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Unemployment insurance has been a crucial element of the U.S. government’s response to the challenges of the global pandemic. As employees across the country demanded assistance, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and additional legislation that significantly expanded eligibility for unemployment insurance, extended the maximum duration of benefits and increased benefit amounts. As a result, the unemployment insurance system met the unprecedented challenge by providing vital support for families as well as for the overall economy during some of the worst months of the COVID-19 pandemic.

 

Unemployment Insurance and Changes Caused by the Coronavirus Pandemic

The unemployment insurance system is a financial partnership between the federal and state governments. The system is funded and taxed at both the federal and state level. It is designed to provide limited compensation for employees who have lost their jobs through no fault of their own. To qualify for benefits, claimants must be “able and available” for suitable work and actively seeking work throughout the duration of the benefit payout. Although unemployment benefits vary, in most states, the unemployment insurance program provides up to 26 weeks of benefits to unemployed workers and replaces 30 percent to 50 percent of a worker’s previous wages.

In addition to this, unemployment insurance is designed to provide an economic stimulus that helps mitigate the severity of recessions during economic downturns. This has proven especially important in the process of addressing and containing the harm caused by the COVID-19 pandemic and stimulating recovery in response to it.

 

Pandemic Unemployment Insurance Programs

State governments administer unemployment insurance programs, and regular unemployment insurance can only be paid to workers who meet state-specific eligibility requirements, for example, having an acceptable reason for the layoff and a minimum level of previous earnings. However, Pandemic Unemployment Assistance (PUA) program extended unemployment benefits to the self-employed and those who otherwise would not meet regular eligibility standards, many of whom nonetheless experienced considerable financial hardship. As a result, expanded eligibility made the unemployment insurance system more equitable by making support available to workers excluded by many state unemployment insurance laws.

Another new program created under the CARES Act, Federal Pandemic Unemployment Compensation (FPUC), added $600 per week to unemployment benefits. In December 2020, Congress voted to extend benefit payments at a reduced rate of $300 per week through March 12, 2021. The American Rescue Plan (ARP) extended the $300 per week bonus unemployment insurance payments until September 6, 2021. The ARP also exempted the first $10,200 in unemployment benefits received in 2020 from taxation, but only for those whose income was below $150,000.

The Pandemic Emergency Unemployment Compensation (PEUC) program extended the duration of unemployment insurance benefits by 13 weeks beyond each state’s maximum. While it was set to expire on December 31, 2020, Congress extended the PEUC through March 14, 2021, and increased the number of weeks workers could claim the benefits from 13 to 24 weeks. Furthermore, the ARP increased the duration of benefits to 53 weeks and extended the PEUC to September 6, 2021, at which point this provision expired.

 

Termination of Federal Pandemic Unemployment Compensation

In June and July of 2021, Twenty-four states ended the pandemic unemployment compensation programs in an effort to limit spending and encourage more workers to return to the labor market. Similarly, most of these states had also ended PUA and PEUC. On September 6, 2021, the unemployment programs created under the CARES Act expired for all states.

While there has been some disagreement surrounding the early termination of pandemic unemployment compensation, data indicates that the states that chose to keep the program until September 6 did not see the same reduction in unemployment claims compared to the states that discontinued the pandemic assistance early.

 

Managing Unemployment Insurance Costs

The COVID-19 pandemic put an enormous burden on both the federal government and the state unemployment insurance systems, requiring changes to the way UI systems work and modifications of typical operations. New emergency programs expanded access and the role of unemployment assistance, thus providing hundreds of billions of dollars in support to households. Policymakers can learn from this experience and build on the success of pandemic unemployment benefits to build a more equitable and comprehensive unemployment insurance system for the long term.

Also, employers have been faced with a number of difficulties due to the economic downturn stemming from the COVID-19 disaster and measures taken in response to it. These changes in unemployment insurance regulations, in combination with a still active pandemic, leave most employers open to additional obligations in addition to managing the already complex UI system.

To handle increased responsibilities successfully, employers can rely on automated unemployment claims management to evaluate, contest, and protest UI claims, so they can avoid needless expenses and save significant costs in the long run. Furthermore, while it is difficult to comprehend the nuances of the UI system and meet the necessary requirements, with a UI claims management software, employers can stay compliant with the latest rules and procedures at both the federal and state level.


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