In a previous bulletin issued April 8, 2020, we discussed the implication of the CARES Act specific to state & local governmental entities, certain nonprofit organizations, and federally-recognized Indian tribes. These are legal entities that opt to make payments in lieu of contributions regarding state unemployment. They are more commonly referred to as reimbursing employers because they reimburse the state unemployment trust fund for every dollar paid in benefits to a former employee rather than pay quarterly tax payments.
In the April 8th bulletin, we reported that The U.S. Department of Labor had issued UI Program Letter 15-20, which addressed the addition of Federal Pandemic Unemployment Compensation (FPUC) allowing eligible individuals to receive an extra $600 per week in unemployment benefits through July 31, 2020. FPUC is fully funded by the federal government and employers will not be charged for any FPUC benefits paid.
Additionally, the CARES Act and PL 15-20 provided reimbursing employers emergency unemployment relief. This relief is defined as 50% reimbursement from the federal government to reimbursing employers for any state unemployment benefits paid to employees as a result of COVID-19. However, information as to how reimbursing employers will receive this relief was not referenced.
Then, on April 27, 2020, The US DOL issued Program Letter 18-20, which provides instructions for implementing the emergency unemployment relief for reimbursing employers, focusing specifically on Section 2103 of the CARES Act. These instructions are primarily directed to state unemployment agencies to assist them in implementing the emergency relief but there are certain aspects that are important for employers to be aware of:
- The reimburser employer must pay their bill in full before reimbursement can be processed.
- These partial reimbursements apply to all payments made by reimburser employers for weeks of unemployment beginning on or after March 13, 2020 ad ending on December 31, 2020.
- Payments of benefits to individuals that are 100% federally-funded under the CARES Act will not be covered under this relief provision.
It is now the task of individual state unemployment agencies to take this guidance and provide further information to reimbursing employers as to whether this relief will be provided in the form of refunds or future credits. To date, no state agency has announced their plans in this area but we will continue to monitor this aspect and update our clients as information becomes available.