[Federal Register Volume 59, Number 49 (Monday, March 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5889]


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[Federal Register: March 14, 1994]


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DEPARTMENT OF LABOR
 

Federal-State Unemployment Compensation Program: Unemployment 
Insurance Program Letters Interpreting Federal Unemployment Insurance 
Law

    The Employment and Training Administration interprets Federal law 
requirements pertaining to unemployment compensation as part of its 
role in the administration of the Federal-State unemployment 
compensation program. These interpretations are issued in Unemployment 
Insurance Program Letters (UIPLs) to the State Employment Security 
Agencies (SESAs). The UPLs described below are published in the Federal 
Register in order to inform the public.

Unemployment Insurance Program Letter No. 13-94

    This UIPL advises SESAs of the provisions of Public Law (Pub. L.) 
103-152 which affect the unemployment compensation (UC) program. Public 
Law 103-152 requires that States establish and utilize a system of 
profiling all new claimants for regular UC in order to identify those 
claimants most likely to exhaust regular UC and in need of reemployment 
services in order to obtain new work. It also requires that an 
individual identified pursuant to the profiling system must participate 
in reemployment services as a condition of UC eligibility.

Unemployment Insurance Program Letter No. 14-94

    This UIPL advises SESAs of the provisions of Public Law 103-182 
relating to self-employment assistance as it affects the UC program. 
Public Law 103-182 amended Federal law to give States the option of 
permitting, for a five-year period, certain individuals to receive 
payments from a State's unemployment fund for the purpose of assisting 
such individuals in establishing businesses and becoming self-employed.

    Dated: March 8, 1994.
Doug Ross,
Assistant Secretary of Labor.
Classification: UI.
Correspondence Symbol: TEURL.
Date: January 28, 1994.

Directive: Unemployment Insurance Program Letter No. 13-94

To: All State Employment Security Agencies

From: Mary Ann Wyrsch, Director, Unemployment Insurance Service

Subject: The Unemployment Compensation Amendments of 1993 (Pub. L. 
103-152)--Provisions Affecting the Federal-State Unemployment 
Compensation Program

    Rescissions: None.
    Expiration Date: January 31, 1995.
    1. Purpose. To advise State employment security agencies (SESAs) 
of the provisions of the Unemployment Compensation Amendments of 
1993, Public Law (Pub. L.) 103-152, which affect the Federal-State 
Unemployment Compensation (UC) Program.
    2. References. Section 4 of Public Law 103-152; Titles III and 
IX of the Social Security Act (SSA); Public Law 103-6; Public Law 
102-318; UI Occasional Papers 89-3 and 91-1; and UIPL 45-93, dated 
September 23, 1993.
    3. Background. On November 24, 1993, the President signed into 
law the Unemployment Compensation Amendments of 1993, Public Law 
103-152. Public Law 103-152 extended the Emergency Unemployment 
Compensation (EUC) program, and amended the SSA to require States, 
as a condition of receiving administrative grants, to establish and 
utilize a system of profiling all new claimants for regular UC for 
purposes of identifying claimants who are likely to exhaust UC and 
will need job search assistance to make a successful transition to 
new employment. The SSA was further amended to require States to 
disqualify an individual identified pursuant this profiling system 
if the individual fails to participate in reemployment services. In 
addition, Public Law 103-152 made a technical change to Title IX of 
the SSA. States have already been advised of those provisions 
affecting the EUC program in GAL 12-92, Change 6. This issuance is 
limited to those amendments to the SSA affecting the Federal-State 
UC program. These amendments are as follows:
    (a) a new requirement that States establish and utilize a system 
of profiling all new claimants for regular UC;
    (b) a new requirement that State law require claimants 
identified as most likely to exhaust regular UC to participate in 
reemployment services as condition of UC eligibility; and
    (c) a technical amendment to Title IX of the SSA pertaining to 
the Unemployment Trust Fund.
    4. Action Required. SESAs are requested to take the action 
necessary to assure consistency with Federal requirements as amended 
by Public Law 103-152. The effective dates for implementation of 
these amendments are found in Attachment III.
    5. Inquiries. Inquiries should be directed to your Regional 
Office.
    6. Attachments.

I. Unemployed Workers Profiling
II. Participation in Reemployment Services
III. Draft Language to Implement Section 4(b) of Public Law 103-152
IV. Technical Amendment Concerning the Unemployment Trust Fund

