[October 2020 update on latest negotiations] With a month to go before the federal election, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are working hard to compromise on a new pre-election stimulus deal that will include additional unemployment benefits and another stimulus check. Per their recently passed bill in the house, Democrats are still pushing for a $600 p/week supplementary UI payment (similar to the FPUC payment which expired in July), but will likely have to settle for a maximum $400 weekly payment in line with the recently paid Lost Wages Assistance (LWA) payment and the White House proposed $1.8 trillion stimulus bill.
However Senate leader, Mitch McConnell has said it is unlikely that the Republican controlled Senate would have the votes to pass such a large stimulus bill and he is instead proposing on passing a smaller $500 billion stimulus bill, with more focus on small business’ via extending the PPP program and only $300 in additional weekly unemployment benefits. This is not something the Democrats or the White House are likely to support. Either way, with only a few days to go before the presidential election if another stimulus bill does not get agreed to this week then it could be a real possibility that no additional unemployment benefits will be available in 2020. This will be a devastating blow to millions of Americans and have a pretty significant impact on the US economy due to the contraction in consumer spending over the holiday season.
In addition to funding extra unemployment benefits, a key part of any stimulus package, there is also bipartisan consensus on sending another $1,200 direct payment (stimulus check) before the end of the year. There would also be help for struggling small business through additional funding for the Paycheck Protection Program (PPP) and for airline industry employee furlough prevention. Support for states, local governments, home owners and renters will also likely be part of any new stimulus package.
See details on when the renewed unemployment stimulus could be paid if passed in the next few weeks. Payments will be retroactive to September 12th, the week after LWA benefits expired.
[August 2020 Update] With Congress unable to reach an agreement on a new stimulus bill and no impending legal challenges it looks like Trumps executive order (detailed below) to replace the extra weekly unemployment benefit (FPUC, or $600 weekly payment) will actually be implemented following FEMA guidance on the Lost Wages Assistance (LWA) Program. The following are key guidelines:
The LWA program will provide eligible claimants in state administered unemployment Insurance (UI) programs up to $400 per week additional UI benefits, starting with weeks of unemployment ending on or after Aug. 1, 2020, and ending Dec. 27, 2020 at the latest. This means that payments will be retroactive to August 1st, even though the program will be implemented after that. See which states have started implementing the LWA program and when unemployment benefits will start to be paid.
As per recent federal enhanced unemployment benefit programs, for individuals to quality for LWA benefits they must certify that they are unemployed or under unemployed due to coronavirus (COVID-19) related reasons, and the state must confirm that the individual is receiving at least $100 of existing unemployment benefits (e.g. under state UI, UCFE, PUA, EB or PEUC programs) This is to prevent fraud from people who were claiming this payment with minimal UI benefits.
LWA a joint federal-state agreement where the federal government is covering 75% or $300 of the extended unemployment benefit (via $44 billion in FEMA Disaster Relief Fund funds). States own contributing the remaining 25% ($100) of the benefit payment using state budgets or the emergency funding received under the CARES Act.
However the state contribution is not mandatory and is at the discretion of the state’s governor. Further states can count existing unemployment benefits paid to claimants against their $100 obligation under the LWA program. This could result in unemployed workers across many states facing significant budget shortfalls only getting the baseline federal payment of $300 in additional benefits.
The LWA is a different program to the FPUC program and some states may require claimants to reapply for these benefits.
Because Trump’s executive order cannot allocate new federal funding, the LWA program may end earlier than Dec. 27 (highly likely) if FEMA expends $44 billion prior or the balance of the Disaster Relief Fund decreases to $25 billion. Congress would then have to approve additional funding.
I will update this article as new information comes to hand. Please check back for updates or subscribe to get them delivered directly to you.
For additional unemployment resources and state based information see the UI resource page.
Source: DOL (LWA program)
[Updated with further WH clarifications] President Trump has signed a series of executive orders, one of which includes extending the weekly unemployment benefits payment (FPUC) to the end of the year. However as expected and per the earlier update below, he is lowering the FPUC amount to a maximum of $400 p/week. The is made up of $300 in federal funding and $100 of state funding. In recent clarifications from the white house confirmed that the state component of the FPUC unemployment funding (25%, or $100) was optional. So this essentially means $300 is the base amount that many jobless Americans could be getting in several states, who are already seeing budget shortfalls from the pandemic induced slowdown.
When will the payment be made?
The legality and ability of this executive order to go into effect is already under question and will likely be challenged in court, not to mention the time it may take states to implement these changes and funding model.
However the Labor Department has said the $300 a week in federal unemployment benefits could reach claimants by the end of August, assuming states can update their systems to accomodate the new payment structure. This will mean, like the first payment, some states will get this payment out faster than other states. Further the extra unemployment payment amount will range between $300 and $400, depending on how much states can fund their portion of the payment.
Given the legal and political challenges the executive order will face, I would not be banking on seeing the $400 in your bank account or debit card anytime soon. More than anything it will almost force Congress to act quicker to pass something more official to ensure the President does not take political advantage of this situation.
[Update – August 6th] At this stage the $600 extra weekly payment has expired and Lawmakers have yet to reach an agreement around an extension. The latest public proposals are shown below and here is an analysis of the impact of losing the $600 to people’s weekly incomes. Based on the stock market’s inexorable rise people are pricing in a likely extension sooner rather than later (otherwise consumer spending would crash) so stay tuned for what the final details may look like. The White house, is looking to get the Democrats and Republicans to compromise on a $400 weekly payment to year end, by making concessions in other areas of the latest stimulus package being negotiated.
