The CARES Act & Reimbursing Employers

By April 8, 2020July 6th, 2020CARES Act

The Department of Labor (DOL) issued UI PL 15-20 to help states enact the CARES Act at the state level. This act affords a temporary, emergency increase in unemployment compensation (UC) benefits, which is also known as the Federal Pandemic Unemployment Compensation (FPUC). The FPUC program grants eligible individuals with $600 per week, in addition to the benefit amount they receive from certain other UC programs. Please be aware that the additional $600 in FPUC benefit payments to eligible individuals each week is fully funded by the federal government.  States will not charge employers for any FPUC benefits paid. Moreover, states and the DOL must enter into a voluntary agreement to administer FPUC program benefits to individuals. Any state implementation costs, or even ongoing administrative costs, for this program are also fully funded by the federal government.

However, the definition of “employer” is not provided in the UI PL. As a result, this leaves the states to question if the FPUC program non-charging also applies to reimbursing employers. In Section 2103 of the CARES Act, the Secretary of Labor has the authority to issue any instructive guidance with respect to “maximum flexibility to reimbursing employers as it relates to timely payment and assessment of penalties and interest pursuant to such State laws.” The DOL advises that this language “could be interpreted to mean that reimbursing employers are to be charged, although states may be flexible in assessment of penalties and interest on reimbursement amounts that may be due but not paid timely.”

Please review Section 2103 of the CARES Act below.


(a) FLEXIBILITY IN PAYING REIMBURSEMENT.—The Secretary of Labor may issue clarifying guidance to allow States to interpret their State unemployment compensation laws in a manner that would provide maximum flexibility to reimbursing employers as it relates to timely payment and assessment of penalties and interest pursuant to such State laws.

(b) FEDERAL FUNDING.—Section 903 of the Social Security Act (42 U.S.C. 1103) is amended by adding at the end the following: ‘‘Transfers for Federal Reimbursement of State Unemployment Funds ‘‘

(i)(1)(A) In addition to any other amounts, the Secretary of Labor shall provide for the transfer of funds during the applicable period to the accounts of the States in the Unemployment Trust Fund, by transfer from amounts reserved for that purpose in the Federal unemployment account, in accordance with the succeeding provisions of this subsection.

(B) The amount of funds transferred to the account of a State under subparagraph (A) during the applicable period shall, as determined by the Secretary of Labor, be equal to one-half of the amounts of compensation (as defined in section 3306(h) of the Internal Revenue Code of 1986) attributable under the State law to service to which section 3309(a)(1) of such Code applies that were paid by the State for weeks of unemployment beginning and ending during such period. Such transfers shall be made at such times as the Secretary of Labor considers appropriate.

(C) Notwithstanding any other law, funds transferred to the account of a State under subparagraph (A) shall be used exclusively to reimburse governmental entities and other organizations described in section 3309(a)(2) of such Code for amounts paid (in lieu of contributions) into the State unemployment fund pursuant to such section.

(D) For purposes of this paragraph, the term ‘applicable period’ means the period beginning on March 13, 2020, and ending on December 31, 2020.

(2)(A) Notwithstanding any other provision of law, the Secretary of the Treasury shall transfer from the general fund of the Treasury (from funds not otherwise appropriated) to the Federal unemployment account such sums as the Secretary of Labor estimates to be necessary for purposes of making the transfers described in paragraph (1).

(B) There are appropriated from the general fund of the Treasury, without fiscal year limitation, the sums referred to in subparagraph (A) and such sums shall not be required to be repaid.

Our office will monitor COVID-19 updates closely and will send out additional announcements as we become aware of any updates. You can also review these updates on our website at too.

Please reach out to your representative with any questions.

Mike Parker

Author Mike Parker

Mike has 30 years of experience in unemployment cost control management, and has been with Thomas & Company for 25 years. He is the primary contact with state agencies building strong relationships, lobbying for opportunities that increase quality of service and efficiencies, and insuring compliance with state specific requirements. He works with the client service team, answering technical questions related to the unemployment insurance programs administered by the individual states and oversees the processes associated with wage audits and fraudulent claim inquiries. Mike is a member of the SIDES Operations Committee and currently sits on four Operations Committee subcommittees.

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