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Recently enacted fiscal year 2021 budget legislation (AB 103) provides that, through December 31, 2020, contributory employer unemployment insurance (UI) accounts will not be charged for UI benefits paid as a direct result of COVID-19. (News release, governor's office, 6-29-2020.)

Under the AB 103 non-charge provision, an employer, or an agent of an employer, must not be found to be at fault for the payment of UI benefits under state law §1026.1 in order to be relieved of COVID-19 UI benefit charges. State law §1026.1 was instituted in 2013 to meet federal requirements that employers not be relieved of UI benefit charge overpayments due to the failure of the employer or its agent to timely and/or adequately respond to UI benefit claim notices.

Extended UI benefit program triggers on for California

Due to the state's high UI benefit rate, AB 103 also allows the state to begin, as of July 1, 2020, to pay extended UI benefits under the federal-state extended benefit (EB) program to individuals who have exhausted their previous state and federal UI benefits.

Under federal law, the EB program offers up to an additional 13 weeks of benefits to individuals who have exhausted both their regular unemployment benefits and 13 weeks of the Pandemic Emergency Unemployment Compensation (PEUC) assistance.

AB 103 also adds an extra seven weeks of extended UI benefits (known in California as the Federal-State Extended Duration benefits program (FED-ED)) and an extra seven weeks of federal Pandemic Unemployment Assistance (PUA) benefits for eligible claimants.

The California Employment Development Department announced that the extra FED-ED and PUA benefits will also not be charged to contributory employer accounts through the end of the year.

Reimbursing employers

Reimbursing or noncontributory employers that reimburse the state for the costs of regular and extended UI benefits are required to pay 100% of their former employees' UI benefit costs. But, under the federal CARES Act, they are eligible to receive a 50% reimbursement of COVID-19 UI benefit charges, including FED-ED benefits.

According to the US DOL, under the Emergency Unemployment Insurance Stabilization and Access Act of 2020 (EUISAA) (Pub. L.116-127), and the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) (Pub. L. 116- 136), the federal government will repay states for up to 100% of EB benefits paid between March 18, 2020 and December 31, 2020. As a result, the DOL allows states to not charge employers with the reimbursed portion of EB benefits; although the DOL guidance provides that states are allowed to charge the employer with any or all of EB benefits if they so desire. (DOL Unemployment insurance program letter (UIPL) 24-20, 5-14-2020.)

Ernst & Young LLP insights

Because California, unlike most other states, has only recently adopted the provision of not charging employer accounts for COVID-19 UI benefits, employers should carefully check the annual Form DE 428T, Statement of Charges to Reserve Account to confirm that they are not being charged for these benefits. The 2020 Form DE 428T covers UI benefit charges for fiscal year 2020 (July 1, 2019 through June 30, 2020). Charges on this statement will be used to calculate the 2021 SUI tax rates.

Form DE 428T should be issued to employers in the next couple of months.

If an employer disagrees with the UI benefit charges shown on the Form DE 428T, a protest may be submitted online or by mail. The protest must be submitted or postmarked within 60 days from the issuance date on the DE 428T. An extension of up to 60 days may be requested. The extension request must be submitted timely, in writing, and show good cause. As stated above, the protest may be denied if the employer failed to respond to the first claim notice, Form DE 1101CZ, Notice of Unemployment Insurance Claim Filed or Form DE 1545, Notice of Wages Used for Unemployment Insurance (UI) Claim.

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