Attachment I to UIPL 13-94

Unemployed Worker Profiling

    a. Text of Amendment--Section 4(a) of Public Law 103-152
    Sec. 4. Worker Profiling.
    (a) In General.--
    (1) Establishment of Profiling System.--Section 303 of the 
Social Security Act is amended by adding at the end thereof the 
following new subsection:
    ``(j)(1) The State agency charged with the administration of the 
State law shall establish and utilize a system of profiling all new 
claimants for regular compensation that--
    ``(A) Identifies which claimants will be likely to exhaust 
regular compensation and will need job search assistance services to 
make a successful transition to new employment;
    ``(B) Refers claimants identified pursuant to subparagraph (A) 
to reemployment services, such as job search assistance services, 
available under any State or Federal law;
    ``(C) Collects follow-up information relating to the services 
received by such claimants and the employment outcomes for such 
claimants subsequent to receiving such services and utilizes such 
information in making identifications pursuant to subparagraph (A); 
and
    ``(D) Meets such other requirements as the Secretary of Labor 
determines are appropriate.
    ``(2) Whenever the Secretary of Labor, after reasonable notice 
and opportunity for hearing to the State agency charged with the 
administration of the State law, finds that there is a failure to 
comply substantially with the requirements of paragraph (1), the 
Secretary of Labor shall notify such State agency that further 
payments will not be made to the State until he is satisfied that 
there is no longer any such failure. Until the Secretary of Labor is 
so satisfied, he shall make no further certification to the 
Secretary of the Treasury with respect to such State.''
    b. Discussion.
    Profiling--Situation Prior to Enactment of Public Law 103-152. 
Profling is based on the premise that a set of characteristics--a 
``profile''--can be developed to identify, at an early stage of 
unemployment, which workers are likely to exhaust UC and will need 
assistance to find new jobs. Research on this point sponsored by the 
Department of Labor and conducted in the State of New Jersey found 
that profiled claimants who received reemployment services returned 
to work earlier than those who did not receive such services. (See 
UI Occasional Papers 89-3 and 91-1 which contain reports on the New 
Jersey project). In addition, studies on the long-term unemployed 
have found that individual characteristics such as schooling and job 
tenure relate to when the individuals return to work. Thus, 
providing early reemployment assistance to individuals most likely 
to remain out of work should result in an earlier return to work.
    Section 4 of Public Law 103-6 addressed the establishment of a 
system of profiling all new claimants for regular UC (including new 
claimants under Federal unemployment benefit allowance programs) to 
determine which claimants may be most likely to exhaust regular UC 
and may need reemployment services to make a successful transition 
to new employment. Although States were not required to establish a 
system of profiling, the Secretary was directed to ``encourag[e] 
[its] adoption and implementation by all States,'' as well as 
provide ``technical assistance and advice to the States in the 
development of model profiling systems.''
    In response to this legislation, the Department took action to 
develop a model profiling system. UIPL 45-93 was issued and States 
were encouraged to provide comments on the profiling system and the 
procedures needed to implement it. The Department was in the process 
of developing this system and a strategy for its implementation when 
Public Law 103-152 was enacted.
    Profiling--Effect of Public Law 103-152. The amendments made by 
Public Law 103-152 repealed section 4 of Public Law 103-6 and added 
subsection (j) to section 303, SSA, to require States, as a 
condition for receiving Title III grants, to implement and utilize a 
system of profiling all new claimants for regular UC. Under section 
303(j)(1), SSA, the system must include components which:
    1. Identify which claimants will be likely to exhaust regular UC 
and will need job search assistance services to make a successful 
transition to new employment.
    2. Refer the claimants described in item 1 above to reemployment 
services, such as job search assistance services, available under 
any State or Federal law. The conference Committee Report defines 
``reemployment services'' as:
    * * * job search assistance and job placement services, such as 
counseling, testing, and providing occupational and labor market 
information, assessment, job search workshops, job clubs and 
referrals to employers, and other similar services. [H. Rep. No. 
333, 103rd Cong. 1st Sess., 5 (1993)]
    3. Collect follow-up information relating to the services 
received by such claimants and their employment outcomes and use the 
information for future profiling.
    4. Meet ``such other requirements as the Secretary of Labor 
determines are appropriate.''
    The Department of Labor will provide further guidance concerning 
``reemployment services,'' job search assistance,'' ``follow-up 
information,'' ``employment outcomes'' and any other requirements 
the Secretary of Labor determines to be necessary for the proper 
implementation of a profiling system.
    c. Technical Assistance and Report. Section 4(c) of Public Law 
103-152 requires that the ``Secretary of Labor shall provide 
technical assistance and advice to assist the States in implementing 
the profiling system'' and that ``such assistance shall include the 
development and identification of model profiling systems.'' The 
Department of Labor plans to provide technical assistance to States. 
Information concerning this assistance and the model profiling 
systems will be provided in future issuances.
    Section 4(d) of Public Law 103-152 requires that, not later than 
the date three years after the date of enactment of Public Law 103-
152, the Secretary of Labor will report to the Congress on the 
operation and effectiveness of the profiling system and of the 
participation requirement described in Attachment II below. Since 
Public Law 103-152 was enacted on November 24, 1993, the report is 
due November 24, 1996.
    d. Effective Date. Section 303(j)(2), SSA, requires that States 
must comply substantially with the requirements of 303(j)(1), SSA as 
a condition of receiving administrative grants under Section 303(a), 
SSA.
    Under section 4(f)(1) of Public Law 103-152, new section 303(j), 
SSA, ``shall take effect on the date one year after the date of the 
enactment of this Act,'' or November 24, 1994. In determining 
whether to take action against a State which has not appropriately 
amended its law and/or not established a profiling system by this 
effective date, the Department of Labor will take into consideration 
the feasibility of such State taking that action to meet the 
requirements of the statute, as interpreted by the Department in its 
operating instructions. These operating instructions will be 
provided in future issuances.

