On August 8, the Trump Administration issued executive orders or presidential memoranda on payroll taxes, student loan deferral, housing assistance, and lost wage assistance (“LWA”). We previously wrote an alert discussing the LWA order, its likely benefits and implementation time, and potential legal challenges to the order. This alert summarizes additional information and guidance provided by the Department of Labor (“DOL”) and the Federal Emergency Management Authority (“FEMA”), as well as an update on states that have applied for or declined LWA grants.
Immediately following the LWA order, many governors publicly expressed concerns about the LWA order’s budgetary and administrative feasibility. In the week following the LWA order, the vast majority of states have thus far opted to stay on the sidelines. As of the date of this alert, seven states have been approved for LWA grants:
The two press releases from FEMA announcing the grants are available here and here. And, so far, South Dakota appears to be the only state to unequivocally declare that it does not intend to apply for an LWA grant. States have until September 10, 2020 to apply for LWA funds, though we expect most states to announce a decision before the end of August.
While states are continuing to mull whether to accept LWA funds, the DOL released a Program Letter (UIPL No. 27-20) and FEMA released additional information to assist states with implementing LWA should they choose to accept it. We’ve summarized the most pertinent information those releases below.
Clarity on alternative benefit elections
The DOL’s Program Letter reiterates that states may provide a $400 LWA benefit by contributing $100, with the remaining $300 being paid via FEMA LWA grant, or states may accept a $300 LWA benefit by considering the $100 of state unemployment compensation benefits to a claimant as its LWA “contribution.”
Due to the serious fiscal strain many states are under, we expect the vast majority of states will elect to receive the $300 LWA grant and count $100 of unemployment compensation as the 25% state contribution.
As with the $600 Federal Pandemic Unemployment Compensation benefit, the LWA payment is not reduced by other payments or sources of income.
Additional information on benefit timing
The DOL Program Letter indicates that LWA will be payable to eligible claimants for weeks of unemployment ending on or after August 1, 2020 through December 27, 2020. However, as previously discussed, FEMA may spend only approximately $44 billion from the Disaster Relief Fund before exhausting available funds for LWA. Accordingly, current expectations are that LWA will be available for approximately five weeks through roughly mid-September barring further congressional appropriations or a large number of states declining to accept LWA grants.
LWA disbursements are likely going to vary significantly, depending on the state’s unemployment system. According to Forbes, Arizona expects to start disbursing LWA payments this week, while other states have declined to give a timeframe for when they will begin disbursing LWA payments. The DOL estimates that, on average, it will take states three weeks to adjust their systems. This will likely be a state-dependent rollout reminiscent of this year’s implementation of expanded unemployment benefits under CARES, which had weeks-long variances in the time from agreement to implementation. Any delay in implementation should not, however, impact what weeks are eligible for LWA payments; the DOL and FEMA agree that LWA benefits may be retroactive back to August 1, 2020.
Guidance on claimant eligibility
The Program Letter confirms that, to be eligible for LWA, the claimant must receive at least $100 of qualifying unemployment compensation and self-certify that the claimant is unemployed or partially unemployed due to disruptions caused by COVID-19. Qualifying unemployment compensation includes regular unemployment compensation, expanded unemployment compensation options from CARES, and several other less commonly used programs. The $100 benefit amount cannot, however, be satisfied using additional benefits or Disaster Unemployment Assistance.
The DOL and FEMA provided additional guidance to the states on eligibility and implementation requirements for receiving LWA funds. Despite this information, the majority of states are still weighing the costs and benefits associated with implementing what may ultimately be a short-lasting program intended to provide supplemental payments while Congress is not in session. We will continue to closely monitor developments regarding LWA assistance.