The COVID-19 outbreak has brought a swift and sudden shutdown to the American economy. On March 27, 2020, more than 3 million Americans filed jobless claims, the highest number by nearly a factor of five since records began in 1967. To help fight off a major recession, the U.S. government passed a major stimulus package the same day that greatly expanded unemployment benefits across the country. As many Americans swept up in the current economic crisis have likely never filed for unemployment, here’s a look at how it’s done and what it covers.
- What Is Unemployment Insurance?
- Who Is Eligible to Receive Unemployment Benefits?
- How To File for Unemployment Benefits
- Is There an Unemployment Waiting Period?
- Unemployment Filing Scams To Look Out For
- Other Smart Money Moves To Make After Losing Your Job
Unemployment insurance is a joint federal-state program that aims to protect workers that are laid off from their jobs. If you’ve found yourself unemployed through no fault of your own, you may be eligible for cash benefits. Although federal benefits are the same in every state, each state has the power to determine its own distinct state unemployment benefits as well. Thus, depending on where you live, your benefits may be higher or lower.
The world of unemployment insurance has recently changed quite dramatically. The U.S. government passed sweeping legislation designed to minimize the effects of the COVID-19 pandemic. Part of this legislation greatly expanded federal unemployment benefits and granted broad leeway for states to do the same.
Traditionally, you’re only entitled to unemployment benefits if you “have separated from your last job due to a lack of available work,” according to the U.S. Department of Labor. You must also meet state requirements for wages earned or time worked. Details vary by state, however.
Under the new legislation, these requirements are significantly broadened. Now, even if your hours have been temporarily removed or reduced, you may still qualify. Similarly, independent contractors, gig workers, those who are ill or caring for a loved one who is sick may also qualify. Federal benefits now extend for up to four months and provide up to $600 per week just in federal unemployment benefits.
State and federal unemployment payments are considered taxable income. You’ll have to report what you have received when you file your taxes.
If you’re laid off and paid compensation for your unused vacation days, it may affect the amount you receive from unemployment insurance. Policies vary from state to state. In California, for example, your vacation compensation will not affect your unemployment benefits if you are not given a definitive return-to-work date.
If you quit your job, it generally disqualifies you from unemployment benefits. You’ll have to check with your state to determine the specifics. In California, for example, you must show that you quit your job for good reason, such as unsafe working conditions, and that you made every effort to keep your job. In that case, you’ll still have to participate in a phone interview with your employer and the State of California.
This action item belongs at the top of your to-do list. There can be a two-to-three week time lapse between the time you file for unemployment and when you receive your first payment, so don’t delay contacting your state unemployment office.
The amount you receive is based on a percentage of your earnings over the last year, and there is a top limit determined separately by each state. While the payments are unlikely to completely replace your income, they can make a big difference in your ability to pay critical bills on time.
Each state has its own specific requirements, but the process is similar. Here are the steps for California:
You must have earned enough wages during the base period, which is determined using an online calculator. Then, you must be:
- Partially or totally unemployed through no fault of your own
- Physically able and available to work
- Actively looking for work and ready and willing to accept work immediately
For California, benefits are capped at between $40 and $450 per week.
You’ll need the following specific information when you file for unemployment:
- Information about your most recent employer, including company name, supervisor’s name, mailing address, physical address and phone number
- Final date of employment
- Reason for termination
- Gross earnings for your final workweek
- Information on all of your employers for the prior 18 months, including company name, address (mailing and physical location), employment dates, gross wages earned, hours worked per week, hourly pay rate and reason you are unemployed
- For formal federal employees, Notice to Federal Employees About Unemployment Insurance, Standard Form 8
- For ex-military, DD 214 Member 4 copy
- Citizenship status; for non-U.S citizens, information from your employment authorization document
In California, you can file online or by fax, phone or email. You’ll have to check with your state unemployment commission to determine available options.
Each week, to continue receiving employment benefits, you will have to certify that you are still eligible. Essentially, you must certify that you still meet all of the conditions that were required for qualification, such as being available and willing to work and actively seeking employment.
Generally, states impose a one-week waiting period before you can begin to receive unemployment benefits. Due to the extraordinary COVID-19 outbreak, however, some states may waive their waiting period. Check with your individual state for current regulations. Bear in mind that with the record number of new unemployment claims currently being filed, states may have to work through their backlog before paying new claims.
