Special Transfers for Unemployment Compensation Modernization and Administration and Relief From Interest on Advances, 48602-48612 [E9-22917]

Agencies

• Employment and Training Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 74, Number 183 (Wednesday, September 23, 2009)]
[Notices]
[Pages 48602-48612]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-22917]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employment and Training Administration


Special Transfers for Unemployment Compensation Modernization and 
Administration and Relief From Interest on Advances

AGENCY: Employment and Training Administration, Labor.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Employment and Training Administration has provided 
guidance to State workforce agencies to assist them in qualifying for 
the incentive payments to modernize their State unemployment 
compensation (UC) law as well as to clarify the special transfer of 
funds, the suspension of interest on Federal loan advances and Federal 
tax on UC authorized by Public Law 111-5. The original guidance was 
issued as Unemployment Insurance Program Letter (UIPL) No. 14-09 on 
February 26, 2009 (available at: https://wdr.doleta.gov/directives/attach/UIPL/UIPL14-09.pdf). Additional guidance was issued on March 19, 
2009 as UIPL 14-09, Change 1 (available at: https://wdr.doleta.gov/directives/attach/UIPL/UIPL14-09c1.pdf). Both UIPLs are published below 
to inform the public. There are no rescissions on this continuing 
guidance.

SUPPLEMENTARY INFORMATION:

UIPL No. 14-09--Special Transfers for Unemployment Compensation 
Modernization and Administration and Relief From Interest on Advances

    1. Purpose. To advise States of amendments to Federal law providing 
for unemployment compensation (UC) modernization incentive payments to 
States, a special administrative transfer to States, relief from 
interest on advances to State unemployment funds, and the partial 
suspension of Federal income tax on UC.
    2. References. The Assistance for Unemployed Workers and Struggling 
Families Act, Title II of Division B of Public Law No. 111-5, enacted 
February 17, 2009; Section 1007 of Public Law 111-5; the Social 
Security Act (SSA); the Federal Unemployment Tax Act (FUTA); 
Unemployment Insurance Program Letter (UIPL) No. 39-97; and Training 
and Employment Guidance Letter (TEGL) No. 18-01.
    3. Background. Public Law 111-5 made the following changes 
affecting the UC program:
     Extended the Emergency UC program, commonly known as 
EUC08.
     Created a new federally-funded program which temporarily 
increases UC benefits by $25 a week.
     Temporarily modified provisions in the permanent Federal-
State extended benefits program.
     Provided for two special distributions from the 
Unemployment Trust Fund (UTF) to the States.
     For States receiving advances to pay benefits under Title 
XII, SSA, waived interest due on these advances for a specified period.
     Suspended the Federal income tax on the first $2,400 paid 
in UC for tax year 2009.

The first three items are addressed in separate UIPLs. This UIPL 
addresses the special distributions, the provisions affecting Title XII 
loans, and the taxation of UC benefits.


[[Page 48603]]


    In general, the first special distribution relates to UC 
``modernization incentive payments.'' The total amount available for 
all States is $7 billion. To obtain its share, the State must make an 
application to the Department of Labor demonstrating that its UC law 
contains certain benefit eligibility provisions. Attachment I discusses 
eligibility for these incentive payments and the application and 
approval process. Attachments II and III discuss these matters in 
greater detail. The last date on which an incentive distribution may be 
made is September 30, 2011, so applications must be received no later 
than August 22, 2011.
    The second distribution is a ``special transfer'' of $500 million 
to the States' accounts in the UTF to be used for certain 
administrative purposes. This administrative transfer is made 
regardless of whether the State qualifies for a modernization incentive 
payment. States do not need to apply to receive these amounts. 
Attachment IV discusses this administrative transfer and the 
permissible uses of the amounts transferred. Attachment VII contains 
the amounts distributed under this administrative transfer and each 
State's potential share under the modernization incentive payments.
    Attachment V discusses the provisions related to suspension of 
interest on advances and the partial suspension of Federal income tax 
on UC. Attachment VI sets forth the text of the amendments discussed in 
this UIPL.
    4. Action. State administrators should distribute this advisory to 
appropriate staff.
    5. Inquiries. Questions should be addressed to your Regional 
Office.
    6. Attachments.

Attachment I--Modernization Incentive Payments--Overview
Attachment II--Modernization Incentive Payments--Base Period 
Provision--Questions and Answers
Attachment III--Modernization Incentive Payments--Other Eligibility 
Provisions--Questions and Answers
Attachment IV--Special Administrative Transfers--Questions and 
Answers
Attachment V--Suspensions--Interest on Advances and Federal Taxation 
of UC
Attachment VI--Text of Sections 2003 and 2004 of Public Law 111-5
Attachment VII--UC Modernization Distributions--Amount

Attachment I

Modernization Incentive Payments--Overview

In General
    Section 2003(a) of Public Law 111-5 added new subsection (f) to 
Section 903, SSA, to provide for incentive payments to States.
    These incentive payments are calculated in the same manner as a 
``Reed Act'' distribution. This means each State's share is based on 
its proportionate share of FUTA taxable wages multiplied by the $7 
billion authorized by the amendments. For purposes of computing each 
State's proportionate share, the Secretary of Labor will use the 
taxable wages that would have been used for calculating any Reed Act 
distribution occurring on October 1, 2008. As provided by Section 
903(f)(1)(B), SSA, tax year 2007 data is used for determining each 
State's share.
    A State's share will be reserved in the Federal Unemployment 
Account (FUA) in the UTF for purposes of making incentive payments. As 
of the close of Federal fiscal year 2011 (that is, September 30, 2011), 
this limitation expires, and any unused amounts again become available 
for any FUA use.
    A State's eligibility for its maximum incentive payment is 
conditioned on its law containing specific provisions:
     To obtain the first one-third of its share, the State law 
must provide for either a base period that uses recent wages or an 
alternative base period (ABP) using recent wages. This ``base period 
provision'' is discussed in Attachment II.
     If a State qualifies under this base period provision, it 
may obtain the remaining two-thirds if its State law contains two of 
four options related to benefit eligibility. These options are 
discussed in Attachment III.

