American Rescue Plan Extends Unemployment Insurance Benefits

More than a year into the pandemic, chronic unemployment and under-employment remain among its most challenging impacts on individuals’ lives and our economy. The adoption and signing into law of the American Rescue Plan Act (ARPA) significantly extends and expands the support provided through state unemployment insurance (traditionally called unemployment compensation) to many workers, independent contractors and so-called “gig workers.”

Unemployment insurance benefits and eligibility are administered at the state level, so the timing of implementation of the ARPA unemployment compensation supplement will vary from state to state. What is certain, however, is that the federal pandemic-related extended and supplemental benefits for eligible unemployed and under-employed workers, independent contractors, self-employed individuals, and workers who have exhausted their state unemployment compensation eligibility will be available through early September 2021.

Individual states will be required to adapt and reprogram their administrative procedures to comply with the new federal benefit programs. It likely will take several weeks for eligible claimants to receive these benefits, but they will be retroactive to the first day of a claimant’s eligibility.

What are the ARPA unemployment insurance benefit enhancements?

1. The Pandemic Unemployment Assistance (PUA) program, created by the CARES Act to assist self-employed individuals, “gig” workers, and others who are ineligible for regular state unemployment insurance benefits or who have exhausted their state unemployment insurance eligibility, has been extended through September 6, 2021 at the rate of a flat $300 per week.

2. Pandemic Emergency Unemployment Compensation (PEUC), the federal enhancement of regular state unemployment compensation benefits, is extended through September 6, 2021, adding a flat $300 per week over and above existing state unemployment compensation benefits.

3. The ARPA extends federal aid to state unemployment compensation systems that provide unemployment compensation benefits beyond the maximum period (typically 26 weeks) for which the state ordinarily provides unemployment compensation benefit eligibility. This federal assistance to state unemployment compensation trust funds will continue through September 6, 2021.

4. An additional, very significant, benefit to unemployment insurance claimants relates to taxability of unemployment compensation benefits. For those with an adjustable gross annual income of less than $150,000, the first $10,200 of unemployment insurance benefits received in calendar year 2020 will be tax free at the federal level. (Whether the benefits are subject to state income tax varies from state to state.)

5. Federal subsidy of state unemployment insurance programs for “short time compensation,“ commonly known as “work sharing,“ will continue through September 6, 2021. States that operate federally conforming programs are eligible for a 100 percent federal reimbursement of the cost of operating such work sharing programs. These programs are aimed at ensuring that people remain at least partially employed, and eligible for healthcare benefits, retirement benefit accruals, paid sick leave, paid vacation and holidays and other common employee benefits.

Because issues relating to unemployment compensation benefits and eligibility determinations are very fact specific and unique to each claimant, you are encouraged to contact the lawyers at Willig, Williams & Davidson for relevant guidance on individual claims as they arise.

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