55 – Unemployment Q&A

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Episode Overview:

Following the feedback of last week’s episode, Ken continues his discussion of Unemployment Benefits for those struggling during the pandemic. Ken takes the time to tackle your questions and hopefully offer some helpful information. Questions include: Why can’t I reach my unemployment office? What if I quit my job just before COVID? After I apply, what do I do? How long will this last? What if I transferred states? What if I work part-time? Is it taxable income?

Transcriptions are auto-generated, please excuse grammar/spelling!

Happy day to you. This is Ken Kaufman, and I am thrilled you’re here for Episode 55 – Unemployment Benefits Q&A. I received a lot of feedback and a lot of questions from last week’s episode where I talked through some of the basics and the mechanics of how unemployment benefits work. Clearly, this is a subject that is impacting a lot of us personally and, this week, I wanted to do a follow-up Q&A session where I’m going to address some of the most common questions I’ve received during the last week and pass some more hopefully helpful information along to you. Let’s go ahead and jump right in.

Question #1: Why is it that I cannot get through to the unemployment office in my state. Their phone number is always bust and their web portal always down or timing out?

Well, I just need to recite some statistics. I mentioned this last week but it’s worth saying again, and I have another week’s worth of startling data to add.

The largest week of total unemployment claimants—the total unemployment claims that were made before the year 2020—was back in 2009. It was actually the week of March 28th. There were a total of 665,000 claims made. If you jump forward almost 11 years, the week ending March 21st of 2020…we’re now getting about 3 weeks away from that. I know that it feels like 3 months or even 3 years since that time, but in that week, we saw 3.3 million unemployment claims. That’s five times more than the highest week ever in the history of the country. And then the week after ending March 28th, the number of unemployment claims more than doubled from the prior week to 6.9 million, a 10-times increase over the highest week in history, which was again dated back 11 years to 2009.

Now, you take all of that and then you add in all of the jobless claims that came in the week of April 4th, 2020, of 6.6 million. That makes a total of 16.8 million unemployment claims on the last three weeks through April 4th. That is it’s an insanely high increase in volume that the unemployment offices are receiving.

Now, just to give you a little bit more context, this means unemployment, which was about 3.5% just a few weeks ago, had grown to about 11%, it literally tripled in just three weeks.

How does this impact the unemployment offices throughout the country? When you look at every single state’s unemployment office, they are experiencing a literal deluge, a virtual tidal wave of applications, and their staff and their IT portal infrastructure has just never seen or experienced anything like this tidal wave before. They couldn’t have even fathomed it. In fact, if they’d ever tried to plan for it, everybody would have told them they were crazy to have any type of a crisis plan that would create such a huge volume of unemployment in such a short period of time, unheralded, unexperienced in the history of the United States.

So, here’s my encouragement. Be patient, keep trying, keep logging in, keep calling. I’ve heard that in general, when you’re getting through to a live person, the agents are helpful. They’re knowledgeable. They’re quick to try to answer questions and resolve any problems you’re having. I’ve actually been amazed with some of the tips and tricks I’ve been hearing about people who have found ways to get through the system and the maze, special numbers and extensions to dial when you get into the queue within the unemployment system, and this of course differs state by state. And there are tips and tricks.

I would recommend that you go ahead and Google the unemployment office’s name. For example, in Texas, it’s called the Texas Workforce Commission. But put the name of your unemployment office in and then follow that by “shortcut to speak to a rep” and likely there’s going to be some people putting some things out there and some content that will hopefully help you in the process if you’re still finding yourself on hold, still finding the portal unresponsive. And one other thing, found people who set their alarm, wake up at 1 or 2 in the morning, and go ahead and process their claim somewhere between 1 or 2 and 4 in the morning. That seems to be a time when there’s less demand on the servers that are backing up the unemployment portals and allowing people in.

You just want to stick to this. All these benefits that you deserve will be paid retroactively. I realize it’s painful and can cause some anxiety and fear because we need the money now. You have bills that are due now. Just do the best you can to get to your happy place. Be grateful for what you have. The system is not going to forget you. Just keep checking in, stay diligent, and this is going to work out. I have been hearing literally dozens and dozens of people who have stuck with it. They’ve gotten through the system. Some have gotten their checks, and some have been told it’s coming vert soon.