State Applications

    In General. The State must apply to the Department of Labor to 
receive any incentive payment. A complete application must document 
which provisions of State law meet the requirements for obtaining an 
incentive payment as interpreted by this UIPL. The application must 
also describe how the State intends to use any incentive payment to 
improve or strengthen the State's UC program. Attachment II discusses 
what constitutes a complete application for purposes of the base period 
provision and Attachment III discusses what constitutes a complete 
application for purposes of the other benefit eligibility provisions.
    Applications are to be signed by the State agency administrator and 
addressed to: Cheryl Atkinson, Administrator, Office of Workforce 
Security, 200 Constitution Avenue, NW., Room S-4231, Washington, DC 
20210.
    States may submit applications by mail, fax, or e-mail. States may 
fax applications to 202-693-2874 to the attention of the Division of UC 
Legislation. E-mail submissions should be sent to 
Atkinson.Cheryl@dol.gov with a cc to Hildebrand.Gerard@dol.gov. Copies 
should be provided to the appropriate Regional Office. For purposes of 
determining the date of receipt (as described immediately below), the 
date of receipt in the National Office will be used.
    Review Process. Within 30 days of receipt by the Department of a 
State's complete application, the State will be notified whether it 
qualifies for an incentive payment. If it does, the Secretary of 
Treasury will transfer the amount of the incentive payment within seven 
days of receipt of the Department's certification. Since all incentive 
payments must be made before October 1, 2011, and since the Department 
must have adequate time to review any application, all applications 
must be received by the Department no later than August 22, 2011.
    To expedite processing of applications and distribution of 
incentive payments to the States, the Department is providing for a 
two-tiered application process under which a State may make one 
application regarding the base period provisions and a separate 
application regarding the other benefit eligibility provisions. Nothing 
prohibits States from making a single application. However, since the 
Department anticipates relatively swift action on base period 
applications, it may be advantageous for States to make two 
applications.
    State Law Status. Applications should only be made under provisions 
of State laws that are currently in effect as permanent law and not 
subject to discontinuation. This means that the provision is not 
subject to any condition--such as an expiration date, the balance in 
the State's unemployment fund, or a legislative appropriation--that 
might prevent the provision from becoming effective, or that might 
suspend, discontinue, or nullify it.
    There is one exception to this limitation. In some cases, a State 
might enact a new provision of law to qualify for the incentive 
payment, but delay its effective date due to implementation 
requirements. In these cases, if the State law provision takes effect 
within 12 months of the date of the Secretary of Labor's certification, 
then the provision will be considered to be in effect as of the date of 
the Secretary's certification to the Secretary of Treasury. In the case 
of a provision that is not effective until more than 12 months (which 
may be the case with ABP provisions) the State

[[Page 48604]]

should time its application so that the Secretary's certification will 
be made no more than 12 months prior to its law's effective date. Thus, 
for example, since the Secretary must rule on any application within 30 
days, the application should be submitted no more than 13 months before 
the State law's effective date. Note, however, as discussed above, the 
Department will not consider applications received after August 22, 
2011. As a result, the latest effective date of a provision must be on 
or before September 21, 2012.

Receipt and Use of Incentive Payments

    Following the Secretary's certification for an incentive payment, 
the entire amount certified will be transferred to the State's account 
in the UTF. A State may use its incentive payment: (1) To pay UC 
(including dependents' allowances); or (2) upon appropriation of its 
State legislature, to pay UC and employment service administrative 
costs. The conditions for administrative use of the incentive payment 
are the same as those applicable to the $8 billion Reed Act 
distribution made in 2002. Refer to Q&As 9 through 19 and Q&A 21 in 
Attachment I to TEGL 18-01 for guidance. Like the $8 billion Reed Act 
distribution, there is no time limit on the use of the incentive 
payment for benefit or administrative purposes. Incentive payments 
available for the payment of UC must, however, be expended before the 
State may obtain an advance to pay UC under Title XII, SSA.

Paperwork Reduction Act (PRA) Statement

    The public reporting burden for this collection of information is 
estimated to average approximately eight hours per response including 
time for gathering and maintaining the data needed to complete the 
required disclosure.
    This UIPL contains a new collection of information in the form of 
an application for UC Modernization Incentive Payments. According to 
the Paperwork Reduction Act of 1995 (Pub. L. 104-13), no persons are 
required to respond to a collection of information unless such 
collection displays a valid Office of Management and Budget (OMB) 
control number. The Department is planning to submit an Information 
Collection Request (ICR) to OMB requesting a new OMB Control Number. 
The Department notes that a Federal agency cannot conduct or sponsor a 
collection of information unless it is approved by OMB under the PRA, 
and displays a currently valid OMB control number, and the public is 
not required to respond to a collection of information unless it 
displays a currently valid OMB control number. See 44 U.S.C. 3507. 
Also, notwithstanding any other provisions of law, no person shall be 
subject to penalty for failing to comply with a collection of 
information if the collection of information does not display a 
currently valid OMB control number. See 44 U.S.C. 3512. The Department 
will notify States of OMB's decision upon review of the Department's 
ICR, including any changes that may result from this review process.

Attachment II

Modernization Incentive Payments

Base Period Provisions
Questions and Answers
    II-1. Question. What provisions must my law contain to qualify for 
an incentive payment under the base period provision?
    Answer. There are two options:
     A regular base period that includes the most recently 
completed calendar quarter before the start of the benefit year, or
     An ABP that includes the most recently completed calendar 
quarter, when the claimant cannot meet monetary qualifying requirements 
using a ``regular'' base period that excludes this quarter.
    II-2. Question: I believe my State law qualifies for the incentive 
payment. What should my application State?
    Answer: The application must:
     Identify the State;
     Cite the specific base period provision of State law 
supporting the application;
     Certify that the provision of State law is either 
currently in effect or will become effective for claims filed on or 
after a specified date;
     Contain a certification that the provision is permanent 
(that is, not temporary) and is not subject to discontinuation under 
any circumstances other than repeal by the legislature;
     Address how the State intends to use the incentive payment 
to improve or strengthen its UC program; and
     Attach the relevant provision of State law.
    II-3. Question: Is the Department aware of any existing ABP 
provisions that will not qualify for the incentive payment?
    Answer: Yes. A provision providing that an ABP will be used only if 
the unemployment fund is above a certain ``solvency'' threshold would 
not qualify because the ABP is subject to discontinuation under a 
specified condition. Also, a State law that permits use of an ABP only 
after a specified number of days have elapsed since the end of the last 
completed quarter in order for wage records to be received would not 
qualify because it does not permit use of the ABP during the days 
immediately following the end of the quarter.

