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Colorado’s expanded unemployment benefits system rejects a fifth of applicants

Banks are also struggling to distribute the millions the state is sending out in unemployment benefits

Mail carrier Henry Mosley delivers mail along an area with many shuttered businesses on South Broadway in Denver on April 14, 2020.
Mail carrier Henry Mosley delivers mail along an area with many shuttered businesses on South Broadway in Denver on April 14, 2020.

Colorado’s unemployment insurance system struggled this week as the state launched a new platform for self-employed workers, while also paying out $600 a week in additional benefits the federal government offered under the CARE Act.

“We did see a lot of confusion among claimants,” Cher Haavind, a spokeswoman for the Colorado Department of Labor and Employment, said Thursday on a conference call.

The state received about 51,000 applications for unemployment benefits since Monday on its new platform. But about 10,000, or one in five, were rejected and sent to file on the system for employed workers.

“This was not a state decision, but built into the federal legislation,” Haavind said. To avoid double-dipping, the federal rules require anyone who earned $2,500 in wages reported on a W-2 over the last 18 months to apply through the regular system until those benefits were exhausted.

Part of the difficulty facing the state is that it doesn’t have a firm grip on how many self-employed workers are out there and didn’t expect so many people to derive income from multiple sources.

Tyler Graim, a freelance cinematographer in Denver, said he followed CDLE advice he received earlier and waited to apply for unemployment benefits when the new platform for independent workers went up on Monday.

He estimates that 95% of his income is tied to contract work, which has stopped due to the pandemic, and thought that would provide the highest level of income replacement. He was surprised when his application was rejected.

“I made $2,600 on W2’s last year and the rest of my income on 1099’s, so I will be getting paid unemployment benefits based on a $2,600 a year salary. This will most likely give me the minimum of unemployment payment possible without my 1099 income included,” he said in an email.

What has made the whole process difficult, he said, is that it has been almost impossible to talk to a live person at CDLE.  To address the crush of calls it is receiving, the CDLE set up a dedicated call center with 80 people through a third-party provider to handle calls just from self-employed workers.

But because the center was new, there were issues to work through on matching communications systems and making sure outside staff were providing the right information.

As the CDLE was launching the new platform, it was also trying to distribute the additional $600 a week that the federal government is providing to unemployed workers, known as Pandemic Unemployment Assistance or PUA, going back to the end of March.

A money transfer request for the week ending April 4 went out on Sunday, with a payment request for the week of April 11 going out on Monday, and a request for the week ending April 18 going out on Tuesday.

“That file was the largest single we have ever had to transmit to a bank in the history of the program,” Haavind said of the $70 million request for disbursements sent out on Sunday night.

Normally, payments go out in 72 hours once the clearing bank receives the batch file from CDLE. People receiving benefits, many of them anxious for the additional funds to arrive so they could pay bills, were told as much. By Thursday morning, the money still hadn’t landed in bank accounts.

“The underlying benefit system is not having any challenges in presenting the payments,” said Jeff Fitzgerald, the state’s unemployment insurance director. The bottleneck appears to be in the banking system, given the large volume of money being moved. The deposits should land Friday, although there were reports that banks were pushing some out on Thursday afternoon.

Those receiving unemployment benefits can choose direct deposit over the debit card option to speed up payment, Haavind said. Banks must issue and mail out debit cards, which can add several days to receiving payment.

Self-employed workers who have their claim approved will automatically default to a debit card payment. But 24-hours after an account is set up, they can go back in and switch to direct deposit.

There’s another issue that is brewing for workers who are receiving benefits that exceed what they made in regular pay. As more small businesses receive funds under the Paycheck Protection Program, or PPP, they are calling workers back.

If 75% of the amount borrowed is used for payroll expenses over the next eight weeks, the loan becomes forgivable. But employers are starting to report that some workers, who can make more collecting unemployment benefits, are declining to come back. That is considered a job refusal and could put benefits at risk.

“If you are on unemployment, you need to be available and actively seeking work,” Haavind said. “We are working on educating our claimant community who may not understand the consequences of that.”

Things get more complicated if an employee refuses to return to work because they are fearful of exposure to the novel coronavirus. The state is trying to work out rules about when an exemption might be offered, Haavind said.