Question #2. This is from the perspective of an employee: I quit one week before my company laid off most of the employees because of COVID-19, and the company told them to go and file for unemployment benefits. So can I file for those benefits, too?

Most likely the answer is going to be no here. The rules state that you must have lost your job through no fault of your own. If you’ve been let go from your company and especially if it’s because a company is suffering significant financial challenges as a result of COVID-19 and the pandemic that’s occurring all around us, most likely you qualify. But quitting, leaving your job voluntarily does not qualify. Even if it was just a week or even one day before when this lay-off happened, you would be considered to be excluded from those who would be eligible. If your employer lets you go and you didn’t violate any type of code of conduct or you didn’t do things that were wrong or inappropriate, then most likely you could jump in there, and make a claim, and be subject to all the other eligibility rules.

Question #3: once I complete my unemployment application, what has to happen in order for me to start getting my unemployment payments? And how much is my payment going to be?

First of all, on the weekly payment, if you can just go back one episode to Episode 54, I go into great detail about how this is calculated and how your overall weekly benefit is derived as well as your overall eligibility. So, I don’t want to repeat any of that here, but in terms of the process, once you’ve filed the claim, the unemployment office actually has to reach out and contact your former employer. And what they’re looking to do there is verify the reason that you were separated from the company. This goes back to the question before. They’re going to verify that you were laid off or that something happened on an involuntary basis to you as opposed to you volunteering and choosing to leave the company or if you were under some type of discipline at the organization or there were some type of misconduct involved.

They’ve got to check back with your employer. You’re going to get a bunch of paperwork and you’re going to need to keep going back to the online portal and then you actually will be needing to formally make a payment request. Once you’ve completed all the requirements and the employer’s completed theirs, you’re going to make your payment request and you’re going to answer questions about your availability for work and everything that goes with that. You’re going to report if you have any new income and hence your benefit needs to be changed or updated in some way. But every week to 2 weeks, you’ve got to go back in there. By the way, that depends on state. I’ve heard some states, you have to go in weekly to request your payment. Other states, it’s every 2 weeks.

Based on your eligibility, your payment can be up to about 40-50% of your wages to a maximum of $521/week. And then there’s the money from the federal government, which leads to our next question.

Question #4: I heard in the news the federal government is adding an extra $600 per week to the amount my state will pay me. Is this true and when does it start?

Yes, it’s true. Under the CARES Act, the federal government has stated that they will be making an extra $600 per week available. The guidance has been issued that, based on your state, is when it’s going to start. I’ve heard some states started the first week of April. Some are saying that the payments will start within the second week of April. Probably about the time that this podcast episode goes live, the $600 will start being added with your state-calculated benefit. At some point, they’ll catch up on a retroactive basis.

Now, whatever the date is that you hear, just know I look at these things so skeptically right now because, well, there’s so many moving parts, and things are changing so rapidly, and because something like this has never been done before. This is completely unprecedented. Everybody’s on completely new ground. I’ve been hearing different commitments on different stimulus packages and different things where dates are missed and commitments are constantly being missed. The real reason why…you’ve probably heard of the saying “the devil is in the details”. That absolutely applies here. The government has these great ideas. They’re trying to roll out these amazing packages to try to help everyone but it ends up taking a lot more work, and it’s more complicated, and there’s a lot more admin and project management that is required of all the parties in order to get this thing to sync up and work. By the way, when you get it, drop a note or come to the Facebook page or something. Let everybody know that you’ve gotten it just for encouragement as everybody is trying to make progress with this.

I did mention that the payments will be retroactive and that each state is on a different timeline. You could just go in and Google your state, and most likely you’ll find some information. If you go to your state’s unemployment website, most likely they’ll have that information available for you on when those payments will start being added to your weekly benefit.

Question #5: I’m going to be making more money staying at home and collecting unemployment, so why in the world should I go back to work?

