Among the actions taken by the federal government is assistance to states as they implement the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including the Pandemic Emergency Unemployment Compensation (PEUC) program, which enables states to provide up to 13 weeks of federally funded benefits to certain individuals.
On April 10, the DOL issued Unemployment Insurance Program Letter 17-20, which states the cost of PEUC benefits is 100% federally funded. “States may not charge employers for any PEUC benefits paid,” the DOL’s announcement says. “Implementation costs and ongoing administrative costs are also 100% federally funded.”
Even with the costs being federally funded, employers may still question just how the enhanced unemployment benefits may eventually affect their unemployment insurance taxes.
‘Salve for Companies’
The April 10 letter is aimed at state unemployment programs, not employers, Jason Boulette, an attorney with Boulette Golden & Marin L.L.P. in Austin, Texas, says. But it does confirm “the costs associated with this particular federal expansion of unemployment will not be passed on to them,” he says. “Indirectly, the guidance is a salve for companies concerned about the effects of furloughs and layoffs on their employees.”
Although the DOL’s guidance appears to mean the costs associated with the PEUC program can’t be passed on to employers by the states, “it doesn’t change the fact that states are paying out record numbers of claims, which will ultimately have to [be] dealt with,” Boulette says.
Boulette’s state, Texas, has said benefits paid to former employees as a result of COVID-19 won’t be included in the employer’s future tax rate calculations. “While I believe that to be true, Texas may ultimately have no choice but to increase replenishment rates if the number of claims threatens the solvency of the unemployment fund (even with federal support),” he says.
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Source: HR Daily Advisor