Friday, November 13, 2009

WebGirl on the Dole

So, apparently, I've now worked long enough for an agency as a W2 employee to qualify for unemployment benefits. I've been taking odd freelance assignments and contracts here and there almost exclusively through this agency because they seem to have good work. But the company is reorganizing and now only subcontracting accounting-related work, so I have been officially laid off, and they've informed me that I can now file for good old unemployment. This is brand new territory for me; I received unemployment only once before when I was much younger.

Well, the world has changed! It is a rosy, cushy world for the unemployed, thanks to the American Recovery and Reinvestment Act of 2009 as well as some other fun laws. I thought I'd share some of the new perks that await me.

1) As one of my working benefits, I had allocated $2,500 into a medical flex account. I figured with all the unreimbursed medical expenses coming up with my fertility treatments, I would zip through that in no time. For those of you unfamiliar with this, it basically means that as long as I spend down this amount on approved medical expenses, the money is tax free. They had been deducting this from my income a little bit at a time off of my sporadic paychecks. To date, they have only withheld $250. Well, guess what? I can still spend down the rest of the account, even though I haven't contributed to it. That's $2,250 coming to me (for use only for medical expenses, but still) that is not only tax-free, but utterly unearned. Free money. Net perk, $2,250.

2) I was using this company's medical insurance and I am now eligible to COBRA it. But monthly COBRA for my husband and me will be in the neighborhood of $700. Ah, but guess what? As long as we don't jointly make $250,000 this year (we won't), the government will fork over 65% of our COBRA payments for 9 months! For nuthin! That brings our medical insurance down to $245, a mere song. And since I have a lot of other 1099 income, COBRA payments are tax deductible for me. Why thank you, federal government. And thank you, readers, since that is your tax money paying for my health insurance. Net perk is $455 x 9 = $4,095

3) Assuming I qualify for the highest unemployment payout, which is about $500/week, and figuring on about 7-8 weeks left to the year, the first $2,400 of that is TAX FREE as long as I receive it during 2009. Talk about incentive not to work! Tax free $2,400 is almost like taxable $3,600 gross, for basically doing, well, nothing. I'll take that. Net perk is the taxes I would have paid on the $2,400, or around $800.

4) While you're collecting unemployment, you can actually work and earn up to 25% of your unemployment benefit, and not lose a penny of the unemployment money. So say my weekly benefit is $500. That means I can still work small contracts as long as they pay $125 or less. Incentive to work, but not to work that hard. Net perk if I decide to take small contracts for the next, say, until the end of the year will be around $875.

All told, my perks will be a little over $8,000 (excluding my actual unemployment benefits). Thanks fellow taxpayers! That's your money.

I have mixed feelings about taking these benefits. One part of me is screaming "you've paid your taxes and if the government wants to give you a perk-filled unemployment period, enjoy. It's not in your control." On the other hand, I feel like some of these perks are almost ridiculous, and I don't want to be a hypocrite. It's hard to turn down legal, string-free money though. We'll see. Will you respect me in the morning?

11 comments:

frum single female said...

take advantage while these benefits are still available. one never knows when they will/could change.

Anonymous said...

You should take advantage while you can because you are in a tight spot. But it DOES make you a hypocrite. I've read your blog long enough to know how you feel about these things.

WebGirl said...

You know what, I've been thinking about it. I have to live with this government, both the bad and the good, for at least the next 3+ years. Barack Obama, whether I like it or not (I don't), is my president. This legislature represents me, whether I agree with them or not (I don't). If I have to pay exorbitant taxes and live with the bad net results of this administration, then I'm okay about taking advantage of the perks as well. Call it rationalization if you like. The point of this post was to make people realize how the gov't has changed the rules for the unemployed, and how little incentive there is for them to find new work right away. That said, I probably won't be taking advantage of many of these perks because, driven by other motivations, I probably will start working again shortly.

Abandoning Eden said...

there may be less 'incentive' for people to find jobs right away, but there's no other jobs for them to get anyways. I know tons of people who would be homeless right now if it wasn't for unemployment insurance, and they are definitely looking for jobs.

WebGirl said...

I'm not saying unemployment insurance is a bad thing. It's not. I'm saying that with the new rules and perks in place, there is not a whole lot of incentive to come off unemployment as there used to be. For example, why should my tax dollars go towards paying for someone else's health insurance for nine months?

I am actually okay about $2,400 of unemployment payments being tax free...actually that makes sense to me as a good perk.

Also, I'm glad your friends are looking for work, but that's anecdotal. The fact is that the way things are structured, it would be pretty cushy for them not to.

Ahuva said...

The FSA "perk" has been around for years. Honestly, I think that particular one is only fair. I suspect that's paid for (in most years, maybe not so much during a recession) by people who are losing the money they weren't able to spend on qualifying expenses. I know I contributed about $600 by not spending down my FSA when I was first getting used to the system.