There has been this issue where the federal government’s $600 a week plus your benefit is going to basically pay you more than if you’re going to your full-time job. It’s an interesting situation. It’s an interesting dilemma that this puts us in. Here is one thing I’ll say when we talk about, “Why should you bother going back to work?” I actually have two things. The first one is, if you’re making yourself available for work, which, in this day and age, it means, if you’re being offered employment and you turn it down, that could make you ineligible for the benefit. Also, in normal circumstances, you would have to be going and making an attempt to find new work and then being unsuccessful in those attempts to continue with your unemployment benefit. In this environment, what we’re hearing is that requirement’s waived but, if an employer comes to you and makes you an offer for work and you say no, that is problematic and you could ultimately be found incompliant with the program if you’re turning the work down and still trying to claim the benefit. I just want to be really clear that it’s important that you understand that, if you just think about staying home and you don’t make yourself available for work in the ways that I’ve talked about, anyways it could cause some challenges from a compliance perspective.

Question #6: I worked in another state last month, I started a new job in a new state this month, and then I was let go because of COVID-19. Does this mean I’m not eligible for the benefits?

I love this question because it means they listened to the last episode and they understand that the states will go and verify your past four to five quarters of earnings in order to determine your eligibility. If a state that you’re brand new in has no records of you being paid in that state, they could deny your claim. Now, here is what happens. The new state that you’re in will coordinate if you give them the information with the prior state where you worked and, when they do, they’ll then be able to determine your eligibility in the exact same way or same manner, and then you’ll be able to start earning your benefit. The interesting thing on the backend is that your new state will actually ask for recoupment of their portion of the benefit that you are being paid because they were the ones collecting that unemployment insurance premium from your employer in the other state.

I love that question, getting right down into the details, but these things work themselves out. Sometimes it might take an extra week or two unfortunately for states to coordinate back and forth especially in the craziness of this, again, tidal wave of unemployment claimants that are unprecedented in the history of the country, but that will get worked through and you’ll find that you would be eligible if you worked in the same state the whole time.

Question #7: how long will unemployment last or how long are these checks going to keep coming?

Couple of nuances here. Under normal circumstances, it can go for as long as 26 weeks so long as you remain eligible, and what we’ve been told now is that the federal government is going to authorize it to be extended for up to another 13 weeks so long as you remain eligible for the benefit. The extra $600 from the federal government however is only going to last through July 31st. It will shut off after July 31st. It’s retroactive. If you haven’t gotten it yet or it’s getting postponed for some reason, you’ll get paid that and you’ll get it through July 31st. After that point, that goes away and then your benefit overall can go up to 39 weeks if you are eligible.

Question #8: What if, after I start receiving my benefits, I start working part-time? Will I lose my benefits?

Here is the short answer – your benefits will be reduced, but not proportional to your income. The unemployment office wants to incent you to pick up whatever hours and whatever income you can.

Let me explain how this works with an example. Let’s say that, before you were laid off, you were making—I’m going to pick an easy number—$1,000 a week, and that means that…I’m just going to round this off a little bit here. That means now that you’re home, your benefit that you’re receiving from the unemployment office will be $500 a week plus the extra $600. That’s actually going to put you at $1,100 a week. This is slightly more than you were making before. If you are able to start working part-time, if that opportunity comes up and you’re offered a position part-time, let’s say that you’re offered two days a week. In that example, what would happen is you now have to start reporting that earnings and your unemployment benefit would go down.

However, the unemployment office wants to encourage you to do anything you can to get any type of earnings coming in, because if you do, they benefit from that because that’s going to be fewer benefits they have to pay out because you have income coming in from your own efforts and your own labor, The way it would work is this. That $1000 amount that you were making before your hours were reduced, that’s now going to go down to $400 because you’re only working 2 out of the 5 days a week. You’ve got a $400 weekly base of income coming in. Since you now have $400/week coming in, the unemployment office will look at the difference between your original income and this new amount of income at $400. The difference is $600. The calculation tells us that the unemployment office will pay you $312/week for the $600 in lost weekly income. But that is not all. To reward you for taking some of the financial burden off of them, they will bump your newly revised $312/week benefit up by somewhere around 25% to reward you. This is their TAHNK YOU. That increases your benefit to $390/week. I am going to round to $400 just to make the math a little simpler. So here is how your weekly compensation would look like after taking the part-time job. You get $400 from your job, $400 from unemployment, and $600 from the federal government. By taking the part-time job, your income has gone up to $1,400/week, up from $1,100/week when you were not working.

