individuals who have exhausted all rights to regular unemployment benefits under state or federal law (PEUC and PUA Programs adds this)
- Must be able to prove you were previously working – tax returns, W-2s, 1099’s, bank statement, paying employee portion of employment taxes, etc. (PUA Program adds this)
- Must demonstrate that they are otherwise able to work and available for work, but they are unemployed, partially unemployed, or unable or unavailable to work because of the COVID-19 (there is a specific list test of allowable reasons, see below) (PUA Program adds this)
- Does not include employees who can telework with pay or who are receiving paid leave benefits.
- Cash based; unclaimed income work is not eligible.
- Expanded Benefits Provisions:
- The “four-month expansion” - adds $600 more per week (for 4 months until July 31, 2020) on top of what a state normally provides for unemployment benefits (PUC Programs adds this)
- Texas average benefit is $246/week
- And prior to COVID-19, it would take about 21 days to receive benefits after applying (expect longer now)
- 39 Weeks of Coverage - Up to 39 weeks of benefits and is available starting with weeks of unemployment beginning on or after January 27, 2020 and ending on or before December 31, 2020. (PUA Program and PEUC Program add this)
- PUA has the expanded types of eligible persons for the full 39 weeks
- PEUC adds 13 weeks to the regular max state duration of benefits of 26-weeks, so total benefits extend to 39 weeks
- The “four-month expansion” - adds $600 more per week (for 4 months until July 31, 2020) on top of what a state normally provides for unemployment benefits (PUC Programs adds this)
Individual Income Tax Implications
- Most received benefits will be treated as taxable income to the recipients, with one exception
- Exception – the $600 more per week for four month (PUC Program) is not considered “income” for Medicare or CHIP tax purposes.
Fraud Provisions
- Sections 2104(f) (from PUC) and 2107(e) (from PEUC) expressly provide that if an individual has obtained the benefit through fraud, the individual is ineligible for any additional benefit payments, must pay back the benefits, and is subject to prosecution under 18 USC §1001. (PUC and PEUC Program adds this)