Attachment II to UIPL 13-94

Participation in Reemployment Services

    a. Text of the Amendment--Section 4(b) of Public Law 103-152.
    (b) Participation Requirement.--Section 303(a) of the Social 
Security Act is amended--
    (1) By striking the period at the end of paragraph (9) and 
inserting ``; and '', and
    (2) By adding at the end thereof the following new paragraph:
    ``(10) A requirement that, as a condition of eligibility for 
regular compensation for any week, any claimant who has been 
referred to reemployment services pursuant to the profiling system 
under subsection (j)(1)(B) participate in such services or in 
similar services unless the State agency charged with the 
administration of the State law determines--
    ``(A) Such claimant has completed such services; or
    ``(B) There is justifiable cause for such claimant's failure to 
participate in such services.''
    b. Discussion. Public Law 103-152 added section 303(a)(10) to 
the SSA to require States, as a condition of receiving Title III 
grants, to place an additional condition of eligibility on claimants 
who have been referred to reemployment services pursuant to the 
profiling system under subsection 303(j)(1)(B), SSA. A profiled 
claimant, in order to be eligible for regular UC for any given week, 
must participate in reemployment services or similar services unless 
the State agency determines that (1) the profiled claimant has 
already completed such services; or (2) there is a justifiable cause 
for the claimant's failure to participate in such services. The 
Department of Labor will provide further guidance to States 
concerning participation in ``reemployment services'' or ``similar 
services'' and ``justifiable cause.''
    The Department believes States will need to amend their laws to 
provide for a disqualification based on a profiled claimant's 
failure to participate in reemployment services. If a State does not 
need to make such a law change, it will be necessary to notify the 
Department that such a disqualification can be accomplished without 
amendment.
    c. Effective Date. Section 4(f) of Public Law 103-152, requires 
that new Section 303(a)(10), SSA, ``shall take effect on the date 
one year after the date of the enactment of this Act,'' or November 
24, 1994. In determining whether to take action against a State 
which has not met this requirement by this effective date, the 
Department of Labor will take into consideration the feasibility of 
such State timely amending its law and establishing a profiling 
system (which is a necessary requisite to this denial provision) 
which meets the requirements established by the Department in its 
operating instructions.

Attachment III to UIPL 13-94

Draft Language to Implement Section 4(b) of Public Law 103-152

    States needing to amend their laws to incorporate the new 
eligibility criteria established by Public Law 103-152, may wish to 
use the following draft language.
    (a) Eligibility for benefits.--An unemployed individual shall be 
eligible to receive benefits with respect to any week only if the 
individual:
* * * * *
( ) participates in reemployment services, such as job search 
assistance services, if the individual has been determined to be 
likely to exhaust regular benefits and need reemployment services 
pursuant to a profiling system established by the Commissioner.

Attachment IV to UIPL 13-94

Technical Amendment Concerning the Unemployment Trust Fund

    (a) Text of the Amendment--Section 5 of Public Law 103-152.
    Sec. 5. Technical Amendment to Unemployment Trust Fund.
    Paragraph (1) of section 905(b) of the Social Security Act is 
amended to read as follows:
    ``(b)(1) Except as provided in paragraph (3), the Secretary of 
the Treasury shall transfer (as of the close of each month) from the 
employment security administration account to the extended 
unemployment compensation account established by subsection (a), an 
amount (determined by such Secretary) equal to 20 percent of the 
amount by which--
    ``(A) The transfers to the employment security administration 
account pursuant to section 901(b)(2) during such month, exceed
    ``(B) The payments during such month from the employment 
security administration account pursuant to section 901(b)(3) and 
(d).
    If for any such month the payments referred to in subparagraph 
(B) exceed the transfers referred to in subparagraph (A), proper 
adjustments shall be made in the amounts subsequently transferred.''
    (b) Discussion. The legislation proposed which eventually became 
Public Law 103-318 contained a provision which would have amended 
section 901(b)(1), SSA, to create new subparagraphs (A) and (B). 
This provision was not enacted. However, corresponding amendments to 
section 905(b) were included in the enacted version of Public Law 
103-319. As these amendments referred to non-existent sections, the 
amendments had no effect. Section 5 of Public Law 103-152 amended 
Section 905(b), SSA, to delete the erroneously enacted language 
pertaining to the non-existing section.
Classification: UI.
Correspondence Symbol: TEURL.
Date: February 16, 1994.
Directive: Unemployment Insurance Program Letter No. 14-94
To: All State Employment Security Agencies
From: Mary Ann Wyrsch, Director, Unemployment Insurance Service
Subject: North American Free Trade Agreement Implementation Act 
(Pub. L. 103-182)--Provisions Affecting the Federal-State 
Unemployment Compensation (UC) Program relating to Self-Employment 
Assistance
Rescisions: None.
Expiration Date: February 28, 1995.