Let’s do one more example. Assume you make $14/hour, or that works out to $560/week if you work the full 40 hours and have no overtime. You are laid off due to the financial struggles COVID-19 has caused your employer. You are fully eligible to receive unemployment. If your highest quarter of earnings was 40 hours a week at $14/hour, then your benefit will be $291/week. The federal weekly benefit of $600 will be added to that, making your weekly payment $891. Since the federal benefit only lasts until July 31st, it will go back down to $291 after that date.

Your former employer calls and offers you 25 hours a week. Here is how the math works.

First, you take calculate your new pay – 25 hours times $14/hour means you are making $350/week. Your earning eligible for the unemployment calculation is the difference between your weekly earnings of $560 when you had all 40 hours, and the new amount at 25 hours, which is $350. And the difference is $210, the amount you would need to return to your full income. The unemployment office would calculate your weekly benefit on this new, lower amount to about $110. Then they would increase it by 25% to $140 rounded up, to determine the new benefit they will pay you. So, your worked income is $350, your unemployment income is $140 is $490. Compared to your earning just on unemployment of $350, this is a nice income increase. And, the extra $600 from the government would put you at $1,090 compared to the $891 before, or about $200 more per week. It is almost always worth it to take whatever part-time work you can since it will increase your weekly income ANMD it will give you something to do so you can stay busy and productive during this stressful period of what was unemployment and would be underemployment with these 25 hours/week.

Question 8: can I apply for benefits if my hours are reduced or my compensation goes down?

You can definitely always apply and you may be eligible. If you do qualify, you’re not going to get the full benefit as if you were fully employed but you’ll get some. Based on your eligibility, you should be able to receive between 40-50% of the wages you lost, or by which they were reduced. The question will go through the math on reduction of hours or wages.


Question 10: do I have to pay taxes on these benefits?

The answer is yes. As ridiculous as that sounds, it’s kind of crazy that the government’s paying you this money and now you’re going to be paying some of it back in taxes but that is how the system works and most states will offer to withhold whatever amount you asked for. Usually, I think the default is 10% but they’ll offer to withhold that and pay it to the federal government in your behalf just like your employer does where they withhold federal income taxes from your earnings.

Now, in conclusion, I want to mention a couple of things after we’ve gone through these 10 questions. There is no shame for losing your job especially with employers doing lay-offs that are outside of everyone’s control. Some businesses are even actually closing entirely and will never reopen again. Everybody’s hurting here. There’s nobody that is missing the impact from family and friends, and people at church, and so on and so forth. I want to encourage you, as best as you can, hold your head up high. There’s a financial resource to help you through this. Everyone is doing their best to get through this tough financial time, not to mention all the other health and other challenges brought on by the coronavirus pandemic. Employers didn’t want to let people go. Employees didn’t want to be let go. This program was designed for exactly situations like this. I have a lot of hope for the future. We are going to come together and solve this pandemic, and we will come back from it from a health perspective, from an economic perspective, and so on. I don’t know the timing but I see the day when it’s going to be behind us but hopefully we’ll be forever changed. Use this as a time for self-improvement and personal growth. Invest more into your relationships right now and become more clear about what your mission in life is and figure out how to accomplish it more effectively, more meaningfully, and more impactfully.

I need to say thank you. This is my third episode in a row where I’m doing this but thank you to all who are working diligently to keep us safe during this time, especially the first-responders, healthcare providers, dental care providers, anyone and everyone who’s putting themselves in harm’s way to treat patients and to serve those in need of help during this time. Many, many thanks to you for joining today. This is a wrap for Episode 55. Happy day.

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Join Chief Financial Officer Ken Kaufman as he helps you track and hack your net worth. For those seeking financial independence, your net worth is one of the most significant measurements of success. Using his two decades of financial experience, Ken Kaufman helps you overcome your financial obstacles and look onward towards a better, brighter financial future.

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