Attachment III

Modernization Incentive Payments

Other Eligibility Provision
Questions and Answers

In General

    III-1. Question: If my State qualifies for the one-third incentive 
payment related to its base period provision, what provisions must my 
law contain to qualify for certification for the remaining two-thirds 
of its incentive payment?
    Answer: In brief, a State law must contain provisions carrying out 
at least two of the following:
     UC is payable to certain individuals seeking only part-
time work.
     An individual is not disqualified from UC for separations 
due to certain compelling family reasons.
     An additional 26 weeks of UC is paid to exhaustees who are 
enrolled in and making satisfactory progress in certain training 
programs.
     Dependents' allowances of at least $15 per dependent per 
week, subject to a minimum aggregation, are paid to eligible 
beneficiaries.

Part-Time Workers

    III-2. Question: What is the part-time work option?
    Answer: State law must provide that an individual will not be 
denied UC under any provision relating to availability for work, active 
search for work, or refusal to accept work, solely because such 
individual is seeking only part-time work as defined by the Secretary 
of Labor.
    The State law may, however, deny benefits if a majority of the 
weeks of work in the individual's base period do not include part-time 
work. States are not required to have this exception in their laws in 
order to qualify for the incentive payment under this option. In fact, 
a State may determine that an individual who has previously worked full 
time may be eligible for UC even if the individual limits him/herself 
to seeking part-time work.
    III-3. Question: For purposes of ``seeking only part-time work,'' 
how does the Department define ``seeking only part-time work''?
    Answer: For purposes of the incentive payment, the Department 
defines

[[Page 48605]]

``seeking only part-time work'' as work meeting any one of the 
following situations:
     Situations where the individual is willing to work at 
least 20 hours per week.
     Situations where the individual is available for a number 
of hours per week that are comparable to the individual's part-time 
work experience in the base period. For example, if the individual 
worked 16 hours per week in the base period, the State may require the 
individual to seek jobs offering at least 16 hours of work. If the 
individual worked 32 hours per week, the State may require the 
individual to seek jobs offering at least 32 hours of work.
     Situations where the individual is available for hours 
that are comparable to the individual's work at the time of the most 
recent separation from employment. This is similar to the preceding 
definition except that it allows the State to take into account periods 
between the end of the base period and the filing of the first claim 
for UC.
    The Department will approve a State's application if the State uses 
any one of the above definitions. The State may also use a combination 
of these definitions. For example, a State may define part-time work as 
work having comparable hours to the individual's work in the base 
period, except that an individual must be available for at least 20 
hours of work per week.
    A State may also have a broader definition of part-time work. For 
example, the State may require the individual to be available for only 
10 or more hours per week. Of course, the State may not allow the 
individual to limit his or her availability to the extent that it 
constitutes a withdrawal from the labor market. (See 20 CFR 
604.5(a)(1).)
    III-4. Question: My State law provides for payment to individuals 
seeking part-time work only if they have worked part-time during the 
entire base period. Would an application containing this limitation be 
certified?
    Answer: No. To qualify for the incentive payment, a State law must 
permit an individual to seek part-time work, except that the State may 
deny benefits if a majority of weeks of work in the base period do not 
include part-time work (i.e., were full-time). Requiring part-time work 
throughout the entire base period is more restrictive than the 
``majority'' standard and would not qualify.
    III-5. Question: My State law provides for payment to individuals 
seeking part-time work only if my agency determines the individual has 
a legitimate reason to limit employment to part-time work. Would an 
application containing this limitation be certified?
    Answer: No. To qualify for the incentive payment, a State law must 
permit an individual to seek part-time work, except that the State may 
deny benefits if a majority of weeks of work in the base period do not 
include part-time work (i.e., were full-time). Requiring agency 
approval is more restrictive.
    III-6. Question: My State law provides for payment to individuals 
who have a history of part-time work. Would an application containing 
this limitation be certified?
    Answer: It depends on how the State interprets and applies this 
provision. To obtain certification, the State's application must 
demonstrate that, at a minimum, all individuals who work the majority 
of weeks in the base period in part-time employment will not be 
determined ineligible because they are seeking only part-time work.
    III-7. Question: My State will use the option that permits us to 
examine whether the majority of weeks of work in the individual's base 
period are in part-time work. If the individual worked 40 weeks in the 
base period and 21 weeks are part-time, must my State's law provide 
that this individual may limit his/her availability to only part-time 
work?
    Answer: Yes, the State's law must provide that the individual may 
limit his/her availability to only part-time work under the facts as 
stated. Since the individual has worked the majority of weeks in the 
base period in part-time work, this individual must be allowed to seek 
only part-time work, as defined by the Department. For purposes of this 
option, a ``week of work'' is a calendar week.
    III-8. Question: My State law requires an individual to be 
available for the same schedule of work as previously worked. For 
example, if the individual worked (either part-time or full-time) 
during specific hours Monday through Friday, the individual will be 
denied if he or she is not available for the same schedule on these 
calendar days. Will my State's application be certified if it contains 
this provision?
    Answer: Yes. The Federal requirement is that an individual not be 
denied ``solely because the individual is seeking only part-time 
work.'' In this case, the State is placing another, additional test of 
availability on all individuals seeking work, regardless of whether the 
work is full-time (as defined under State law) or part-time (as defined 
consistent with Q&A III-3).
    In cases where a test applies only to part-time workers, the 
Department will evaluate the test to determine if it is consistent with 
the definition of ``seeking suitable part-time work'' contained in this 
UIPL. For example, if a State required that only individuals seeking 
part-time work be available for the same work schedule, the State's 
application would be denied since this UIPL does not interpret 
``suitable part-time work'' to include such a requirement. If a State 
test, although worded in a way that is applicable to both full-time and 
part-time workers, is in fact applicable only to part-time workers, it 
will be reviewed as described in this paragraph.

