Over the last few weeks, members of Congress have been negotiating legislation to provide Americans with additional financial relief as the COVID-19 pandemic continues to spread throughout the country. While the country waits for Congress to provide an additional relief package, we’ve reached two important deadlines:
- Applications for the Paycheck Protection Program (PPP) have closed on August 8, 2020, with over $125 billion remaining in unused funds, and
- The $600 federal stimulus that was added to unemployment benefits under the CARES Act expired on July 31, 2020.
Start running payroll and benefits with Gusto
The inability of Congress to reach an agreement and provide a financial relief package has left many Americans struggling. In response to the congressional stalemate, the president bypassed Congress and signed four executive orders and memos on August 8, 2020; these include legislation on federal unemployment benefits (which we’ll discuss in this post) and legislation on deferring payroll taxes, which you can read here. These are meant to act as interim legislation while we wait for Congress to pass laws.
There are over 30 million Americans out of work who saw their unemployment checks slashed by $600 when federal benefits expired. Let’s dive into how President Trump’s memo may affect your unemployment benefits.
What’s changing with federal unemployment benefits?
A little refresher: under the CARES Act, the federal government provided an additional $600 per week to people on unemployment. This federal benefit ran out at the end of July, leaving many Americans with diminished unemployment checks.
The memo authorizes an additional $400 per week to be added to unemployment checks. This federal unemployment stimulus will be provided to eligible claimants starting (retroactively) on August 1, 2020, through December 6, 2020.
Has eligibility to receive the federal unemployment benefit changed?
Under the CARES Act, anyone who qualified for at least $1.00 of either state unemployment benefits or Pandemic Unemployment Assistance (PUA) was eligible for the federal $600 stimulus.
Now, a claimant must qualify for at least $100 of state unemployment benefits or PUA to receive the additional $400. Depending on how your state calculates benefits, someone who was eligible for the $600 of federal stimulus through the end of July (including those who are self-employed or workers who rely on tips) may not be eligible for this extended benefit.
Where will the money come from?
The president is redirecting up to $44 billion from the Homeland Security Disaster Relief Fund (DRF) into unemployment benefits.
Additionally, the president has instructed that 75% of the stimulus ($300) will come from federal funds, while states will be asked (but not required) to come up with the remaining 25% ($100) from their allocation of the Coronavirus Relief Fund.
In the wake of COVID-19, state budgets are stretched, so if this Executive Order is implemented, stay abreast of your state’s actions.
Is it possible the government will run out of funds for the federal unemployment benefit program?
Trump’s executive action extends benefits until the DRF is drawn down to $25 billion or until December 6, 2020, whichever comes first.
It is very likely those disaster funds will last for weeks—not months. If the DRF funds run out, the program could be terminated.
The other event that could terminate the program is if Congress comes to an agreement and enacts new legislation on COVID-19 unemployment benefits.
Does the president have the power to extend federal unemployment benefits?
That remains unclear.
It is important to note that by taking this action, the president may have encroached on Congressional control of federal spending, and so may not have the power to implement these executive orders and memos.
What happens when Congress agrees on pandemic relief legislation?
The president’s memo is an interim measure and any congressional legislation that is passed by the Senate and signed into law by the president will replace this interim legislation.
When can I actually expect to receive this benefit?
Unfortunately, this also remains unclear.
The Constitution places control of federal spending firmly in the hands of Congress, so technically, the president may not have legal authority to allocate these funds. How this will play out, and whether (and when) you will be able to access those $400 is not yet known.
Even if the federal government manages to implement this unemployment benefit, state actions may vary. Because 25% of the stimulus is expected to be funded by the states—and it seems that states can choose to opt out—this portion of the benefit may not reach your bank account. States that opt in to providing the 25% may take time to secure funding.
Your big takeaway: until this money is in your bank account, don’t count on it.
As we learn more about how government action affects you, we will continue to update this post—check back for more information.