    1. Purpose. To advise State agencies of the provisions of the 
North American Free Trade Agreement Implementation Act which affect 
the Federal-State UC Program.
    2. References. The Federal Unemployment Tax Act (FUTA); Title 
III of the Social Security Act (SSA); the Federal-State Extended 
Unemployment Compensation Act of 1970 (EUCA), as amended; section 
9152 of Public Law 100-203; section 507 of the North American Free 
Trade Agreement Implementation Act (NAFTA), Public Law 103-182; 
Unemployment Insurance Program Letter (UIPL) 29-83, Change 1: 
General Administration Letter (GAL) 7-94; and UI Occasional Paper 
92-2.
    3. Background. On December 8, 1993, the President signed into 
law the NAFTA, Public Law 100-182, which affects the UC program in 
two ways. First, NAFTA created a transitional adjustment assistance 
program designed to address worker dislocation caused by NAFTA. This 
aspect of NAFTA was addressed in GAL 7-94. Second, NAFTA amended 
Federal law to give States the option of permitting, for a five-year 
period, certain individuals to receive a payment from the State's 
unemployment fund for the purpose of assisting such individuals in 
establishing a business and becoming self-employed. It is this 
second aspect of NAFTA which is the subject of this UIPL.
    4. Discussion.
    a. In General. The ``withdrawal standard'' of Section 
3304(a)(4), FUTA, and section 303(a)(5), SSA, limits withdrawals 
(with specified exceptions not relevant here) from a State's 
unemployment fund to payments of ``compensation'' and prior to the 
enactment of NAFTA would have prohibited withdrawals for the purpose 
of paying self-employment allowances. The term ``compensation'' is 
defined in section 3306(h), FUTA, as ``cash benefits payable to 
individuals with respect to their unemployment.'' Due to this 
requirement that the payment be with respect to ``unemployment,'' 
the withdrawal standard has previously, with one temporary 
exception, prohibited States from using unemployment funds to assist 
individuals in establishing themselves in self-employment.
    The previous temporary exception was created by section 9152 of 
Public Law 100-203, the Budget Reconciliation Act of 1987. Public 
Law 100-203 authorized three demonstration projects to test the 
feasibility of providing self-employment allowances, payable from a 
State's unemployment fund, to individuals. Only Massachusetts 
operated a demonstration project. The initial report on this project 
was issued in UI Occasional Paper 92-2, Self-Employment Programs for 
Unemployed Workers, and is available by writing Ingrid Evans, United 
States Department of Labor, Unemployment Insurance Service, 200 
Constitution Ave. NW., room S-4231, Washington, DC 20210. A final 
report will be available in 1994.
    NAFTA amended Federal law to allow payments to self-employed 
individuals under specified conditions during the five years 
following NAFTA's date of enactment. The report of the House Ways 
and Means Committee describes the intent behind the new Self-
employment provision:
    Providing States the authority to establish and operate self-
employment programs would significantly benefit workers that may be 
dislocated because of the NAFTA. The traditional system of 
unemployment compensation is primarily designed to provide income 
support for workers who are temporarily laid off or expect to be 
unemployed for only a short time. However, as a result of the NAFTA, 
some workers may lose their jobs permanently and need additional 
tools besides the basic income maintenance provided by the 
unemployment insurance system in order to re-enter the work force. 
For some of those workers, access to a self-employment program would 
be the best path for them to re-enter the work force. This provision 
gives states the ability to add the tool of self-employment training 
and support to the options available to help speed the transition of 
dislocated workers back into the work force. [H. Rept. No. 361, Part 
1, 103rd Cong., 1st Sess. 94 (1993).]
    Specifically, section 507, NAFTA, amended the withdrawal 
standard (and the definition of ``unemployment fund'' in section 
3306(f), FUTA) to provide that amounts may be withdrawn from the 
unemployment fund of a State ``for the payment of allowances under a 
self-employment assistance program (as defined in section 3306(t)) * 
* *'' FUTA. This exception to the withdrawal standard applies solely 
to the self-employment assistance (SEA) allowances described in 
section 3306(t), FUTA, which was also added to FUTA by section 
507(a), NAFTA. Under new section 3306(t)(1), SEA allowances are 
payable ``in lieu of regular'' UC for the purposes of assisting 
individuals in establishing a business and becoming self-employed.
    b. Eligibility for SEA Allowances. SEA allowances are to be 
payable ``in the same amount, at the same interval [e.g., payment 
with respect to a period will be made weekly if that is the State's 
usual practice for claims for regular UC or every other week if that 
is the usual practice], on the same terms, and subject to the same 
conditions as'' regular UC. (Section 3306(t)(2), FUTA.) This ``equal 
treatment'' provision applies to all monetary and nonmonetary 
(including reporting and certification) eligibility requirements 
except where specifically prohibited by other provisions of Federal 
law pertaining to SEA allowances. It also applies to notice and 
appeal rights.
    Since individuals engaged in self-employment activities will 
normally be disqualified if certain eligibility provisions for State 
UC are followed, section 3306(t)(2), FUTA, provides that these 
provisions of State law shall not be followed. Specifically, the 
following provisions shall not apply:
    (1) State requirements relating to availability for work, active 
search for work, and refusal to accept work.
    (2) State requirements relating to disqualifying income are not 
applicable to income earned from self-employment by individuals 
claiming SEA allowances.
    In addition, individuals in the SEA program will be considered 
to be ``unemployed'' for purposes of both Federal and State UC laws 
provided the individuals meet provisions of State law subject to the 
above equal treatment provision and four additional eligibility 
provisions for SEA allowances discussed immediately below. (The 
effect of this requirement on Federal law is discussed below in item 
4.f.)
    Section 3306(t)(3), FUTA, contains the four additional 
eligibility provisions which individuals must meet to receive SEA 
allowances:
    (1) They must be eligible to receive regular UC under the State 
law (or they would be eligible but for the requirements suspended by 
the SEA provisions at section 3306(t)(2), FUTA, as discussed above). 
This is basically a restatement of the ``equal treatment'' 
requirement of section 3306(t)(1), FUTA, and includes monetary as 
well as initial and continuing nonmonetary eligibility. For purposes 
of determining SEA eligibility, ``regular compensation'' includes UC 
for ex-servicemembers (UCX) and former Federal employees (UCFE). 
(See item 4.g below.)