Quits Due to Compelling Family Reasons

    III-9. Question: For purposes of qualifying for the incentive 
payment, what are ``compelling family reasons?''
    Answer: To qualify for the incentive payment using the ``compelling 
family reason'' option, the State law must provide that an individual 
will not be disqualified for separating from work under any and all of 
the following circumstances:
     Domestic violence (verified by reasonable and confidential 
documentation as the State law may require) which causes the individual 
reasonably to believe that the individual's continued employment would 
jeopardize the safety of the individual or of any member of the 
individual's immediate family (as defined by the U.S. Department of 
Labor (Department)).
     The illness or disability of a member of the individual's 
immediate family (as these terms are defined by the Department).
     The need for the individual to accompany his/her spouse: 
(1) To a place from which it is impractical for such individual to 
commute; and (2) due to a change in location of the spouse's 
employment.
    III-10. Question: An employer discharges an individual for chronic 
absenteeism that constitutes misconduct under my State's law. Only 
after the separation does the individual indicate that the absences 
were to care for a member of his/her immediate family. Would my State's 
application be denied if individuals in this situation were 
disqualified under a misconduct separation?
    Answer: No. The Federal law provides that an ``individual shall not 
be disqualified from [UC] for separating from employment'' for 
compelling family reasons. In some cases, such as when the individual 
fails to advise the employer of an absence, the basis for the 
separation may go beyond ``compelling

[[Page 48606]]

family reasons.'' That is, misconduct may exist despite the existence 
of what otherwise would be compelling family reasons, and the State may 
deny the individual under its misconduct provisions.
    To be certified, a State law must reasonably define misconduct. The 
fact that the employer initiated the discharge does not mean misconduct 
exists. For example, an individual who is hospitalized as a result of 
domestic violence may be unable to contact the employer. If the 
individual is discharged in such cases, the State law, to be certified, 
must consider the individual to have separated from work due to 
compelling family reasons. Similarly, if the employer discharges an 
individual who has informed the employer of expected absences to care 
for an ill child, the State law must consider the individual to have 
been separated from work due to compelling family reasons.
    Many State misconduct provisions have been interpreted to require a 
willful and wanton disregard of the employer's interest. The Department 
anticipates that these State law provisions are generally expected to 
meet the conditions pertaining to compelling family reasons since 
separations for compelling family reasons do not in themselves 
constitute a willful and wanton disregard of the employer's interest. 
However, to assure the State's law does not provide for a denial due to 
misconduct for such separations, the State's application will need to 
address the application of its misconduct provisions to compelling 
family reasons.
    III-11. Question: For purposes of the domestic violence provision, 
what is meant by ``verified by such reasonable and confidential 
documentation as the State law may require?''
    Answer: As in other UC adjudications, the State must gather 
sufficient facts to support any eligibility determination, which may 
include verification of the individual's belief that his/her continued 
employment would jeopardize the safety of the individual or a member of 
the immediate family. When the State verifies the individual's belief, 
the Department has determined the State may reasonably require a 
statement supporting recent domestic violence from a qualified 
professional from whom the individual has sought assistance such as a 
counselor, shelter worker, member of the clergy, attorney, or health 
worker.
    The State must accept any other kind of evidence that reasonably 
proves domestic violence. The State may accept, but may not require, as 
evidence (1) an active or recently issued protective or other order 
documenting domestic violence, or (2) a police record documenting 
recent domestic violence as doing so will create an unreasonable bar to 
benefits.
    If the State obtains one instance of information that adequately 
verifies the individual's belief, it would defeat the purpose of the 
new Federal provisions for the State to burden the individual by 
requiring additional information. Therefore, any application that 
indicates that multiple verifications are necessary will not be 
certified.
    At a minimum, for purposes of holding information about domestic 
violence confidential, the Department's regulations at 20 CFR Part 603 
addressing the confidentiality of UC information will apply, as it does 
to all confidential UC information. Given the sensitivity of the kind 
of information that may be needed to prove domestic violence, as well 
as the confidential sources from which it may have to be obtained, the 
Department views the language about ``confidential information'' as an 
authorization to seek information which may come from confidential 
sources and as a reminder that such information must be kept 
confidential.
    III-12. Question: For purposes of the domestic violence and 
illness/disability options, what is meant by ``immediate family 
member?''
    Answer: At a minimum, a State must include spouses, parents and 
minor children under the age of 18 in its definition of ``immediate 
family member'' for its provision to qualify for certification. States 
may provide for a more inclusive definition (for example, including 
grandparents, sisters, brothers, domestic partners, adult children or 
foster children), but they are not required to do so for their 
provisions to be certified.
    III-13. Question: For purposes of the illness/disability option, 
what is meant by ``illness'' and ``disability?''
    Answer: ``Illness'' means a verified illness which necessitates the 
care of the ill person for a period of time longer than the employer is 
willing to grant leave (paid or otherwise). Similarly, ``disability'' 
means a verified disability which necessitates the care of the disabled 
person for a period of time longer than the employer is willing to 
grant leave (paid or otherwise) for. ``Disability'' encompasses all 
types of disability, including (1) mental and physical disability; (2) 
permanent and temporary disabilities; and (3) partial and total 
disabilities. What is key is that the individual's illness or 
disability necessitates care by another individual and the employer 
does not accommodate the employee's request for time-off.
    This is a minimum standard for a State to receive its incentive 
payment. States may have broader eligibility provisions. However, a 
State law provision would not be certified if it has a narrower 
definition of illness or disability or provides for overly restrictive 
limits on the types of verification of illness. For example, if the 
State requires a medical doctor to verify an illness or disability when 
other sources of verification are available, the application would not 
be accepted. As another example, if a State law's provisions only apply 
when the family member is terminally ill, the provision will not be 
certified.
    III-14. Question: My State law pertaining to separations to care 
for family members is limited to cases where no reasonable, alternative 
care was available. Would this provision be certified?
    Answer: No. The new Federal provisions broadly require, as a 
condition of certification, that the State law not disqualify an 
individual separating because of the ``illness or disability of a 
family member. * * *'' The Act does not permit a State to limit 
eligibility to particular circumstances surrounding a separation for 
this reason. Thus, a provision would not be certified if it applies 
only when no reasonable, alternative care is available.
    III-15. Question: For purposes of quitting to accompany a spouse to 
a new location from which it is impractical to commute, what is meant 
by ``impractical?''
    Answer: What is ``impractical'' will be based on commuting patterns 
in the locality. States should assure that their provisions reasonably 
reflect these commuting patterns.
    III-16. Question: My State looks at whether it is impractical for 
the individual to commute from the new location. We do not examine the 
reason why the spouse relocated. Would this provision qualify for an 
incentive payment?
    Answer: In this case, the State permits payment of UC in all 
situations required for the State to qualify for an incentive payment. 
State law may provide for broader eligibility than required for 
certification, such as where it is not practical to commute from the 
new location.
    III-17. Question: Do the provisions on compelling family reasons 
affect my State's availability requirements as a condition of claimant 
eligibility?
    Answer: There is no effect. States must continue to require, at a 
minimum,

