How to Navigate Unemployment During COVID-19

Please note the publish date of this blog. Financial information, market conditions, and other data mentioned in this post may no longer be accurate or relevant.

With the arrival of a global pandemic, the unemployment rate in the US has risen quickly and dramatically. At this point, many of  us know someone who has been laid off. For clients who may need to help themselves, their children or friends, here is some information to navigate unemployment challenges in this difficult time. 

Essential Facts about Unemployment Assistance

  • To claim unemployment assistance, you must be able to work and actively seek opportunities. 
  • You can file for unemployment if you have been laid off, or if your hours have been significantly reduced.
  • If you are receiving severance pay, in California you may still apply for unemployment insurance right away. In other states, you may need to wait until the severance pay runs out. 
  • Usually, you must certify to the state that you are seeking work each week or receiving training as long as you receive assistance. The state of CA has temporarily waived this requirement.. 
  • To receive assistance, you will need a bank account. Most states send money by direct deposit or by pre-funded ATM cards.
  • All unemployment compensation is taxable income. Ideally, you should request the state withhold taxes from your benefit, or you may be surprised when filing 2020 taxes. 
    • California filers will be given the choice to withhold 10% for Federal taxes. 
    • Instead of withholding taxes, you may also make estimated payments throughout the year. For more specific guidance around tax withholding, speak to your financial advisor or CPA.

Filing for Unemployment Assistance

Once you’ve been laid off, you should file for unemployment as soon as possible. Unemployment benefits are managed by states, not the federal government, and each state has its own process. You should file in the state where you were working, not necessarily where you live. All states now have websites to make filing easier and more efficient. 

To submit a claim, have a copy of your paystub, bank information, and first and last date of work available to share. It’s helpful to know your former employer’s state unemployment account number. 

In the past, processing time for unemployment claims was two to three weeks. With the unprecedented rise in new claims, the process may be significantly delayed.  

COVID-19 Changes to Unemployment & Help for Self-Employed

The recent CARES Act made unemployment assistance easier to access, with better benefits:

  • The previous mandatory one-week waiting period has been waived
  • Benefits will increase by $600 per week between April 15 and July 31
  • Usually 26 weeks, the unemployment benefit period has been extended for a maximum of 39 weeks.  

Another significant change affects self-employed workers. In the past, independent contractors, freelancers, and gig workers were typically not eligible for unemployment assistance. They now qualify and only need to have experienced a partial decline in their business, and that assistance may be retroactive to January 27, 2020. 

To access these benefits, the self-employed will need to verify that their unemployment or reduced hours relate to the pandemic. They should be prepared to show proof of their previous business income; providing tax returns, invoices, and bank statements may also be required. Be prepared for a long wait; since these benefits are new, many states have not yet provided a website for self-employed people to apply, including California. 

Other Important Considerations After a Layoff

Review your health insurance options: Some employers may still be covering health benefits for employees who are furloughed rather than laid off. If not, and you want to keep your current coverage, you have 60 days to enroll in COBRA. COBRA lets you keep the same group plan, but you must pay 102% of the total monthly premium. Since many employers subsidize your monthly premium, the new COBRA amount may be significantly higher than expected. 

Another option is purchasing health insurance through your state’s marketplace. If you’re facing financial hardship your state may provide assistance, which could be taxable at a later date. We recommend consulting with a health insurance agent. For California residents, health insurance is required for all months in 2020 or you may face a penalty.

Review other benefits you may keep: Your Human Resources department should provide time sensitive information about any benefits still available to you. For instance, your life insurance coverage may be portable, meaning you can keep the same policy with a group rate. If you retain existing life insurance coverage, you can avoid the underwriting process for a new policy. This is particularly important if you have underlying health issues that could inhibit obtaining life insurance on your own.

For employees with stock options, be aware that options can expire 30 to 90 days after your last day on the job (this varies by company). We recommend discussing stock options with your HR department and financial advisor to understand the tax implications and determine if exercising the options is in your best interest. 

Prepare employment related information and accounts you will still need to access: Be sure you know how to access your retirement plan (401k, 403b, etc.) or health savings account online. Make sure your login is tied to a personal email and not your work email, in the event you need to reset your password.

Learning to navigate new financial terrain in a time of crisis can be stressful and challenging but it’s important to understand all of the options available to you. If you or someone you know could benefit from guidance through this process, take advantage of our upcoming pro bono financial check ups. Learn more and sign up here.


What’s your financial archetype?

Simplify your life with a plan

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.