    Since the SEA allowance is ``in lieu of'' regular UC, the total 
amount of SEA allowances that individuals may receive is equal to 
their maximum benefit amount of regular UC less any regular UC 
previously received. Similarly, the weekly SEA allowance amount must 
equal the weekly benefit amount for regular UC. Also, SEA allowances 
and regular UC may not be paid for the same period.
    The term ``regular compensation'' is defined in section 205(2), 
EUCA, as ``compensation payable to an individual under any State 
unemployment compensation law (including compensation payable 
pursuant to 5 U.S.C. chapter 85), other than extended compensation 
and additional compensation.'' Thus, individuals who have exhausted 
regular UC are ineligible for SEA allowances. Individuals may not 
receive SEA allowances in lieu of Federal-State extended benefits 
(EB), additional benefits (AB) entirely financed by the State, any 
wholly funded Federal extension of UC, or other types of 
compensation not meeting the definition of regular UC.
    Individuals who are terminated from or voluntarily leave the SEA 
program may collect regular UC with respect to the benefit year (if 
otherwise eligible) until the total amount of regular UC paid and 
SEA paid equals the maximum benefit amount. Such individuals may be 
paid EB if otherwise eligible. This is because, under 20 CFR 
615.5(a)(1), these individuals are ``exhaustees'' for EB purposes 
because they have received ``all of the regular compensation that 
was payable under the applicable State law * * *.'' Similarly, 
individuals who exhaust the maximum benefit amount as SEA program 
participants may also receive EB if otherwise eligible. Whether any 
of the individuals discussed in this paragraph are eligible for 
other Federal extensions will depend on the law creating the 
extension. Whether individuals are eligible for AB will be 
determined by State law.
    (2) The individuals must be identified pursuant to a State 
worker profiling system as likely to exhaust regular UC. For further 
discussion of SEA profiling requirements, refer to items 4.d and 4.j 
of this UIPL.
    (3) The individuals are participating in self-employment 
assistance activities which are approved by the State agency. State 
agency is defined in Section 3306(e), FUTA, as the authority 
``designated under a State law to administer the unemployment fund 
in such State.'' The activities which must be offered the 
individuals are entrepreneurial training, business counseling, and 
technical assistance. (Information concerning these activities may 
be found in UI Occasional Paper 92-2, which describes services 
provided to claimants participating in the self-employment 
demonstration programs in Washington and Massachusetts.) If these 
activities are not available, an individual pursuing self-employment 
will not be eligible for SEA allowances; determination of 
eligibility for regular UC for such individuals will be made under 
State law provisions relating to self-employment. The activities may 
be offered by either private or public entities.
    An individual who fails to participate in a scheduled activity 
(e.g., failure to attend a scheduled training course) is not 
considered to be participating in SEA program activities. However, 
for purposes of receiving a SEA allowance, it is not always 
necessary for the individual to have actually participated in SEA 
program activities for the week claimed. What is, at a minimum, 
necessary is that the individual be participating in a program 
(approved by the State agency) which provides training programs on 
an ongoing basis and allows individuals to avail themselves of other 
SEA program services when they are needed. As long as individuals 
are under such a program, even though no activities are scheduled 
for a given week, they will be considered to be participating in SEA 
program activities and may be paid SEA allowances. It is possible 
that an individual may be eligible for both regular UC and the SEA 
allowance. This will occur when the individual is participating in 
training related to self-employment which is also approved training 
under State law. In this instance, the State is free to determine 
whether regular UC or the SEA allowance will be paid as long the 
eligibility requirements for the respective program are met. 
However, in no instance may both regular UC and the SEA allowances 
be paid with respect to the same period.
    Since States do not disqualify individuals under their regular 
UC laws for failure to participate in SEA program activities, the 
SEA ``equal treatment'' provision does not address what 
disqualifications States may impose in these cases. It is 
recommended that States disqualify these individuals from receipt of 
SEA allowances only for the week the failure to participate occurs. 
Such individuals may be eligible for regular UC for that week if 
State law provisions relating to regular UC are met. Individuals who 
fail to meet the participation requirement may be dropped by the 
State from the SEA program.
    (4) They are actively engaged on a full-time basis in activities 
(which may include training) relating to the establishment of a 
business and becoming self-employed. The Department of Labor 
(``Department'') is researching the relationship of this requirement 
to the Americans with Disabilities Act. When this research is 
completed, guidance on what constitutes a ``full-time basis'' will 
be provided.
    As is the case with failing to participate in SEA activities, 
States do not currently disqualify individuals under their regular 
UC laws for failure to actively engage on a full-time basis relating 
to the establishment of a business and becoming self-employed. 
Therefore, the SEA ``equal treatment'' provision does not address 
what disqualifications States may impose in these cases. It is 
recommended that States disqualify these individuals from receipt of 
SEA allowances only for the week the failure to actively engage on a 
full-time basis occurs. Such individuals may be eligible for regular 
UC for that week if State law provisions relating to regular UC are 
met. Individuals who fail to meet the ``full-time'' requirement may 
be dropped by the State from the SEA program.
    c. 5 Percent Rule. Section 3306(t)(4), FUTA, places a limitation 
on the number of individuals in a State who may receive SEA 
allowances. Specifically, it provides that the aggregate number of 
individuals receiving the allowance must ``not at any time exceed 5 
percent of the number of individuals receiving regular unemployment 
compensation under the State law at such time * * *.'' The 
Department will monitor this ``5 percent test'' on a monthly basis. 
Therefore, States must use at least a monthly measurement period as 
well. The calculation relates to individuals actually receiving 
(i.e., paid) SEA for the week as a percent of those receiving 
regular UC for the same week. Thus, for example, if 10,000 
individuals receive regular UC (including UCFE and UCX) for a given 
week, then no more than 500 may receive SEA allowances (including 
UCFE and UCX claimants).

