Please ensure Javascript is enabled for purposes of website accessibility

Boosted Unemployment Benefits Could End Before July 31 Due to This Loophole

By Maurie Backman – Jul 2, 2020 at 5:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Some laid-off workers may be in for a financial shock when their enhanced jobless benefits expire sooner than anticipated.

Tens of millions of Americans are out of a job due to the COVID-19 pandemic. Fortunately, some have been getting adequate monetary relief thanks to the $600 weekly boost in unemployment benefits that's been in play since the CARES Act was passed in late March.

Standard unemployment benefits don't come close to replacing a laid-off worker's former income. But that additional emergency benefit, in combination with the state benefits people who lose their jobs are normally entitled to, has meant that many have seen their missing paychecks completely replaced. A large fraction of unemployed people, in fact, have more income now than they did while they were working because of that $600 boost.

But that extra federal stimulus income is set to expire on July 31, and a loophole in the way the CARES Act is worded could cause some unemployed workers to lose their payments even sooner.

Man at laptop looking down with pained expression while holding eyeglasses

Image source: Getty Images.

A quirk of the calendar lets states cut people off early

The specific wording in the CARES Act says the $600 weekly unemployment boost will end "on or before July 31, 2020." That date falls on a Friday this year, which you'd think would work out just perfectly since that's the end of a workweek. But not so fast.

States typically pay unemployment benefits on a weekly cycle that concludes on either a Saturday or a Sunday. Because the CARES Act says that the $600 boost ends on or before July 31, some states may stop distributing the added payments on Saturday, July 25, or Sunday, July 26, instead. As such, those who are counting on that extra $600 a week for at least one more full month may be in for a shock when it disappears a week early.

Will the unemployment boost get extended?

New COVID-19 diagnoses are spiking across the country, which may soon lead to some states and localities to reintroduce the restrictions on economic activity and personal behavior they recently began to relax. And even if shelter-in-place orders and shutdowns don't return, it's certain that the United States is already in a recession. Given that, and recognizing that the dual purposes of the $600 unemployment bump were to support both Americans and the much-troubled U.S. economy, it's clear that the need for that additional aid is still very real. But while some lawmakers have been fighting to extend the $600 weekly unemployment boost through the end of the year, others are pushing back, stating that it's not necessary given that the economy is slowly opening back up.

Furthermore, those opposed to extending the $600 weekly boost have argued that it actually disincentivizes some laid-off workers from returning to their old jobs, since those who were being paid low wages before are doing better by not working. But given the current state of the economy and the high level of uncertainty about how long our various troubles will last, it's fair to say that large numbers of out-of-work Americans will need some amount of additional relief.

Whether that aid will come in the form of an extension of the current unemployment enhancement is unclear. One alternate proposal floated by a bipartisan group of respected economists suggests replacing the $600 weekly boost with a weekly boost of up to $400, with the level for each state linked to its unemployment rate, and phasing out once that rate drops below 7%.

Still, at this point, no political consensus in Congress has begun to appear for any new direct stimulus aid to Americans, so out-of-work people collecting unemployment should brace for the possibility that their $600 weekly boosts will go away in just a few more weeks. And in a less favorable scenario, those payments may go away a week sooner than expected.

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.