COVID-19: Social Insurance and Other Income-Support Options for Those Unable to Work

COVID-19: Social Insurance and Other Income-Support Options for Those Unable to Work

Updated March 17, 2020
COVID-19: Social Insurance and Other Income-Support
Options for Those Unable to Work
Overview
Unlike some federal or state programs, UC and DUA have
There is uncertainty about how the Coronavirus Disease
the ability to rapidly respond and provide immediate
2019 (COVID-19) may spread in the United States; what
income support. Thus, Congress may consider amending or
measures federal, state, or local governments may take to
expanding current unemployment benefits for individuals
mitigate the spread; and the possible effect on individual
unemployed due to COVID-19. For example, the DUA
income security from both. This In Focus provides an
authority could be a model for responding to public health
overview of existing federal and state government social
emergencies. More generally, in response to the 2007-2009
insurance programs or options that may be implemented
recession, UC benefits were temporarily augmented and
relatively quickly to provide financial assistance for those
extended, with some costs temporarily assumed by the
unable to work due to COVID-19 from (1) their own
federal government.
illness; (2) exposure leading to quarantine; (3) illness of a
close family member or school closures that may require
Workers’ Compensation
long-term caregiving; or (4) unemployment resulting from
Every state has a workers’ compensation system that
business closures.
provides wage-replacement and medical benefits to persons
who are injured, become ill, or die in the course of
Existing Social Insurance Programs
employment. There is no federal requirement that states
have workers’ compensation systems and no federal
Unemployment Compensation and Disaster
oversight of state workers’ compensation systems. The
Unemployment Assistance
federal government administers workers’ compensation for
The joint federal-state Unemployment Compensation (UC)
federal employees under the Federal Employees’
program provides income support through UC benefit
Compensation Act (FECA) and for longshore and harbor
payments. Although there are broad requirements under
workers and several other groups of private-sector
federal law regarding UC benefits and financing, the
employees, such as overseas federal contractors, under the
specifics are set out under each state’s laws. States
Longshore and Harbor Workers’ Compensation Act
administer state-funded UC benefits with U.S. Department
(LHWCA).
of Labor (DOL) oversight, resulting in 53 different UC
programs operated in the states, the District of Columbia,
Although the state programs and the FECA and LHWCA
Puerto Rico, and the Virgin Islands. To receive UC
programs share similar features, each program operates
benefits, claimants must generally have been laid off
under its own laws and regulations. However, nearly all
through no fault of their own; have enough recent earnings
private-sector workers in the United States are covered by
(distributed over a specified period) to meet their state’s
some form of workers’ compensation. Coverage of self-
earnings requirements; and be able, available, and actively
employed individuals and certain other classes of workers
searching for work. The UC program generally does not
varies by program. The diffuse nature of workers’
provide UC benefits to the self-employed, those who are
compensation makes it difficult to provide general
unable or unavailable to work, or those who do not have a
information on how any given program would respond to
recent earnings history. Individuals who are laid off for
cases of workers contracting COVID-19 in the workplace.
reasons related to COVID-19 would be subject to UC laws
regarding benefit eligibility in the state where the previous
A worker who contracts COVID-19 as a direct result of his
work was performed. Individuals who are unavailable for
or her job, such as a healthcare worker who contracts
work due to COVID-19 (e.g., because of a quarantine, or
COVID-19 after treating a patient, would likely be covered
caregiving for sick or quarantined family members) may
by workers’ compensation and eligible for benefits.
not meet state requirements regarding being able and
However, a person who contracts COVID-19 through
available for work.
casual contact with a coworker or other person that happens
to occur in the workplace may not be covered, as it could be
Disaster Unemployment Assistance (DUA) provides
argued that the risk of this person being exposed to
federally funded unemployment benefits to individuals who
COVID-19 was not related to, or peculiar to, the
are unable to work as a result of a federally declared
individual’s job. Ultimately, such compensation decisions
disaster and are otherwise ineligible for regular UC
would have to be made by the specific workers’
benefits; however, the current statutory definition of “major
compensation programs and may vary across programs.
disaster” (42 U.S.C. § 5122[2]) for the purposes of DUA
Workers’ compensation would not generally be expected to
does not include a disease outbreak. Thus, DUA will not be
provide any benefits to a person who is unable to work
available under current law in response to COVID-19.
because of a quarantine order unrelated to his or her
employment.
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COVID-19: Social Insurance and Other Income-Support Options for Those Unable to Work
State Temporary Disability Insurance and Medical