I don't have any issues with the fed contributing to COBRA payments, although I think the ceiling should be closer to $150k/family. A lot of people pass up COBRA because of the costs and end up in emergency rooms, which ultimately costs the taxpayer a lot more money.

Most people can't afford to live off of unemployment, so I don't know that there's all that much incentive not to work. Most people want to get off of unemployment as soon as possible so that they can get back to their regularly scheduled lifestyle. I know several people who are unemployed right now; all of them are desperate to get a job to replace that lost income.

WebGirl said...

Interesting update to the FSA perk. Turns out that unless we COBRA our FSA, we can only put in claims to expenses incurred before I lost my job. BUT, if we pay one month's COBRA, and we then incur expenses, we can put in a claim for the full amount and then stop COBRA'ing it, thereby leaving my former employer holding the bag.

I agree, lots of people get screwed over by not putting in claims for the full amount they committed to in the beginning of the year. It's a dumb system.

I disagree about incentive to work. People are in different situations. Someone bringing in a second income who has kids would be thrilled to stay home for a few months on the government's dole. Or someone who contracts and has ebbs and flows in his work schedule also has no incentive to hurry back to work when they can take a few months and get some free money and perks. Yes, if you are talking about people who live from paycheck to paycheck, unemployment is probably not enough for them.

You SHOULD have issues with the gov't paying for COBRA, because that means that other taxpayers are paying for your health insurance. And then it's your turn...do you think you should work longer and harder to pay taxes so that other people can have virtually free health insurance? I don't. That is not the government's role.

Ahuva said...

I think that the vast majority of Americans live from paycheck to paycheck. I know of families where both parents are currently unemployed and the longer one is out of the work force, the harder it is to return to it. I actually don't know of anyone right now who would feel comfortable enough to just take a few months off so that they can get some free money and perks. Even if their spouse is still employed, few jobs these days are truly secure.

Oh, I would have a problem with the government paying permanently for health insurance, but I don't see a problem with temporarily subsidizing COBRA payments for people who truly can't afford them. A lot of people who are homeless or go bankrupt are there because of medical emergencies. It's in our best interest as a nation to prevent that from happening if possible. It will cost me a lot more as a taxpayer, otherwise.

(Also, for the record, I have never applied for unemployment or COBRA myself. I have always been fortunate enough to go straight from one position to the next with no more than a few gap weeks.)

WebGirl said...

Ahuva, "I think that the vast majority of Americans live from paycheck to paycheck." What do you base this on? I would certainly hope the vast majority of Americans have savings accounts and put away a little money each month in proportion to their income.

Also, don't make the mistake of thinking that people you know represent the majority of America. I know we all tend to do that. (I do.)

I guess my point about the unemployment system is that it is not geared toward encouraging people to find new employment. You're right in that if you can't afford to live off the perks, this won't make a difference in your motivation. But the system itself should act as a motivator. Because my salary is a second income, I could probably skate on unemployment perks for nearly a year and cover most of my expenses. I won't do that because I like my work and I like making money. But the system itself makes things very cushy for me and doesn't exactly make me want to pound the pavement.

You might not see a problem now with subsidizing COBRA payments, but you will when your tax bill for 2011 is double that of 2009. You will when you realize that of the five days a week you are working now, Monday and Tuesday are just to pay for things like other people's healthcare. There's more than one way to skin a cat. There are lots of ways to help out-of-work people cover their healthcare costs without forcing other people to pay for it. For example, opening up group policy rates to individuals or allowing unemployed people to temporarily downgrade to catastrophic-only insurance until they find a job could cut premiums in half. Enabling people to help themselves is always a better option to bailing them out.

Ahuva said...

Actually, I was basing it on the things I've been reading in the Washington Post and possibly in the Wall Street Journal as well. But I Goggled it: CareerBuilder.com did a survey where 41% of respondants said that they "often or always" live paycheck to paycheck. An article on msn.com (September 2009) said that six in 10 workers live from paycheck to paycheck. A 2008 survey by American Pulse said 50.8% said they live from paycheck to paycheck. Something called the "2008 'Getting Paid in America' survey" claims that 71% of people live from paycheck to paycheck.

I hear what you're saying, but I just don't see it as motivating people to remain unemployed. I see it as trying to keep people from drowning. You are in an enviable situation since your income is not needed. I don't believe that's the case in most (or at least half of) households. The Washington Post did a whole series on people who have eaten through what savings they had thinking that they would get another job soon and are now nearing financial ruin.

I don't know that I believe that my tax bill will really double in 2011, but even if it does... like you I am in the enviable position of being able to survive on far less than my current household income. Offering a catastropic-only insurance is a good idea, though.

WebGirl said...

According to the Congressional Budget Office, extending unemployment benefits increases the average duration of unemployment by about two weeks. You can find this on http://www.cbo.gov/ftpdocs/89xx/doc8916/01-15-Econ_Stimulus.pdf, page 25, #30. This finding is dated January 2008, long before Obama was in office. When you give away stuff for free, you don't create any reason to work for it.