    Note: The 5 percent figure is not arrived at by taking 5 percent 
of the sum of the number of individuals receiving SEA and the number 
of individuals receiving regular UC.

    The 5 percent figure is an express limitation which the State 
may not exceed. Therefore, States must monitor SEA allowance 
payments closely to assure that the 5 percent limitation is not 
exceeded. The Department recommends that new individuals not be 
added to the SEA program if it appears the 5 percent threshold may 
be exceeded.
    d. No Cost to Unemployment Trust Fund (UTF). Section 3306(t)(5), 
FUTA, places an additional requirement on the States as a condition 
of paying SEA allowances. It provides that the payment of SEA 
allowances must not result in any cost to the UTF ``in excess of the 
cost that would be incurred by such State and charged to such 
[Unemployment Trust] Fund if the State had not participated in'' the 
SEA program. Put simply, payment of SEA allowances may not result in 
any additional benefit charges to the UTF. This limitation applies 
only to the benefit costs associated with the payment of SEA/regular 
UC. It does not apply to the charging of SEA allowances to 
employers.
    Since individuals successfully establishing themselves in self-
employment will not collect EB, the UTF will accrue some savings to 
the Extended Unemployment Compensation Account and the State's 
account. However, since EB is not always payable in a State, the 
Department has determined that this ``no cost'' requirement will be 
met only if:
    (1) The State implements a profiling system which assures that 
only claimants likely to exhaust regular UC will receive SEA 
allowances. An inadequate profiling system were those likely to not 
exhaust regular UC are allowed to receive SEA allowances will not 
meet the ``no cost'' requirement.
    (2) The State creates ``participation requirements'' designed to 
assure SEA allowances are paid only to those who actually 
participate in the SEA program. Participation requirements for 
determining if an individual is actively engaged on a full-time 
basis in SEA activities must be at least as stringent as the able 
and available requirements for regular UC; otherwise the SEA program 
will not meet the ``no cost'' requirement.
    More information on what is required of States in these areas is 
described in item 4.j below.
    e. State Reports. Section 507(c), NAFTA, provides that any State 
operating a SEA program authorized by the Secretary of Labor must 
report annually to the Secretary the number of individuals who 
participate in the SEA program, the number of individuals who are 
able to develop and sustain businesses (e.g., business survival 
data), the cost of operating the SEA program, and compliance with 
program requirements. The report must also contain other relevant 
data needed by the Department, including data related to business 
income, number of employees and wages paid in the new businesses, 
and incidence and duration of unemployment after business start-up.
    State reports will be submitted with respect to a calendar year 
and will be due the June 30 following the report year. This means 
the first report may be for only part of a year. For example, if a 
State's SEA program is effective April 1, 1994, then the first 
annual report will be due on June 30, 1995 and will cover a nine-
month period.
    Failure to submit the report as required will create an issue 
under section 303(a)(6), SSA, which requires that, as a condition of 
receipt of administrative grants for the UC program, State law 
provides for ``the making of such reports, in such form and 
containing such information, as the Secretary of Labor may from time 
to time require * * *.''
    Under section 507(d), NAFTA, the Secretary of Labor is required 
to submit a report to Congress with respect to the SEA program not 
later than four years after the date of enactment of NAFTA. Since 
NAFTA was enacted on December 8, 1993, this report is due no later 
than December 8, 1997. This report will be based on the reports from 
the States operating SEA programs.
    f. Individuals Receiving SEA considered to be Unemployed. As 
noted in item 4.a, section 3306(h) defines ``compensation'' as 
``cash benefits payable to individuals with respect to their 
unemployment.'' Payments to self-employed individuals are not 
compensation since they are not payable with respect to 
unemployment. However, under section 3306(t)(2)(c), FUTA, 
individuals to whom the SEA allowances are payable ``are considered 
to be unemployed for the purposes of Federal and State laws 
applicable to unemployment compensation, as long as such individuals 
meet the requirements'' of section 3306(t). The effect of this 
provision is that, with respect to SEA, individuals are considered 
to be unemployed and payments made to them are considered to be 
``compensation.'' Thus, the term ``compensation'' is considered to 
include individuals eligible for SEA allowances. The term ``regular 
compensation'' does not, however, include SEA allowances. This is 
because under Section 3306(t)(1), FUTA, SEA is payable ``in lieu 
of'' regular UC.
    g. Equal Treatment Requirements Elsewhere in Federal Law. In 
addition to the SEA ``equal treatment'' requirement in Section 
