Unemployment Benefits

In today’s economic environment, reductions-in-force are not only unavoidable, but necessary in order for companies to meet the demands of  an ever-changing business and economic environment.  And, while no company wants to lay off any employee, there comes a time when layoffs must happen.

In what could be viewed as an “entitlement benefit,” the majority of companies in the United States prefer to provide a lump-sum severance benefit to their reduced workforce in order to provide a “cushion” to new employment.  Unfortunately, this type of severance, when coupled with the potential for the laid off employee to receive state unemployment insurance (UI) benefits simultaneously, may inadvertently encourage that former employee to stay out of work longer than is necessary. 

After months of negotiating, on Monday, April 7, 2014, the Senate passed House bill 3979 which contained an amendment to renew Emergency Unemployment Compensation (“EUC”) benefits to the long-term unemployed.  The bill passed by a vote of 59-38 and now heads to the House for a vote and final approval.

After a failed attempt to extend Emergency Unemployment Compensation (“EUC”) benefits on January 15, 2014, on February 6, 2014 Senate Democrats sought to once again move a short term EUC benefit extension bill through the Senate.  60 votes were needed to push the bill to further Senate consideration.

Senator Jack Reed’s (D-RI) latest proposal included provisions to pay for the $6.4 billion cost of the EUB benefit extension with a pension smoothing amendment which would reduce required pension contributions by employers.  While there was interest on the part of a number of Republicans in finding language that would attract 60 votes through the amendment process, Senate Majority Leader Harry Reid chose to bring the bill to the floor without further amendment.  The proposed bill attracted only two Republican votes and failed.

With the expiration of Emergency Unemployment Compensation (“EUC”) benefits on December 28, 2013, Senate Majority Leader Harry Reid provided extension legislation to the Senate; however there were concerns that new “pay for” amendments may be necessary to gain approval in the House.

Senator Reid proposed voting on alternative legislation with the cost paid for with a provision that called for extending the defense sequester cuts beyond the 10 year budget window.  Unfortunately, the Senate lacked the votes to send the bill to the House, but there was a possibility that another EUC benefit extension bill could be considered in the future.

Senator Jack Reed (D-RI) has proposed a new amendment to the EUC benefit extension bill that would extend EUC benefits through March 31, 2014 and seek to “pay for” the extension largely through a pension smoothing proposal that would permit employers to reduce pension contributions, resulting in money available to be spent in the economy and presumably increase tax revenue.

With the expiration of Emergency Unemployment Compensation (“EUC”) benefits on December 28, 2013, President Obama had indicated support for an extension of the EUC benefit program.  In response, Senate Majority Leader Harry Reid scheduled extension legislation for a cloture vote in the Senate on January 6, 2014.  The bill would extend EUC benefits for three months through March 31, 2014.

While the United States Senate did successfully vote 60-37 to avoid cloture on January 7th to further consider the passing of legislation to extend EUC benefits, there were concerns by the Senate that new “pay for” amendments may be necessary to gain approval in the House.

With the signing of the “American Taxpayer Relief Act of 2012” in January 2013, legislation was passed to further extend the Emergency Unemployment Compensation (“EUC”) benefit program through December 28, 2013.  EUC benefits allow qualified states to provide up to 47 additional weeks of federally funded unemployment insurance (“UI”) benefits to people who have exhausted their regular state UI benefits.

The U.S. unemployment insurance (UI) benefit system serves as the first line of defense for millions of workers and their families when they lose their jobs. When workers become unemployed they often apply for and receive UI benefits. However, the rate and duration of UI benefits varies widely depending on the state in which the employee has worked.

During the mid to late 2000s, record high levels of unemployment coupled with low UI reserve funds have threatened the stability of the federal-state UI tax and benefit system. Since June 2013, 18 states and the U.S. Virgin Islands have exhausted their UI trust funds and are borrowing from the federal government to pay unemployment benefits. Meanwhile, 6 states are currently using employer financed bonds to repay federal loans, and 9 states have positive balances of less than six months of benefits in their state trust funds.