By Jessica Soroka, JD
June 2, 2009
Rising unemployment rates have resulted in new federal legislation aimed at assisting those affected by the recession. Part of the American Recovery and Reinvestment Act of 2009 (ARRA) is designed to help people who are out of work due to the economic crisis currently facing this country. The goals of the new laws are to increase the number of workers eligible for benefits and to make it easier for people to qualify for unemployment benefits. The extra benefits are desperately needed because the Bureau of Labor statistics recently estimated the rate of unemployment at 8.5%. In March, 46 states had increases in unemployment rates and record numbers of large scale lay-offs.
The federal government already provided extra benefits to workers in states with high unemployment rates with the Extended Benefits (EB) program. This program increased the duration of unemployment benefits by 20 to 33 weeks however, ARRA further expands the duration of benefits and makes it easier for people to qualify for emergency benefits.
Before residents of a particular state can take advantage of the new benefits under ARRA, the legislature of that state must adopt certain legislation. As an incentive to states to adopt such legislation, the federal government will pay all costs for the extra benefits through the end of 2009. Previously, states split the cost of emergency benefits equally with the federal government, but the states’ obligation to pay is temporarily suspended.
States with high unemployment rates can qualify to provide workers with an additional 13 to 20 weeks of unemployment benefits with federal funds beyond the 20 to 33 weeks currently available to workers who have exhausted state benefits. A state must have an unemployment rate of more than 6.5% for three months to qualify for the extra 13 weeks and a rate of 8.0% to receive an additional 20 weeks. Anyone whose benefits were exhausted before January 2009 in a qualifying state is eligible for the extra benefits.
Currently, workers in 38 states qualify for the extra federal benefits with two more scheduled to begin receiving federal funds in May 2009. These extra weeks of benefits were scheduled to end in March of 2009, but were recently extended to December 31, 2009. The unemployed also will receive an extra $25.00 per month for unemployment insurance and the first $2,400.00 of unemployment benefits are not subject to taxes.
The ARRA also changed an old rule that required a worker to file for state unemployment benefits within one year of the state reaching the required level of unemployment to trigger the emergency benefits. Under the new rules, any worker is eligible for the emergency benefits regardless of when the state qualified for the federal benefits based on its unemployment rate. This new rule allows many workers to take advantage of the increased federal benefits despite the fact that their current combined state and federal benefits may last for over a year.
The federal government is also covering 65% of COBRA health insurance costs for nine months for workers who lost their jobs between September 2008 and December 31, 2009. The worker is responsible for the remaining 35%, while the provider is reimbursed through a tax credit. This option is available to workers retroactively, which is beneficial to those who declined participating in COBRA due to high cost. Only workers who lost their job involuntarily are eligible for COBRA at the reduced rate.
By making COBRA coverage more affordable, ARRA also benefits workers by reducing gaps in health insurance coverage that can cause problems with a new insurance company such as triggering a pre-existing condition clause. However, the ARRA has no effect on the coverage periods of individual state laws. Employers were required to provide notice of the new election period to former employees by April 18, 2009. Employees then have 60 days to decide whether to participate in COBRA at the reduced rate.
In these extraordinary times of high unemployment rates and record-breaking layoffs, these new rules are intended to assist the millions who have lost their jobs by extending benefits and making it easier for workers to qualify for benefits. If every state with the qualifying number of unemployed workers adopt the necessary legislation, millions of workers will be able to take advantage of the increased federal assistance.
Jessica A. Soroka is an attorney with Albrecht & Weegar, PLLC located in Conway, New Hampshire.
By Jessica Soroka, JD