Colorado legislators pass bill to direct federal funds to repay unemployment insurance debt

Colorado legislators on May 10 passed a bill that would direct $600 million of federal American Rescue Plan Act (ARPA) funds to help pay back the state’s $1 billion unemployment insurance trust fund debt to the federal government. The bill would also forgive certain non-fraud overpayments, meaning some workers who received more unemployment insurance payments than they were owed during the coronavirus pandemic would not have to pay the money back. The bill also contains provisions allowing claimants to work part-time and make up to half their previous income without a benefit reduction and allowing unlawful U.S. immigrants to claim unemployment insurance benefits if their employer pays unemployment taxes.

The $600 million funding would reduce the unemployment insurance tax burden on employers, which increased in 2022 and will increase in 2023 unless the fund’s solvency improves. The bill now goes to Colorado Gov. Jared Polis (D) for consideration.

Unemployment insurance is a joint federal and state program that provides temporary monetary benefits to eligible laid-off workers who are actively seeking new employment. Qualifying individuals receive unemployment compensation as a percentage of their lost wages in the form of weekly cash benefits while they search for new employment.

The federal government oversees the general administration of state unemployment insurance programs. The states control the specific features of their unemployment insurance programs, such as eligibility requirements and length of benefits.

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