[Proposals] Republicans have proposed a contentious extension to the weekly FPUC supplementary unemployment benefit under their recently released HEALS (health, economic assistance, liability protection, schools) Act. They are proposing to extend the current weekly FPUC unemployment benefit to the end of the year, but doing so in two phases as follows:
- They will cut the current supplementary $600 FPUC weekly payment to $200 per week. This straight line cut would be in effect till the end of September 2020 (or first week of October in some states based on their UIC payment schedule), in order to allow states to implement the second phase approach which ties wages earned before a job loss to the amount of supplementary unemployment benefits paid. The $200 payment would be on top of current state maximums and would have a disproportional effect on states like Florida and Arizona which already have low UIC weekly benefit amounts.
- In the second phase from early October 2020, the Republicans are proposing limiting the total unemployment benefit (supplementary + state amount) to 70% of an individual’s pre job-loss wages rather than a fixed weekly supplementary benefit as is currently in place. The maximum supplementary amount that could be paid would be $500. The calculation of the 70% threshold will be based on a federal Department of Labor formula or by a state proposing an approved alternative method. So for example Jack, who lives in California, was earning $800 p/week before he involuntarily lost his job. His UI payment under the Republican proposal would be limited to a maximum of $560. Assuming he was eligible against other criteria, he would then get the state maximum of $450 plus a supplementary amount $110 only. This compares to the $1050 ($450 + $600) he would get under the current FPUC program. A pretty significant difference.
- For contractors, gig wokers and freelancers this new approach would have a larger impact since consistently proving their income before the job loss will be a challenge. Further it will likely take state UI agencies several weeks to implement this new calculation method and verification processes, which is why $2 billion was included in the HEALS Act states to upgrade their UI systems.
The above counter proposal is in response to the Democrats HEROES act (details below, and passed in the House back in June) which proposed a straight extension of the $600 payment to the end of the year. While the parties are still far apart, the silver lining is that Republicans are finally on board with an extension. The reason the extension is low is purportedly because they want to encourage returning to work where wages would be higher than unemployment for most Americans. But the Democratic controlled house won’t likely accept such significant cuts with many pundits expecting a compromise to result in a supplementary $300 to $400 weekly amount (or an equivalent amount) till the end of the year.
This story is developing as both parties are going to have to compromise on a final extension. The main takeaway is that the $600 payment will be cut, but that the overall FPUC program will be extended to provided supplementary benefits.
[Prior Updates] The expansive pandemic unemployment provisions passed under the CARES act stimulus package have been widely acknowledged as the largest boost to individuals who lost their jobs as a result of the Coronavirus induced slowdown. In particular the extra $600 (FPUC) weekly payment on top of the regular state unemployment compensation has been by far the most effective part of the government’s economic policy response to the fallout from the Coronavirus induced recession and unemployment spike. For over 50 percent of jobless Americans the extra $600 and regular UI weekly payment more than replaced what they were earning from working.
While the debate rages along party lines on extending benefits, Trump administration officials and Congressional Republicans have strongly indicated they don’t want to extend the $600-a-week FPUC supplementary UI benefit past its current expiry at the end of July 2020. They feel the economy is improving and want to encourage workers to go back to work versus relying on the generous enhanced unemployment benefits. This is why they are pushing back-to-work bonus payments or reducing the extra weekly payment to somewhere between $200 and $400, and providing a temporary stipend to those who return to work.
House Democrats, led by Speaker Nancy Pelosi, on the other hand have reiterated the importance of the $600 weekly payment for the millions of unemployed by passing putting a new Stimulus bill in the House, called the HEROES act, which includes an extension of the $600 per week extra unemployment payment (FPUC) through to January 2021 as the current FPUC provisions approved in March are set to expire at the end of July.
There is little doubt that the $600 payment and other enhanced unemployment benefits – in addition the PUA covering those workers not normally eligible for state unemployment benefits or extending existing benefit coverage periods by 13 weeks (under PEUC) for those whose jobs or livelihood were impacted by COVID – will be a big boost to many households. However the roll-out of these new provisions and payment to recipients has been less than stellar to say the least, mainly because of decades of under-investment in the administrative capacity of state UI agencies and systems (many still using mainframes or home grown software) has left them incapable of flexibly in adjusting to the new provisions and determining the eligibility of newly covered worker groups. Even back pay for retroactive payments is taking far longer than planned.
A Compromise on Extending Unemployment Benefits?
It appears highly likely that the President and his administration will have to provide some level of support to the millions of unemployed workers given the resurgence of the Coronavirus in several states that has forced extended business closures. As such a Senate proposal by the Democrats called The American Workforce Rescue Act (AWRA), may provide a party line compromise that the president could get behind, particularly as the presidential election is only a few months away. The AWRA proposal would continue to provide the full $600 extra weekly unemployment payment as long as the states unemployment rate is above 11%. When it drops below 11% (based on a three-month average), it will start to phase out to $0 until the state’s unemployment rate drops below 6%. So essentially $100 less for every percentage drop between 11% and 6% of a state’s unemployment rate.
With the current provisions expiring in a few weeks, I expect that that Congress will eventually craft a bill to extend these UI benefits to the end of 2020 using a hybrid of one of the above proposals – which may well also include another 2020 stimulus check to cover those not eligible for unemployment benefits.
The table below shows the impact of losing the extra $600 weekly payment against the maximum weekly benefit amount (WBA) current paid by state unemployment agencies. As you can see, in several states it is pretty significant and the impact is much, much higher if you are not getting close to the maximum amount in your respective state.
|State||Standard UIC Max. Weekly Benefit||UIC WBA + $600||% UIC Income Lost|
|District of Columbia||$444||$1,044||135%|
This article was updated on October 20