Unemployment Insurance Title XII Advances and Voluntary Repayment Process

CLASSIFICATION

Title XII/Reed Act

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

CORRESPONDENCE SYMBOL

DL/DFAS
DATE

July 16, 2009

ADVISORY:

UNEMPLOYMENT INSURANCE PROGRAM LETTER No. 32-09

TO:

STATE WORKFORCE AGENCIES

FROM:

JANE OATES /s/
Assistant Secretary

SUBJECT:

Title XII Advances - Whether Amounts Are Available for the Payment of
Benefits and the Establishment of Administrative Subaccounts

1.

Purpose. To (1) advise states of the Department of Labor’s (Department’s) revised
position for determining if amounts are available for the payment of unemployment
compensation (UC) for purposes of obtaining a Title XII advance and to (2) provide
procedures for establishing Administrative Subaccounts in the state’s account in the
Unemployment Trust Fund (UTF).

2.

References. Title II of Division B of Public Law No. 111-5, the American Recovery and
Readjustment Act (the Recovery Act), enacted February 17, 2009; Titles IX and XII of
the Social Security Act (SSA); Unemployment Insurance Program Letter (UIPL) No. 39
97; UIPL No. 44-97; UIPL No. 14-09; Training and Employment Guidance Letter
(TEGL) No. 18-01; Employment and Training (ET) Handbook No. 401, and OMB
Control No. 1205-0199.

3.

Background. Section 1201 of the SSA provides for “Title XII advances” to states that
have depleted their unemployment funds. In determining the amount of any advance, the
Department must “[take] into account all other amounts that will be available in the
State’s unemployment fund for the payment of” UC. (Section 1201(a)(3)(B), SSA.)
UIPL No. 39-97 described the Department’s position on which state unemployment
funds are “available” for the payment of UC and which are “unavailable.” It also
provided procedures to set aside funds deemed “unavailable” in a “Subaccount” in the
state’s account in the UTF, where those funds would not be “tak[en] into account” in
determining the amount of an advance.

RESCISSIONS
None

EXPIRATION DATE
Continuing

UIPL No. 39-97 took the position that all unemployment funds are “available” for the
payment of UC except for certain “validly obligated” Reed Act funds, because only valid
obligations rendered funds “unavailable” for the payment of benefits. In light of
questions about the use of UC Modernization Incentive Payments (OMB Control NO.
1205-0474) made under the Recovery Act, which are subject to most of the rules
applicable to Reed Act funds, the Department has re-examined its position that valid
obligations are required to render unemployment funds “unavailable.” This UIPL is
issued to reflect the Department’s revised position. It supersedes items C.2 and C.3 of
Attachment I to UIPL No. 39-97 and any other portions of such UIPL which conflict with
this UIPL.
4.

Scope. This UIPL applies only to those funds which the state has the option of using
either for the payment of benefits or for certain permissible administrative expenses.
Funds that may be used either for the payment of benefits or administration fall into three
categories:
•

Traditional Reed Act distributions made to states in the 1950s and in October
1998, under the provisions of Section 903(a), SSA. Under Section 903(c)(2),
SSA, these distributions may be used only for the payment of UC unless the state
legislature appropriates some or all of such funds for the administration of its UC
law or public employment offices. (See UIPL No. 39-97 for more details.)

•

The $8 billion Reed Act distribution made on March 13, 2002, under Section
903(d), SSA. Congress labeled this transfer a Reed Act distribution although it
differed from traditional Reed Act distributions in several ways. Like traditional
Reed Act distributions, it gives states the option of using the funds only for the
payment of UC or for certain administrative purposes, if appropriated by the
state’s legislature. (See TEGL No. 18-01 for more details. The state
appropriation must meet the same requirements as those required for a traditional
Reed Act appropriation under Section 903(a), SSA, except that there is no
deadline by which the appropriated amounts must be obligated.)

•

Up to $7 billion in UC Modernization Incentive Payments which are provided to
qualifying states under the Recovery Act. Like the above Reed Act distributions,
a qualifying state may use its Incentive Payment for administrative purposes, if
appropriated by the state’s legislature. (See UIPL No. 14-09 for more details.
The state appropriation must meet the same requirements as for the 2002 Reed
Act distribution.)

This UIPL does not apply to the following distributions which may be used only for
administrative purposes:

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•

The “special” Reed Act distributions made in the month of October in each of
1999, 2000, and 2001, which totaled $300 million. (See UIPL No. 44-97 for
details.)

•

The Special Administrative Distribution of $500 million made on February 27,
2009, by the Recovery Act. (See UIPL No. 14-09 for details.)