[[Page 48607]]

that individuals be able to and available for work as defined by the 
Department's regulations at 20 CFR part 604. The new Federal provisions 
on compelling family reasons relate only to whether the reason for 
quitting work is disqualifying, and do not address issues related to 
the individual's continuing unemployment. Thus, for example, an 
individual who quits employment for a compelling family reason may not 
be disqualified for quitting, but the individual will be ineligible if 
unavailable for work.

Training Benefits

    III-18. Question: If a State elects the training benefit option, 
under what conditions must it be payable?
    Answer: The State law must provide that a training benefit be 
payable to any individual who is unemployed (as determined under State 
law, including partial and part-total unemployment), has exhausted all 
rights to regular UC, and is enrolled in and making satisfactory 
progress in either:
     A State-approved training program, or
     A job training program authorized under the Workforce 
Investment Act of 1998 (WIA).
    The State law must provide for payment of the training benefit to 
individuals who are enrolled in and making satisfactory progress in 
both of the above types of programs. However, the State law is not 
required to provide for payment of the training benefit to an 
individual who is receiving ``similar stipends'' or other training 
allowances which can be used for non-training costs. (In addition, the 
State may treat such stipends as disqualifying income.) In this case, 
``similar stipend'' means an amount provided under a program with 
similar aims, such as providing training to increase employability, and 
in approximately the same amounts.
    WIA or other approved job training programs for which training 
benefits are paid may be limited to those that prepare an individual 
for entry into a high-demand occupation if the individual has been:
     Separated from a declining occupation, or
     Involuntarily and indefinitely separated from employment 
as a result of a permanent reduction of operations at the individual's 
place of employment.
    The requirements related to the job training program are minimum 
requirements for purposes of certification. If the State pays training 
benefits to a broader class of individuals participating in training 
than specified above, the State will meet the requirements for this 
option. For example, a State law may pay additional training benefits 
to any individual who is preparing for a job in a ``demand occupation'' 
as opposed to a ``high-demand occupation.'' However, a State law would 
not qualify for certification if it limits training benefits to a 
narrower class of individuals. For example, if the training benefits 
are payable only to individuals in job training programs leading to 
high-wage occupations, the State law would not be certified because the 
Federal provision does not authorize a high-wage restriction.
    Whether an occupation is ``declining'' or ``high-demand'' will be 
determined by the State using available labor market information data.
    III-19. Question: How must the amount of training benefits be 
determined for purposes of this option?
    Answer: The amount of UC payable for a week of unemployment must, 
at a minimum, equal the individual's weekly benefit amount (including 
dependents' allowances) for the most recent benefit year less any 
deductible income as determined under State law. The total amount of UC 
payable to any individual must equal at least 26 times the individual's 
average weekly benefit amount (including dependents' allowances) for 
the most recent benefit year.
    III-20. Question: What is meant by ``State-approved training 
program''?
    Answer: A program that the State determines is reasonably expected 
to lead to employment in an occupation, including high-demand 
occupations.
    III-21. Question: What evidence may my State require for purposes 
of determining whether an individual is making satisfactory progress in 
the training program?
    Answer: The State may require reasonable evidence of satisfactory 
progress, such as reports from training providers and evidence of 
attending training when attendance is a necessary part of such 
training.
    III-22. Question: My State has a training benefit provision, but 
amounts must be appropriated each year by the legislature. Will this 
provision qualify for the incentive payment?
    Answer: No. To qualify for an incentive distribution, the State law 
provision may not be subject to discontinuation. A provision subject to 
appropriation may be capped with the result that it could be 
discontinued within the State's fiscal year for which the appropriation 
is made. Further, there is no guarantee any appropriation will be made 
for future years.
    III-23. Question: May the training benefit be paid after federally-
funded extensions of UC?
    Answer: Yes. The training benefit may be paid after the individual 
exhausts eligibility under the current Emergency Unemployment 
Compensation program or under the permanent Federal-State Extended 
Benefits program.
    III-24. Question: May eligibility for the training benefit be 
terminated by the expiration of a benefit year, or may it be limited to 
individuals who have not previously received it?
    Answer: No. Federal law does not contain these limitations.

Dependents' Allowances

    III-25. Question: What is meant by ``dependent'' for purposes of 
qualifying for an incentive payment under the option related to 
dependents' allowances, as well as in other provisions relating to 
incentive payments?
    Answer: The term ``dependent'' is defined under State law for all 
of these purposes.
    III-26. Question: With respect to the dependents' allowances 
option, what dollar amounts must be paid as dependents' allowances to 
qualify for the incentive payment?
    Answer: The State must pay an amount equaling at least $15 per 
dependent per week. However, the State may cap the total allowance paid 
to an individual for dependents at $50 per week of unemployment or 50 
percent of the individual's weekly benefit amount for the benefit year, 
whichever is less.
    The State is not, however, required to pay the full dependents' 
allowance when the individual has earnings for the week. Instead, the 
State may provide for a reasonable reduction in the amount of any such 
allowance for such week. A State law will qualify for certification 
under this ``reasonableness'' test if it provides for the same pro rata 
reduction in the dependents' allowance as was applied to the weekly 
benefit amount. For example, if the individual is eligible for one-half 
of the weekly benefit amount, the State may reduce the dependents' 
allowance by one-half. If a State applies another reduction test that 
it believes is reasonable, the State's application must explain why the 
test is reasonable.
    III-27. Question: My State does not pay a dependents' allowance if 
the individual qualifies for the maximum weekly benefit amount. Would 
my State's dependents' allowances provision qualify?
    Answer: No. The new Federal provisions require, as a condition of 
certification, that a State pay dependents' allowances, but permits 
some limitation on their aggregation. Because this State provision 
places an

[[Page 48608]]

additional limitation on dependents' allowances, the Department would 
not certify it. Similarly, the Department would not certify a State 
provision that does not pay dependents' allowances to individuals who 
qualify for the minimum weekly benefit amount.

