YCP - In the News - Beware of retirement Plans

When benefits expire
After 26 months of unemployment, what's next?
Paula Moore
Denver Business Journal
August 2, 2002

Personal bankruptcy -- particularly Chapter 13, which involves repaying debt -- is one alternative, but it's best to consider that one sooner rather than later because the bankruptcy laws will only get tougher. Because it's been relatively easy to walk away from debt, especially credit card bills, Congress has been drafting new law to make it harder. The long-debated legislation is expected to go up for a vote this fall.

The second, even more egregious way to bring in income is welfare.

"There you're talking about the real poor," said Dirk de Roos, a partner at the Denver office of Faegre & Benson LLP and a specialist in labor and employment law. "You can't own a house or a car; you essentially can have no assets of any kind."

But in Colorado, it takes a lot to run through unemployment insurance these days.

Jobless Coloradans who qualify for the insurance get it for as long as 26 weeks, the limit in most states. They collect a percentage of their salary for the last year or two consecutive quarters based on labor department formulas, or a minimum of $25 a week and a maximum of $398.

Because of recent extenuating circumstances, though, there are ways to extend unemployment benefits.

Someone who lost a job or business because of the recent wildfires that ravaged the state can apply for Disaster Unemployment Assistance, or DUA, through Aug. 23. That federal help administered by the state is designed for the few people who can't qualify for standard unemployment benefits, according to the Colorado Department of Labor and Employment.

Those approved for DUA can get benefits as long as 26 weeks. They collect at least $146 a week and a maximum of $390 or $398, depending on when they applied.

During times of high unemployment like now, the federal government can also help states with Temporary Emergency Unemployment Compensation, or TEUC, and that assistance is available in Colorado. President George W. Bush signed legislation in March authorizing the extra help. The extended benefit lasts as long as 13 weeks and is for all unemployed workers.

In May, the U.S. Department of Labor also gave the state $7.5 million in National Emergency Grant funds to help Coloradans who are out of jobs because of last September's terrorist attacks. People in the high-tech, telecommunications, airline and aviation industries here were hit especially hard. Such displaced workers, many of them highly educated and skilled, had already been straining the state's Workforce Centers since the economy started to soften in 2000.

The labor department's roughly 20 Workforce Centers statewide help job seekers find work and get training, if needed.

A longtime federal benefit that often goes hand in hand with unemployment insurance is COBRA, short for the Consolidated Omnibus Budget Reconciliation Act of 1985. Through COBRA, employers can let employees who quit or have been terminated keep their group health insurance at their own expense.

That benefit generally lasts as long as 18 months, but it can go as long as 36 months under special circumstances. An ex-employee's wife, for example, can get COBRA benefits for the longer period if the ex-employee dies or the two divorce.

In the end, though, the state labor department's main job isn't paying the unemployed until they find work; it's helping them get work.

"Ultimately, a person could reach the end of the road of services," said Bill Thoennes, spokesman for the Colorado labor department. "It's our hope that most people can be redirected toward jobs there's more demand for. Our main goal is to get them back to work."

To that end, the state recently got even more federal grants.

In May, it received $1.6 million for nurses' training from the U.S. labor department and Health Corporation of America, which partners with HealthONE in Colorado to run hospitals and clinics here. The federal government kicked in a little more than $1 million of that money, and HCA came up with the rest. Both the local and federal governments hope the training will create more registered nurses to help alleviate the state's nursing shortage.

The U.S. labor department anted up another $1.3 million in July to create stronger cooperation between the state government and nonprofit, religious and community groups to help the unemployed. The grant -- one of the largest ever given to a state by the labor department -- hopefully will help those groups better coordinate services ranging from job-readiness and literacy programs to food, shelter and counseling services.

Technically called the Colorado Workforce, Faith and Community Works Initiative, the program is part of an effort launched by President Bush just after he took office in 2001.

To qualify for unemployment insurance in Colorado, workers must have worked for a company for at least a year, or four of the last five calendar quarters, and earned at least $2,500 in wages. They have to be out of a job "through no fault of their own," meaning they must have been fired, laid off or worked for a company that folded.

In this state, unemployment compensation comes from funds paid entirely by employers.

To stay eligible for benefits, job seekers must be able and available to work, look for work and be willing to accept a suitable job. They must also report any kind of temporary work they're doing, from mowing lawns to part-time jobs.

Recipients of unemployment benefits used to go to the state's unemployment office in person and wait in line to be interviewed before they could get a check, which was often a long and depressing experience, according to those who went through it. Now they can telephone in updates on their job-hunting results every two weeks on the Colorado Unemployment Benefits Line. If a person's phone "claim" is accepted, he or she receives an unemployment check in the mail.

But not all out-of-work Coloradans take advantage of unemployment benefits. Managers who get bounced from their companies because of a downsizing or merger often negotiate "parachutes" to protect themselves. A common arrangement is one year's salary plus another year or two of benefits such as health insurance.

But such a benefit can cause problems for employers, according to Bob Ballard, a tax attorney, life and disability insurance specialist and vice president of Marsh Financial Services Inc. in Denver. Executives make the deal with the departing manager, but then the human resources department may have a hard time making good on it. The ex-employee may have been promised disability insurance, for example, but disability applies only to active employees, so the company may have to find an individual plan to fulfill its commitment, and it can be expensive.

"What happens is you're negotiating a $200 million deal, and there are huge issues, and everybody's exhausted," Ballard said. "You've got these four executives and you want to treat them right, but that can easily cost another $2 million to $4 million in liability nobody thought of."

The good news about unemployment in Colorado is that the state's economy has perked up this year, and fewer people need unemployment benefits.

The state's most recent jobless data, for June, show unemployment down in June for the fourth consecutive month. The unemployment rate fell two-tenths of a percentage point to 5 percent that month, meaning that employment rose by 6,800 people to 2.25 million employed in the state.

First-time claims for unemployment benefits were down recently, too -- to an average of 3,200 a week in the second quarter of this year from 4,400 in the fourth quarter of 2001.

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