In consideration that the added $600 per week of federal unemployment insurance (UI) benefits (the Federal Pandemic Unemployment Compensation or FPUC) authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act lasted only through July 31, 2020, the Administration authorized the Federal Emergency Management Agency (FEMA) to spend up $44 billion from the Disaster Relief Fund (DRF) to continue funding UI benefits for lost wages due to COVID-19. Under the Lost Wages Assistance (LWA) program, qualified individuals can receive an added federally funded benefit of up to $300 per week and an optional $100-per-week benefit paid by the state or territory. (FEMA: Lost Wages Supplemental Payment Assistance Guidelines.)

The $300 weekly benefit is paid directly by FEMA and is not charged to employers' UI accounts for experience rating purposes thereby not affecting the future assigned state unemployment insurance (SUI) tax rates of employers.

A state or eligible US territory was given until September 10, 2020, to request a grant for the administration of the LWA program.

LWA is effective September 1, 2020, and continues until any of these conditions are met:

1. FEMA has expended $44 billion from the Disaster Relief Fund (DRF)
2. The DRF balance reaches $25 billion
3. Enactment of legislation providing supplemental federal unemployment compensation or similar compensation for unemployed or partially employed individuals due to COVID-19
4. The program end date of no later than December 27, 2020

FEMA funding to each state will be based on the state's projected estimate of the amount of lost wages supplemental payments to be made per week, the estimate of eligible claimants and a planning estimate for the state, inclusive of FEMA's budgetary authority.

All states (except South Dakota) and the District of Columbia, Guam and the US Virgin Islands applied for the LWA grants before the September 10 deadline. Only five states (Kansas, Kentucky, Montana, Vermont and West Virginia) are providing the full $400 weekly benefit; the remaining paying only the federally funded amount of $300 per week.

Following is a heat map of the state adoption of the LWA program as of September 13, 2020.

Ernst & Young LLP insights

Employers will need to confirm that, like the federally funded FPUC UI benefit, the $300 federally funded LWA UI benefit is not charged to their UI accounts for purposes of computing their future SUI tax rates.

For more information about federal COVID-19 unemployment insurance, including a detailed state tracker, see our special report, COVID-19: state guide to payroll and employment tax provisions.

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