Regular Compensation

    III-28. Question: The options relating to part-time work, 
compelling family reasons, and dependents' allowances specify that they 
must be applied to ``regular compensation.'' Does this mean they are 
not required to be applied to other payments of UC?
    Answer: For UC programs where benefits are funded by the Federal 
government, Federal ``equal treatment'' requirements apply. Therefore, 
except where the laws and regulations governing these programs provide 
otherwise, benefits for the following UC programs must be paid in the 
same amount, on the same terms, and under the same conditions as 
regular compensation:
     The permanent Federal-State Extended Benefits program.
     The UC programs for former Federal employees and ex-
military personnel. Moreover, these programs are also included in the 
definition of ``regular compensation'' in Section 205(2) of the 
Federal-State Extended Unemployment Compensation Act of 1970, as 
amended.
     The current emergency UC program, commonly called the 
EUC08 program.
     The Disaster Unemployment Assistance program.
     Trade Readjustment Allowances payable under the Trade Act, 
as amended.
    However, unless a State's law contains an ``equal treatment'' 
requirement for ``additional compensation,'' it need not apply the 
requirements relating to part-time work, compelling family reasons and, 
with one possible exception for the training benefit (explained in the 
next paragraph), dependents' allowances in the payment of additional 
compensation. Additional compensation is not regular compensation, but, 
rather, compensation totally financed by a State and payable under 
State law by reason of high unemployment or other special factors. 
Thus, the limitation to ``regular compensation'' means, for example, 
that for a State's provision relating to part-time workers to be 
certified, the State law need not pay additional compensation to part-
time workers.
    Note that benefits under the training benefits option are a form of 
additional compensation. However, as discussed above for the training 
benefits option, the State must include dependents' allowances in 
calculating the individual's weekly benefit amount for the training 
benefit. Those dependents' allowances must be calculated for the 
training benefit in the same manner as they are calculated for regular 
compensation. Thus, if a State selects its dependents' allowances 
provision for certification, it must apply it to the training benefit.

Applications for Incentive Payments

    III-29. Question: I believe my State law qualifies for an incentive 
payment under two or more of the above options. What should my 
application State?
    Answer: For each option under which the State is applying, the 
application must:
     Name the State;
     Cite to and attach the specific provisions of State law 
supporting the application;
     Certify that the provision of State law is either 
currently in effect or will become effective for claims filed after a 
specified date;
     Contain a certification that the provision is permanent 
(that is, not temporary) and is not subject to discontinuation under 
any circumstances other than repeal by the legislature; and
     Address how the State intends to use the incentive payment 
to improve or strengthen its UC program.
    The following additional information is also required:
     When an application is based on an interpretation of State 
law rather than explicit statutory language (as may be the case under 
the options for part-time workers and compelling family reasons), the 
State must provide evidence of its interpretation. This evidence may 
include regulations, court cases, precedent decisions, or 
administrative procedures. An application that merely asserts a 
provision of State law is interpreted in a certain way will be deemed 
incomplete and denied. Similarly, an application that cites to a court 
case as an authoritative interpretation will be deemed incomplete and 
denied unless the State provides regulations or procedures 
demonstrating the court case has been implemented. The application must 
describe these authorities and attach copies of any relevant material.
     For an application pertaining to compelling family 
reasons, the State must (1) explain its requirements for verification 
of domestic violence and why they are reasonable, and (2) describe how 
the State's misconduct provisions are consistent with Q&A III-10. The 
application must attach copies of any relevant material supporting the 
application's statements.
     For an application that provides for a ``reasonable 
reduction'' in dependents' allowances for weeks with earnings, describe 
the reduction and why it is believed to be reasonable.
    III-30. Question: My State has submitted an application under the 
base period provision for the first one-third of its incentive payment. 
Should we wait until that application is approved prior to submitting 
an application for the remaining two-thirds?
    Answer: No. It is not necessary to wait for approval of the base 
period application. However, the Department will not certify the State 
for the remaining two-thirds until it certifies the base period 
provision.

Attachment IV

Special Administrative Transfers

Questions and Answers
    IV-1. Question: How was Federal law amended to authorize the 
special administrative transfer?
    Answer: Section 2003(a) of Public Law 111-5 added a new subsection 
(g) to Section 903, SSA, to make a special administrative transfer to 
all States totaling $500,000,000 within 30 days of the date of 
enactment, which was February 17, 2009. A State need take no action to 
receive its share of the distribution.
    IV-2. Question: How is my State's share of the special 
administrative transfer determined?
    Answer: It is calculated in the same manner as a ``Reed Act'' 
distribution. This means each State's share is based on its 
proportionate share of FUTA taxable wages multiplied by the 
$500,000,000 authorized by the amendments. For purposes of computing 
each State's proportionate share, the Secretary of Labor will use the 
taxable wages that would have been used for calculating any Reed Act 
distribution occurring on October 1, 2008. As provided by the SSA, data 
for tax year 2007 is used for determining each State's share.
    IV-3. Question: What are the permissible uses of the administrative 
transfer?
    Answer: The administrative transfer may be used only for--
     Implementing and administering the provisions of State law 
that qualify the State for the incentive payments;
     Improved outreach to individuals who might be eligible by 
virtue of these provisions;

[[Page 48609]]

     The improvement of UC benefit and tax operations, 
including responding to increased demand for UC; and
     Staff-assisted reemployment services for UC claimants.
    IV-4. Question: Must my State legislature appropriate these special 
administrative transfers?
    Answer: Federal law does not require such an appropriation. (This 
is unlike the incentive payments discussed in Attachment I, which must 
be appropriated by the State legislature before they can be used for 
administrative purposes.) However, nothing prohibits a State 
legislature from appropriating such money or from attaching more 
specific or limiting conditions to the use of such money.
    IV-5. Question: Do I need to amend my State's UC law?
    Answer: Most State UC laws contain permanent provisions regarding 
the use of moneys transferred under Section 903, SSA. These provisions 
usually mirror the requirements of Section 903(c)(2), SSA, pertaining 
to ``traditional'' Reed Act distributions, including a provision that 
the moneys be used for the payment of UC unless appropriated by the 
legislative body of the State for the administration of the State's UC 
law or the State's system of public employment offices.
    The special administrative transfer is not, however, available for 
the payment of UC and its administrative uses are more limited. As a 
result, if the State's UC law permits a broader use, the State must 
either (1) amend its UC law to reflect the more limited use of the 
special administrative transfer, or (2) interpret its UC law consistent 
with the limited uses specified in Section 903(g), SSA. States 
exploring the latter option may be able to base their interpretation on 
State UC law provisions that require interpretations of State UC law in 
a manner consistent with Federal law.
    Attachment II to UIPL 39-97 contains draft language for State Reed 
Act provisions, which many States used to create their permanent 
provisions. For these States, we recommend the following language be 
added:

