Unemployment Insurance Update – March 19, 2021

Unemployment Insurance Update – American Rescue Plan Act, March 19, 2021

Extension of UI benefit period and federal supplemental payment.

The COVID stimulus legislation signed into law by President Biden (the “Rescue Plan”) extends the term of unemployment benefits available to the unemployed and underemployed workers and adds a $300 per week federal supplement to the state benefit for which an applicant is eligible.

If you are already receiving unemployment benefits, payments generally will be extended for another 25 weeks, until September 6, 2021. The federal supplemental benefit of $300/week also will continue through Sept. 6.

Although unemployment benefits usually are taxable, the Rescue Plan makes the first $10,200 of UI benefits tax-free for people with incomes of less than $150,000. This exclusion of UI benefit from taxation applies to amounts paid in 2020 only.

If I already filed my 2020 taxes, how do I claim this new tax break?

It’s not yet clear, but you may have to file an amended return. The Internal Revenue Service (IRS) has not issued formal guidance yet. It is possible that the IRS may be able to make the tax adjustment automatically based on your 2020 tax return.

How will the federal supplemental payments work?

If you qualify for at least $1 of your state’s UI benefit, you should also receive the full $300 federal supplemental payment for weeks ending after March 14 and through Sept. 6. The $300 payment is known as “FPUC”, federal pandemic unemployment compensation payments.

The Rescue Plan also provides that the $300 federal supplement will not be counted when calculating eligibility for Medicaid and the Children’s Health Insurance Program.

When will I receive the extended state benefit and the federal supplement? Might there be gaps in UI payments?

State Unemployment Offices and commentators have cautioned that there may be gaps for UI beneficiaries in many states because it usually takes several weeks for agencies to program new benefit extensions and supplemental payments.

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