Because these two distributions may be used only for administrative purposes, they are
not available for the payment of benefits. Therefore, no action is needed by states to set
aside these funds as unavailable for the payment of benefits.
Except for the funds discussed above, all other amounts in the state’s unemployment fund
are limited to the payment of UC. As such, they must be used for that purpose before the
state may receive a Title XII advance.
5.

Procedures to set aside amounts in an Administrative Subaccount. Under the
Department’s new interpretation, the Department will approve a state’s request to set
aside amounts in an Administrative Subaccount when the funds have been limited to
administrative use due to the following actions:
•

The state legislature has appropriated the funds and the state agency has obligated
the funds. (For this UIPL’s purposes, “obligated” means a valid obligation that
meets the state law’s requirements for obligating funds.) For example, the state
agency has entered into a contract that requires it to pay for the provision of
computer services. The state’s request must include information about the
appropriation, including a copy of the relevant sections of the law and the date the
appropriation was enacted and became effective. The request must include also
the date the obligation(s) was entered into, the amount of the obligation(s), and
the last date under which payment(s) is required.

•

The state has appropriated the funds for administrative purposes, but the agency
has not yet entered into an obligation. The request must include the same
information regarding the appropriation indicated above. It must also include the
expiration date of the appropriation, the date the state expects to obligate the
money, and an explanation of why the state reasonably expects to enter into an
obligation by such date.

If the state does not enter into an obligation by the time the appropriation authority ends,
the authority to place or retain the funds in an Administrative Subaccount also ends.
Absent evidence of an obligation, the Department will remove funds from the Subaccount
on the day after the date the appropriation ends. It is the state’s responsibility to advise
the Department of any obligation to avoid a removal of funds. Also, if the appropriation
authority has not yet ended, but the state has determined that it will not enter into an
obligation by the date described in its request, the state must immediately and in writing
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advise the Department (1) of its revised expected date for entering into such an obligation,
or (2) that it no longer plans to obligate such funds, in which case the Department will
remove the funds from the Subaccount.
•

The state has appropriated the funds for payment of agency staff. In this case,
there will likely be no obligation since the agency will not obligate funds to itself.
In addition to including the appropriation material indicated in the first dot point
above, the state’s request must include a plan describing: (1) the expected uses;
(2) the period of time during which the funds will be expended, including the
projected rate of expenditures over such period; and (3) the date the authority will
end.

In each case, the Subaccount must be established prior to the state receiving a Title XII
advance. It should also be noted that it is possible for a state with an outstanding advance
to place funds in an Administrative Subaccount. For example, after receiving its
quarterly employer contributions and a UC Modernization Incentive Payment, a state
may not need to obtain additional Title XII advances for several months. If the state
appropriates some or all of its Incentive Payment and meets one of the three conditions
listed above, it could have amounts set aside in an Administrative Subaccount. Such
amounts must be placed in the Administrative Subaccount before the next borrowing.
6.

Reporting on Subaccount. Subaccount activities must be reported on form ETA 8403,
“Summary of Financial Transactions, Title IX Funds” (Office of Management and
Budget (OMB Control No. 1205-0154). The ETA 8403 is to be submitted for each
month in which an administrative appropriation is enacted, or funds are obligated,
withdrawn from the state’s unemployment trust fund account, or expended. See the
reporting instructions for the ETA 8403 report, which begin on page III-2-1 of ET
Handbook No. 401.

7.

Address. States may submit requests by fax, e-mail, or mail. States may fax
requests to 202-693-2874 to the attention of OWS Budget (this is not a toll-free number),
or email to [email protected]. Requests mailed should be addressed to:
Administrator
Office of Workforce Security
Attention: DFAS
200 Constitution Avenue NW
Room S-4231
Washington, DC 20210

8.

Paperwork Reduction Act of 1995 (PRA) Statement. The public reporting burden for
this collection of information is estimated to average approximately one hour per request,
including time for gathering and maintaining the data needed to complete the required
disclosure.
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This UIPL contains a collection of information in the form of a request for establishment
of an Administrative Subaccount to be reported on ETA 8403 (OMB Control No. 12050154). The Department is submitting a revised Information Collection Request (ICR) to
OMB for OMB Control No. 1205-0199 to incorporate this revised position on obtaining a
Title XII advance. The Department notes that a Federal agency may not 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 provision 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 its review of
the Department’s ICR if any changes result from this review process.
9.

Action. State administrators should distribute this advisory to appropriate staff.

10.

Inquiries. Questions should be addressed to your Regional Office.

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