3306(t)(2), FUTA, Federal law contains two other equal treatment 
requirements mandating payment of compensation ``in the same amount, 
on the same terms, and subject to the same conditions'' as UC 
payable under State law. One requirement is found in section 
3304(a)(6)(A), FUTA, and pertains to payment of UC based on services 
performed for State and local governments and certain nonprofit 
entities, commonly called ``reimbursing'' employers. The other 
requirement is found in 5 U.S.C. 8502(b) and pertains to payment of 
UCX and UCFE. As noted in item 1.f, above, the term ``compensation'' 
is considered to include SEA allowances. Therefore, individuals who 
perform services covered under these two additional ``equal 
treatment'' provisions must be given the option of receiving SEA 
allowances. The payment of SEA allowances does not require an 
amendment to the UCFE/UCX agreement.
    The ``equal treatment'' requirement contained in section 
3306(t)(2), FUTA, provides that SEA allowances will be ``payable in 
the same amount, at the same interval, on the same terms, and 
subject to the same conditions, as regular unemployment compensation 
under the State law * * *.'' Thus, SEA allowances must be paid to 
all eligible individuals to whom regular UC is payable under State 
law, including individuals who performed services to which section 
3304(a)(6)(A), FUTA, and 5 U.S.C. chapter 85 apply.
    These equal treatment requirements extend to all aspects related 
to the payment of SEA.
    h. Financing of SEA Allowances. It will be necessary for States 
to review their laws to determine how the allowances will be 
financed. Financing depends on the type of employer for which the 
individual receiving the allowance previously performed services.
    (1) Experience Rated Employers. Section 3303(a)(1), FUTA, 
requires, as a condition of employers in a State obtaining the 
additional credit against the Federal unemployment tax, that no 
reduced contribution rate be assigned an employer, except on the 
basis of ``experience with respect to unemployment or other factors 
bearing a direct relation to unemployment risk * * *.'' All but one 
of the existing experience rating systems consist of charging 
payments of compensation or benefit wages to an employer who had 
previously provided employment to the compensated individual.
    As noted in item 1.f, under section 3306(t)(2)(c), FUTA, 
individuals to whom the SEA allowance is payable ``are considered to 
be unemployed for the purposes of Federal and State laws applicable 
to unemployment compensation * * *.'' Under this provision, SEA 
allowances reflect ``experience with respect to unemployment or 
other factors bearing a direct relation to unemployment risk'' for 
purposes of section 3303(a)(1), FUTA. Therefore, the measurement of 
an employer's experience through charges based on SEA allowances is 
appropriate.
    In charging SEA allowances, States must use the same method of 
charging (e.g., charging base period employers proportionately) and 
noncharge in the same situations (e.g., noncharging claims where the 
individual has voluntarily quit) as apply to regular UC. To fail to 
do this would raise an issue under the ``uniform method'' 
requirement of section 3303(a)(1), FUTA. See UIPL 29-83, Change 1, 
dated September 24, 1991.
    The Department will address the issue of whether SEA allowances 
may be noncharged when it develops a comprehensive noncharging 
policy.
    (The one experience rating system not using payments of 
compensation or benefit wages is Alaska which uses a payroll decline 
system. The Department believes this system will not be affected by 
the payment of SEA allowances.)
    (2) Reimbursing Employers. Section 3309(a)(2), FUTA, provides 
that costs ``of compensation attributable under the State law'' to 
service performed for State and local governments and nonprofit 
organizations to which that section pertains must be reimbursed by 
such entities. Since, as discussed in item 1.f, SEA allowances are 
considered to be compensation, this requirement also applies to SEA 
allowances.
    (3) Federal Military and Civilian Employers. Under 5 U.S.C. 
8509(b), moneys in the Federal Employees Compensation Account shall 
be ``available only for the purpose of making payments to States 
pursuant to agreements'' with the Secretary of Labor. Since payments 
of SEA are payments of compensation for purposes of Federal law, SEA 
allowances attributable to Federal military or civilian service may 
be charged to Federal employers.
    i. Payment of Administrative Costs. Costs of administering SEA 
allowances (including those paid to UCFE and UCX claimants) are 
payable from grants received for the administration of State's UC 
law under Title III of the SSA. Costs of providing SEA program 
services such as entrepreneurial training, business counseling and 
technical assistance are not, however, payable from these Title III 
funds.
    j. Required Plan. Section 3306(t)(6), FUTA, provides that a 
State SEA program must meet ``such other requirements as the 
Secretary of Labor determines to be appropriate.'' Secretary's Order 
No. 4-75 (40 FR 18515) gives the Department the authority to make 
this determination. The Department has determined that, prior to 
implementing a SEA program, the Department must approve a State 