Internal Revenue Service guidance could clarify whether
Leave Insurance
COVID-19-related expenses (outside of direct health
Temporary Disability Insurance (TDI) and Medical Leave
expenses) would be included as being withdrawn on
Insurance (MLI) are state-mandated insurance programs
account of hardship. Hardship distributions are subject to
that provide time-limited cash benefits to qualified workers
the 10% penalty unless they qualify for an exemption. In
who generally are unable to work due to nonoccupational
addition, some employer-sponsored plans permit employees
illnesses or injuries. Workers qualify for benefits by
to take out loans (up to a statutory maximum) from their
meeting minimum work or earnings requirements and, in
retirement accounts.
most cases, by serving a nonpayable waiting period (usually
one week). Benefits replace between 50% and 90% of a
In response to certain past federally declared disasters,
worker’s pre-disability earnings (up to a maximum amount)
Congress has waived the 10% penalty for withdrawals for
and are provided for up to 12-52 weeks. Where available,
disaster-related expenses. For example, a provision in
state TDI/MLI programs cover nearly all private-sector
Division Q of the Further Consolidated Appropriations Act,
workers and, in some cases, state and local government
2020 (P.L. 116-94) allowed for penalty-free distributions up
workers. Federal workers are not covered by TDI/MLI, and
to $100,000 for individuals who lived in an area that had a
self-employed individuals may elect coverage in some
major federally declared disaster from January 1, 2018, to
states. Currently, TDI/MLI programs operate only in
60 days after the enactment of the legislation on December
California, Hawaii, New Jersey, New York, Puerto Rico,
20, 2019. Congress could enact a similar penalty waiver
Rhode Island, and Washington State.
provision, providing penalty relief for COVID-19-related
retirement account withdrawals. In 2019, 36% of U.S.
In general, covered workers who meet the state’s minimum
households had an IRA and 43% of civilian workers
work or earnings requirements (i.e., insured workers)
participated in an employer-sponsored defined contribution
qualify for TDI/MLI benefits if they become unable to
retirement plan.
work due to COVID-19 illness and satisfy the waiting
period requirement (if any). However, insured workers who
Related Resources and References
are quarantined due to COVID-19 but who are not ill may
CRS Report R46219, Overview of U.S. Domestic Response
not qualify for TDI/MLI benefits unless the state
to Coronavirus Disease 2019 (COVID-19).
specifically permits them to do so. Historically, the federal
government has played no direct role in the operation of
CRS Report RL33362, Unemployment Insurance:
TDI/MLI programs, which are established and funded via
Programs and Benefits.
state laws. That said, federal law permits states to withdraw
employee contributions (if any) from the state’s
DOL, Comparison of State Unemployment Laws 2019,
unemployment fund to finance TDI/MLI benefits. Congress
https://oui.doleta.gov/unemploy/comparison/2010-2019/
could permit states to use employer UC contributions to
comparison2019.asp.
finance benefits; however, this option would likely assist
only those states with existing TDI/MLI programs.
CRS Report RS22022, Disaster Unemployment Assistance
(DUA).
Other Income Support Options
CRS Report R45182, Unemployment and Employment
Access to Individual Retirement Accounts and
Programs Available to Workers Affected by Disasters.
Employer-Sponsored Defined Contribution
Pensions
CRS Report R44580, Workers’ Compensation: Overview
The Internal Revenue Code generally imposes a 10%
and Issues.
penalty on retirement savings account withdrawals,
including those from individual retirement accounts (IRAs)
CRS Insight IN11229, Stafford Act Assistance for Public
and employer-sponsored defined contribution plans (such as
Health Incidents.
401[k]s and the federal government’s Thrift Savings Plan),
that occur before the account owner reaches age 59½.
CRS Report R40368, Unemployment Insurance Provisions
Under current law, certain circumstances that warrant
in the American Recovery and Reinvestment Act of 2009.
withdrawals are exempted from the penalty, including
unreimbursed medical expenses in excess of 7.5% of
CRS Report R44835, Paid Family and Medical Leave in
adjusted gross income (10% if under age 65).
the United States.
While individuals may withdraw amounts from their IRAs
Laura Haltzel, Coordinator, Section Research Manager
for any reason, individuals with employer-sponsored plans
Katelin P. Isaacs, Specialist in Income Security
are generally not permitted to withdraw funds except in the
William R. Morton, Analyst in Income Security
case of hardship. Plans may, but are not required to, offer
Elizabeth A. Myers, Analyst in Income Security
hardship distributions and may choose which situations
qualify. Safe harbor regulations automatically deem certain
Scott D. Szymendera, Analyst in Disability Policy
expenses as being due to hardship, or immediate and heavy
Julie M. Whittaker, Specialist in Income Security
financial need (26 C.F.R §1.401[k]-1[d][3][B]), including
IF11447
certain medical expenses and expenses and losses incurred
by the employee on account of a federally declared disaster.
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COVID-19: Social Insurance and Other Income-Support Options for Those Unable to Work

Disclaimer
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