    (6) Notwithstanding paragraph (1), moneys credited with respect 
to the special transfer made under section 903(g), SSA, may be used 
solely for the purposes specified in such section and are not 
subject to appropriation by the legislature. [Emphasis added.]

States should modify this language to accord with State usage and to 
assure correct State law citations. The emphasized language is 
necessary only if the State chooses to avoid the appropriation process 
for the special administrative transfer. As an alternative to this 
approach, States may also consider a broader amendment that 
automatically authorizes the State law to take into account any Federal 
law limitations on use not contained in State law.
    IV-6. Question: My State has an advance under Title XII, SSA, so 
that it can continue to pay benefits. Does this affect my 
administrative transfer?
    Answer: No. Eligibility for the transfer does not depend upon a 
State having no outstanding advance. Therefore, the entire amount of 
the special administrative transfer for a State will be transferred to 
the State's account in the UTF, notwithstanding any advance.

Attachment V

Suspensions

Interest on Advances and Federal Taxation of UC

Interest Payments

    V-1. Question: How did the amendments made by Section 2004 of 
Public Law 111-5 affect interest due on Title XII advances?
    Answer: Section 2004 added new paragraph (10) to Section 1202(b), 
SSA. Under this new paragraph, any interest payment due during the 
period beginning on the date of enactment (that is beginning February 
17, 2009) and ending on December 31, 2010, shall be ``deemed to have 
been'' paid by the State. This effectively waives all interest due 
during this period. Further, no interest accrues on any advance or 
advances made to a State during this period.
    V-2. Question: Will interest accrue on advances made prior to the 
date of enactment?
    Answer: Yes. Although interest will accrue on such advances, any 
interest due within the period beginning February 17, 2009, and ending 
on December 31, 2010 will, as discussed in the previous Q&A, be waived. 
However, interest accrued after September 30, 2010, will not be due 
within this period. Instead, such accrued interest will be due no later 
than September 30, 2011.
    V-3. Question: How is interest after December 31, 2010, determined?
    Answer: The normal rules for determining the amounts of interest 
accrued and the dates interest is due will again apply.

Partial Suspension of Federal Income Tax

    V-4. Question: How did the amendments made by Public Law 111-5 
affect the taxation of unemployment benefits?
    Answer: For tax year 2009 only, the first $2,400 paid in 
unemployment benefits is not subject to Federal income tax. Amounts 
above $2,400 remain taxable.
    V-5. Question: Will this suspension require any operational changes 
by my agency?
    Answer: States are to continue to (1) report UC payments on Form 
1099 and (2) withhold Federal income tax from UC benefits when 
requested by the individual. States are encouraged to promptly update 
information provided to individuals about the taxation of UC so that 
individuals may make informed decisions about whether to elect (or 
continue) the withholding of Federal income tax from UC.

Attachment VI

Text of Sections 2003 and 2004 of Public Law 111-5

    Text may be found at: https://wdr.doleta.gov/directives/attach/UIPL/UIPL14-09f.pdf.

Attachment VII

                                     UC Modernization Distributions--Amounts
----------------------------------------------------------------------------------------------------------------
                                     $500 M Admin        $7.0 Billion
              State                  Distribution        Distribution         \1/3\ Share         \2/3\ Share
----------------------------------------------------------------------------------------------------------------
AK..............................          $1,115,660         $15,619,234          $5,206,411         $10,412,823
AL..............................           7,176,668         100,473,351          33,491,117          66,982,234
AR..............................           4,283,524          59,969,332          19,989,777          39,979,555
AZ..............................          10,721,206         150,096,885          50,032,295         100,064,590
CA..............................          59,905,736         838,680,283         279,560,094         559,120,189
CO..............................           9,104,983         127,469,762          42,489,921          84,979,841
CT..............................           6,272,238          87,811,338          29,270,446          58,540,892
DC..............................           1,973,784          27,632,982           9,210,994          18,421,988
DE..............................           1,562,028          21,868,398           7,289,466          14,578,932

[[Page 48610]]

