The Coronavirus Aid Relief and Economic Security (CARES) Act: Its Impact on Unemployment Insurance

The CARES Act imposes important new requirements on the Federal-State Unemployment Insurance Program.

With the increase in checks being converted to electronic transactions, the Automated Clearing House transaction volume is also rapidly growing especially with the introduction of same-day processing. Also, many types of ACH products and services are introduced to consumers and businesses. As with all other payment systems, there is risk in ACH network.

Background:

The Federal-State Unemployment Insurance Program provides monetary benefits to individuals who have lost their jobs through no fault of their own. Under the Program, states are allowed to determine monetary and non-monetary qualifications for benefits, the weekly benefit amount, the duration of benefits, and the charging and non-charging of benefits amounts collected by separated employees. As a result, there is a significant variance among the states concerning who is eligible for UI benefits, how much they receive each week, the duration of those benefits, which employers are charged for those benefits, the amount of the benefits charged, and the method used to calculate employers tax liability.

Under the CARES Act, both individuals qualified for benefits and those normally disqualified can collect UI benefits. This means that part-time workers, self-employed individuals, independent contractors, and workers unemployed because of the coronavirus are more likely to receive benefits.

Coverage Period Under the CARES Act:

The period of time covered under the CARES Act is for the weeks of full-time unemployment, part-time unemployment, or the inability to work caused by COVID-19. The program began January 27, 2020 and ends December 31, 2020.

Who Can Collect for CARES Act Benefits:

As a result of the Act, the following individuals can collect benefits. Individuals:

• Who have qualified for their entitlement to regular state UI benefits and have exhausted those benefits.
• Who are diagnosed with or are experiencing the symptoms of COVID-19 and have sought a medical diagnosis.
• Who are members of households of individuals diagnosed with COVID-19.
• Who are providing care for a family member or a member of the household who has been diagnosed with COVID-19.
• Who are giving primary care to a child or to another person of the household and are unable attend school or another facility because of the direct result of COVID-19.
• Who are unable to reach their place of employment because of a quarantine imposed as a direct result of COVID-19.
• Who are unable to reach their place of employment because they have been advised by a health care provider to self-quarantine due to COVID-19.
• Who have scheduled employment but are unable to reach the job or who no longer have the job as a direct result of COVID-19.
• Who become breadwinners or the major support of households because the heads of the households have died as a direct result of COVID-19.
• Who have quit as a direct result of COVID-19.
• Who are unemployed because their place of employment is closed as a direct result of COVID-19.
• Who are self-employed, are seeking part-time employment, who do not have sufficient work history, or otherwise who do not qualify for regular state UI benefits.

NOTE: Benefits are not provided under this Bill, if the individual has the ability to telework with pay; or if the individual is receiving paid sick leave or other paid leave benefits.

Duration of UI Benefits under the CARES Act:

Individuals collecting regular state unemployment insurance benefits typically collect benefits for a variable duration of benefits with the maximum duration of benefits equal to 26 weeks. NOTE: Seven states (CT, HI, IL, MD, NH, NY, WV) and Puerto Rico have a uniform duration of 26 weeks of benefits.

The maximum duration of benefits under the CARES Act is 39 weeks. Individuals in regular state UI programs will collect their calculated state UI benefit duration plus additional weeks of benefit through week 39. Individuals not qualifying under state UI programs will qualify for 39 weeks of benefits.

The Weekly UI Benefits Amount:

The amount of regular state weekly UI benefits vary among the states. For instance, the minimum and maximum weekly benefits amount range from $50 to $438 in DC, from $50 to $430 in Maryland, and from $60 to $378 in Virginia.

Individuals collecting benefits under the CARES Act will typically collect the weekly amount of benefits under the state law where the individual was employed.

NOTE: All workers totally unemployed will also collected $600 per week.

The Charging or Non-Charging of UI Benefits

As noted, the states' regular UI programs are based on an experience rating system. That is, employers are charged for the benefits collected by their separated employees and the amount of those charges is used to calculate the employer's annual UI tax rate. Typically, UI benefits paid to claimants are charged directly to the separating employer.

States may elect to "non-charge" certain UI benefits and socialize the cost of those benefits among all employers in the state. The CARES Act allows states to make this decision.. some states have elected to socialize these costs.

Unemployment Insurance Benefits under Short-Time Benefit Programs:

Under the UI Work Sharing Program, employers have the ability to preserve jobs and retain employees, while allowing their employees to collect UI benefits. Employers needing to reduce payroll costs, can, rather than totally laying off some employees and having them collect their full benefit entitlement, under the Short-Time Benefits program reduce the workdays or work hours of all employees and allow this larger group of employees to collect a portion of their UI benefits. This procedure allows employers to retain by their employees and has the benefits of ameliorating the adverse effect of the reduction of business activity by providing partial benefits, at the same time it keeps the work force attached to their employer.

The Federal government limits payments under the CARES Act to 26 times the amount of regular compensation payable to each claimant. Under a Short-Time benefit plan, employers must pay the State an amount equal to one-half of the amount of short-time compensation under the plan.

Author :
Mr. Ronald Adler, President-CEO, Laurdan Associates, Inc., and Consultant with MetricStream

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