money Extra unemployment benefits may expire early for many because of quirk in system
The additional $600 in coronavirus unemployment benefits are set to expire at the end of July, but jobless Americans will get their last weekly paycheck with that extra boost earlier than that because of a quirk in the system.
Most states pay unemployment benefits based on weeks ending on Saturday or Sunday. That means either July 25 or July 26 will be the last time jobless workers will get the extra $600. After that, eligible recipients will receive only their regular unemployment benefits.
Under the CARES Act passed in March, unemployed Americans received an additional $600 in weekly unemployment benefits on top of their regular state benefits. This extra benefit is set to expire on July 31, unless Congress extends it, which seems unlikely to happen.
The expiration comes as 1.4 million more workers filed for unemployment benefits this week. This was the first increase in jobless claims since March.
The median decrease in unemployment benefits after the expiration would range from 52% to 72%, according to an analysis by Evercore ISI provided to Yahoo Money. Those unemployment benefits are often the only source of income for jobless Americans, leading to a huge hit on their incomes, said Ernie Tedeschi, an economist at Evercore ISI told Yahoo Money.
“That's going to make it hard on these families,” Tedeschi said. “Even if they get sort of backfilled later on because of what Congress eventually passes, that's going to be several weeks where families aren't going to be sure if they can make rent or buy necessities.”
What if they’re extended?
Republicans lawmakers said they will unveil their stimulus plan this week, which will likely include an extension of the unemployment benefits at a 70% wage replacement, Treasury Secretary Steven Mnuchin told reporters on Thursday. This will likely mean the benefits will be reduced to $175 to $200 a week, down from $600 a week.
Even if an extension is implemented, Americans will likely see a lapse in receiving their benefits as some — including Senate Majority Leader Mitch McConnell (R-KY) — think a stimulus deal likely won’t be reached by the end of the month.
“If Congress is negotiating this package with July 31 is the deadline in mind if they wait until July 31,” Tedeschi said. “We're already going to be past the point where people have lost emergency unemployment insurance benefits.”
Read more: Do you have to pay taxes on unemployment benefits?
Until a deal can be struck, the GOP is also considering a temporary extension of at least some of those benefits, a move that the White House isn’t backing.
“If we can't get it all done by next week, we cannot allow there to be a cliff in unemployment insurance given we're still about 11% unemployment, about 17 million Americans out of work some through no fault of their own," Sen. Rob Portman (R-OH) told reporters on Wednesday. “So I think we should do something.”
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.
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