Some scams to watch out for if you’re filing for unemployment include the following:
- Paying a fee: No fee applies when filing for unemployment benefits.
- Fake websites: Only use the official unemployment website for your state.
- Emails and text messages: Legitimate unemployment agencies will never ask for your personal information via email or text message.
- False debit or ATM cards: Only request cards from official state agencies.
You should never provide your Social Security number or credit card number to unsolicited callers or via text or email.
Filing for unemployment insurance is only the first step in the process of dealing with being unemployed. Here are other important steps you should take after you’ve lost your job to help shore up your personal and financial well-being.
It might be tempting to simply cash out your 401(k) when you’re feeling the financial pressure of unemployment, but don’t make a hasty move until you know all your options. Cashing out the retirement savings before you’re 59.5 years old generally means you’ll have to pay income taxes on the money, as well as a hefty penalty for early withdrawal.
Legislation passed during the COVID-19 epidemic, however, has relaxed rules regarding 401(k) plans and IRAs. For 2020, you can withdraw up to $100,000 from your 401(k) without paying taxes or early withdrawal penalties, as long as you return the money within three years. If you can’t return the money, you can pay the required taxes over three years.
The loan limit for borrowing from a 401(k) has also been raised to $100,000 from $50,000. Account holders over age 70.5 can also skip taking a required minimum distribution for 2020.
Legislation related to the COVID-19 pandemic now automatically suspends principal and interest payments on federal student loans through Sept. 30, 2020. This suspension does not apply to private loans, however.
In non-emergency periods, you will normally have to go about adjusting your payments yourself. Completing the application process at studentaid.gov takes about 10 minutes, but before you do it, use the repayment calculator to determine the plan most suitable for your situation. In some circumstances, you could qualify for a $0-per-month payment.
You will need to recertify your income and family size each year, which might result in a payment rate adjustment. As you consider new job offers, insert the proposed compensation into the repayment calculator for a look at how it affects your student loan payment schedule.
Whether you need to brush up on your budgeting skills or have never felt the need to create a budget before, now is the time to sharpen your pencil and figure out how to balance your outgo with your (reduced) income. Free resources can help you achieve that goal.
Numerous budgeting and tracking apps are available for your mobile devices. Check with your local community college, library and parks and recreation department for free and low-cost budgeting seminars with a personal touch.
In any economy, it’s a good idea to develop new skills, as employers are constantly looking for workers with broad skill sets. During the coronavirus quarantine, many educational resources have popped up online, making it easier than ever to develop new skills.
Paying a professional resume writer to review and present your skills, education and experience on a single page for scanning into prospective employers’ applicant tracking systems is an investment in your future. Because rates vary widely depending on the writer’s experience and areas of expertise, do your research and get quotes before you hire. A good place to start is by contacting members of the National Resume Writers’ Association.
Traditionally, you’ll need funds to pay for transportation, dry cleaning, hairdresser appointments and incidentals when you go to interviews. In the current social distancing environment, however, you should brush up on your video conferencing skills through avenues such as Skype and Zoom.
It can be tedious to go through recent debit and credit card statements line by line, but it’s an efficient way to identify what you spend on entertainment. The average for American consumers is nearly $269 per month — an amount that you could reallocate toward truly necessary payments until you have a new job.
Some items like restaurants and movie theaters will be obvious, particularly during the coronavirus shutdown, but look carefully for automatic deductions you’ve set up for subscriptions, memberships and services. Canceling two or three video streaming subscriptions, memberships to forums you rarely visit and payments for snack-of-the-month deliveries might not seem like a big deal, but the savings add up quickly if you’ve been a prolific subscriber.
Be persistent. Some services are notoriously difficult to cancel, and you might need to get your credit card company involved to stop the automatic payment arrangements.
COBRA allows you to continue your health insurance for up to 18 months if you’ve worked for an employer with at least 20 employees. You can generally qualify if you’ve lost your job or if your employer reduced your hours to the point that you no longer receive health benefits. You’ll have 60 days from then to decide if you want to sign up for COBRA. You’ll generally have to pay more for COBRA since your employer will no longer be paying part — or all — of your premium.
Legislation passed during the COVID-19 pandemic provides qualifying participants with a 65% reduction in their COBRA premiums for nine months. Employers will shoulder the burden of the remaining 35%, which will be subsidized by the government through a tax credit.
More From GOBankingRates