UIPL, Modernization

CLASSIFICATION

UC Incentive Payments

Employment and Training Administration
Advisory System
U.S. Department of Labor
Washington, D.C. 20210

CORRESPONDENCE SYMBOL

DL
DATE

February 26, 2009

ADVISORY:

UNEMPLOYMENT INSURANCE PROGRAM LETTER No. 14-09

TO:

STATE WORKFORCE AGENCIES

FROM:

DOUGLAS F. SMALL /s/
Deputy Assistant Secretary

SUBJECT:

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:
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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.

RESCISSIONS
None

EXPIRATION DATE
Continuing

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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.
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 – Amounts

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