As with previous relief packages, Biden's plan includes provisions to help the millions of people who have lost their jobs as a result of the pandemic. The unemployment rate stands at 6.2%, according to February data from the Department of Labor. That's down from a high of 14.8% during the spring lockdowns, but still well above the pre-pandemic rate of 3.5% in February 2020.
Here's how the stimulus package will affect unemployment benefits.
The federal government has provided various amounts of enhanced unemployment benefits since the beginning of the pandemic. The CARES Act, passed in March 2020, provided $600 per week of enhanced unemployment through July, and both President Trump's Lost Wages Assistance program and the $900 billion relief bill signed in December provided a few extra weeks and months of $300 per week in enhanced unemployment. The latest provisions are set to expire March 14.
While Biden's original bill called for raising the benefit to $400 per week, the Senate ultimately agreed on $300 per week instead. The $300, on top of state benefits, will last through September 6. The extra aid will replace 74% of people's average pre-layoff wages, according to a CNBC analysis.
Video by David Fang
Benefits through the Pandemic Emergency Unemployment Compensation program, which extends unemployment for people who exhaust their regular state benefits, will be available for a total of 79 weeks, up from 50, and run through September 6.
The program, known as the PEUC, was originally created as part of the CARES Act. It was originally slated to expire the week after Christmas, but the December relief bill extended it until March 14.
The Pandemic Unemployment Assistance program, which covers the self-employed, gig workers, part-timers, and others who are typically ineligible for regular unemployment benefits, will also be extended until September 6 under the American Rescue Plan. The program was originally slated to expire on March 14. The extension will enable workers to get a maximum of 53 weeks of unemployment benefits, up from 24.
Policymakers included a provision in the latest stimulus to help Americans who received benefits last year avoid a surprise tax bill this spring by waiving taxes on the first $10,200 in unemployment income. Typically, unemployment benefits are taxable. That includes state benefits as well as the federal supplements. Those who made more than $10,200 in unemployment income will only be taxed on anything above that number under the American Rescue Plan.
Individuals who made less than $150,000 in adjusted gross income can qualify, though it's currently unclear how people will factor this into their returns and whether it could delay tax deadlines.
People can opt to withhold 10% of their benefits to help cover taxes. But fewer than 40% of the 40 million people who received unemployment insurance in 2020 elected to have that tax withheld, according to a research paper by The Century Foundation. And some states only withheld taxes from the state unemployment benefits and not the federal supplement, leaving taxpayers with surprise tax bills.
Video by Stephen Parkhurst
People who have been laid off have the option of continuing to receive their employer-sponsored health insurance through a program called Consolidated Omnibus Budget Reconciliation Act, or COBRA. But currently, they must shoulder the entire cost of coverage, which can be extremely expensive. The average annual premium for individual job-based coverage in 2020 was $7,470, and $21,342 for families, according to the Kaiser Family Foundation.
As part of the stimulus package, the government will cover 100% of COBRA premiums for qualifying individuals. Participants will still be responsible for copays and deductibles.
Those eligible should receive written notification, likely from the Department of Labor, with the program lasting until September.
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