 
FL..............................          31,733,965         444,275,516         148,091,839         296,183,677
GA..............................          15,734,725         220,286,144          73,428,715         146,857,429
HI..............................           2,180,480          30,526,725          10,175,575          20,351,150
IA..............................           5,058,171          70,814,387          23,604,796          47,209,591
ID..............................           2,304,345          32,260,831          10,753,610          21,507,221
IL..............................          21,510,763         301,150,687         100,383,562         200,767,125
IN..............................          10,607,023         148,498,323          49,499,441          98,998,882
KS..............................           4,926,439          68,970,143          22,990,048          45,980,095
KY..............................           6,441,139          90,175,943          30,058,648          60,117,295
LA..............................           7,027,524          98,385,331          32,795,110          65,590,221
MA..............................          11,620,239         162,683,341          54,227,780         108,455,561
MD..............................           9,053,580         126,750,124          42,250,041          84,500,083
ME..............................           2,016,519          28,231,263           9,410,421          18,820,842
MI..............................          14,877,327         208,282,572          69,427,524         138,855,048
MN..............................           9,290,259         130,063,620          43,354,540          86,709,080
MO..............................           9,522,006         133,308,082          44,436,027          88,872,055
MS..............................           4,009,761          56,136,656          18,712,219          37,424,437
MT..............................           1,394,697          19,525,764           6,508,588          13,017,176
NC..............................          14,647,397         205,063,552          68,354,517         136,709,035
ND..............................           1,039,443          14,552,205           4,850,735           9,701,470
NE..............................           3,116,126          43,625,769          14,541,923          29,083,846
NH..............................           2,242,944          31,401,220          10,467,073          20,934,147
NJ..............................          14,773,097         206,823,364          68,941,121         137,882,243
NM..............................           2,787,327          39,022,582          13,007,527          26,015,055
NV..............................           5,495,529          76,937,412          25,645,804          51,291,608
NY..............................          29,481,579         412,742,107         137,580,702         275,161,405
OH..............................          18,893,471         264,508,588          88,169,529         176,339,059
OK..............................           5,420,463          75,886,483          25,295,494          50,590,989
OR..............................           6,112,474          85,574,641          28,524,880          57,049,761
PA..............................          19,521,393         273,299,496          91,099,832         182,199,664
PR..............................           2,946,268          41,247,756          13,749,252          27,498,504
RI..............................           1,675,756          23,460,578           7,820,193          15,640,385
SC..............................           6,961,392          97,459,490          32,486,497          64,972,993
SD..............................           1,260,545          17,647,634           5,882,545          11,765,089
TN..............................          10,129,145         141,808,031          47,269,344          94,538,687
TX..............................          39,690,810         555,671,344         185,223,781         370,447,563
UT..............................           4,356,943          60,997,206          20,332,402          40,664,804
VA..............................          13,460,932         188,453,049          62,817,683         125,635,366
VI..............................             143,065           2,002,911             667,637           1,335,274
VT..............................             994,136          13,917,898           4,639,299           9,278,599
WA..............................          10,470,988         146,593,828          48,864,609          97,729,219
WI..............................           9,566,720         133,934,079          44,644,693          89,289,386
WV..............................           2,369,759          33,176,630          11,058,877          22,117,753
WY..............................           1,017,509          14,245,130           4,748,377           9,496,753
                                 -------------------------------------------------------------------------------
    US..........................         500,000,000       7,000,000,000       2,333,333,331       4,666,666,669
----------------------------------------------------------------------------------------------------------------

UIPL No. 14-09, Change 1--Special Transfers for Unemployment 
Compensation Modernization and Administration and Relief From Interest 
on Advances

    1. Purpose. To provide additional guidance to States concerning 
unemployment compensation (UC) modernization incentive payments, the 
recent special administrative transfers, and to correct guidance 
related to relief from interest on advances to State unemployment 
funds.
    2. References. The Assistance for Unemployed Workers and Struggling 
Families Act, Title II of Division B of Public Law 111-5, enacted 
February 17, 2009; the Social Security Act (SSA); the Federal 
Unemployment Tax Act (FUTA); and Unemployment Insurance Program Letter 
(UIPL) No. 14-09.
    3. Background. UIPL No. 14-09 provided guidance to States on the UC 
provisions of Public Law 111-5, including how to qualify for UC 
modernization payments. This UIPL, using a Question and Answer (Q&A) 
format, provides, among other things:
     Additional guidance concerning applications for UC 
modernization incentive payments and on using a training benefit 
provision to qualify for such payments.
     Additional guidance related to the special administrative 
transfer.
     A correction to earlier guidance related to relief from 
interest on advances.
    4. Action. State administrators should distribute this advisory to 
appropriate staff.
    5. Inquiries. Questions should be addressed to your Regional 
Office.
    6. Attachment. QUESTIONS AND ANSWERS

Attachment

Questions and Answers

UC Modernization--Applications Under ``Permanent'' Laws

    CH 1-1. Question. UIPL No. 14-09 provides that applications for 
incentive payments should only be made under provisions of State laws 
that are currently in effect as permanent law and not subject to 
discontinuation. Does this mean that my State may never repeal

[[Page 48611]]

any of the provisions that qualified it for a UC Modernization payment?
    Answer: No. If a State eventually decides to repeal or modify any 
of these provisions, it may do so, and it will not be required to 
return any incentive payments. However, in providing the incentive 
payments, Congress clearly intended to support States that had already 
adopted certain eligibility provisions and to expand eligibility to 
additional beneficiaries by encouraging other States to adopt these 
provisions. By specifying that the provisions must be in effect as 
permanent law, Congress also made clear its intention that the benefit 
expansions not be transitory. While States are free to change or repeal 
the provisions on which modernization payments were based subsequent to 
receipt of incentive payments, Congress and the Department rely on 
States' good faith in adopting the eligibility criteria, and the 
application must attest to this good faith as required by the following 
Q&A.
    CH 1-2. Question: Are there any changes to the application 
procedure?
    Answer: Yes. Each State's application for incentive payments must 
contain a certification that the application is submitted in good faith 
with the intention of providing benefits to unemployed workers who meet 
the eligibility provisions on which the application is based.

UC Modernization--Training Benefits

    CH 1-3. Question: May my State establish a limitation on when the 
individual must enroll in training to be eligible for the training 
benefit?
    Answer: Yes. As a general matter, individuals who were separated 
from declining occupations or businesses reducing operations, and who 
would benefit from job training, should be placed in appropriate 
training as soon as possible. A State law would qualify for 
certification if it provided that an individual must be enrolled in 
training no later than the end of the benefit year established with 
respect to the separation that makes the individual eligible for the 
training benefit. (That is, a separation from a declining occupation, 
or a separation due to a permanent reduction of operations at the 
individual's place of employment.) A State may provide for a longer 
period of time, but its application would not be certified if it 
provided for a period of time ending prior to the end of the 
individuals' benefit year.
    States adopting this limitation must notify individuals of the 
limitation at the time the State approves their initial claims.
    CH 1-4. Question: Q&A III-24 in UIPL No. 14-09 provides that 
eligibility for the training benefit may not be terminated by the 
expiration of a benefit year. Does this mean that my State may set no 
outside limits on payment of the training benefit?
    Answer: No. Q&A III-24 was intended to assure that an individual 
enrolled and making satisfactory progress in training did not have 
eligibility for the training benefit terminated because the benefit 
year ended. A State may, however, terminate an individual's training 
benefit after the individual has been provided a reasonable period to 
collect the entire training benefit. A State law would qualify for 
certification if it provided that no training benefits are payable one 
year following the end of the benefit year. If a State adopts a shorter 
termination date, its application must justify why the date is 
reasonable.
    CH 1-5. Question: An individual voluntarily quit a job. May my law 
deny this individual the training benefit?
    Answer: The answer depends upon the fac