plan. This approval process will assure an orderly start-up of the 
SEA program in a State. To be approved the plan must contain:
    (1) A description of the profiling system used to identify SEA 
program participants. The State has three options for choosing a 
profiling system:
    (A) Using elements of the statistical model developed by the 
Department for purposes of providing technical assistance in 
implementing Section 303(j), SSA. (Section 303(j), SSA, requires 
States to establish and use a system of profiling all new claimants 
for regular UC.) The report on the profiling model, Profiling 
Dislocated Workers for Early Referral to Reemployment Services by 
Kelleen Worden (October 6, 1993), is available from the appropriate 
Regional Office. If this model is used, States must re-estimate the 
coefficients using State data.
    (B) A statistical model developed by the State.
    (C) Another profiling method developed by the State.
    Regardless of which option is chosen, the State must demonstrate 
that its system has a high degree of accuracy for purposes of 
meeting the cost-neutrality requirement discussed in item 4.d. For 
this reason, the State must submit with its plan a baseline analysis 
of historical data indicating the extent to which the exhaustion 
rate of individuals identified by the proposed system exceeds the 
exhaustion rate of the population of all beneficiaries under the 
regular UC program. The determination of whether the system is 
sufficiently accurate will be made by the Department.
    (2) Assurances that the annual report will be submitted as 
required and contain such information as required by this UIPL.
    (3) A description of participation requirements including:
    (A) The structured set of services provided to individuals in 
the SEA program. The description must address the working 
relationship of the State agency with any entity (such as a State 
economic development agency or an agency administering the Job 
Training Partnership Act) providing services under the SEA program.
    (B) A description of what actions (such as certification 
procedures) the States will take to assure SEA participants are 
engaged ``on a full-time basis'' in self-employment activities.
    (4) Legislative language implementing the SEA program consistent 
with the requirements of this UIPL. (Draft language is provided in 
Attachment II and a Commentary in Attachment III.)
    (5) A description of the source (and amount of) funds for paying 
for SEA program activities such as entrepreneurial training, 
business counseling, and technical assistance, and assurances that 
Title III, SSA, funds will not be used for these activities.
    (6) Assurances that the payment of SEA allowances will not 
create any additional benefit costs to the UTF.
    Since no State may commence operation of a SEA program without 
approval of a plan by the Department, States may expedite 
implementation of the SEA program by submitting their plans prior to 
obtaining legislation. Although the Department may provide 
provisional approval of a plan prior to enactment, it will not 
approve any plan until certified copies of SEA legislation are 
provided by the State. Any modifications to an approved plan are to 
be submitted to the Department.
    Proposed plans and modifications to approved plans are to be 
submitted to the appropriate Regional Office.
    k. Counting of SEA Claims for EB Trigger Purposes. SEA claimants 
are to be included in the calculation of the insured unemployment 
rate (IUR) for purposes of determining whether EB is payable in a 
State.
    l. Reporting Requirements. Any changes required in reporting to 
the Department will be addressed in future issuances.
    m. Effective Date and Termination Date of SEA Programs. Under 
Section 507(e), NAFTA, the provisions of Federal law relating to SEA 
programs are effective on the date of enactment of NAFTA. In 
addition, these provisions provide only temporary exceptions to the 
withdrawal standard. The authority to operate SEA programs expires 
five years after the date of enactment of NAFTA. Since NAFTA was 
enacted on December 8, 1993, the SEA program provisions were 
effective on that date and expire on December 8, 1998.
    5. Action Required. The establishment of SEA programs is 
optional for States. However, States must enact enabling legislation 
and obtain this Department's approval of a plan prior to 
implementing a SEA program.
    6. Inquiries. Inquiries should be directed to the appropriate 
Regional Office.
    7. Attachments.
    I. Text of Section 507, NAFTA.
    II. Draft Language to Implement a Self-Employment Assistance 
Program.
    III. Commentary on the Draft Language to Implement a Self-
Employment Assistance Program.

Attachment I to UIPL 94-

Text of Section 507, NAFTA

Sec 507.  Treatment of Self-Employment Assistance Programs

    (a) General Rule.--Section 3306 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subsection:
    ``(t) Self-Employment Assistance Program.--For the purposes of 
this chapter, the term `self-employment assistance program' means a 
program under which--
    ``(1) Individuals who meet the requirements described in 
paragraph (3) are eligible to receive an allowance in lieu of 
regular unemployment compensation under the State law for the 
purpose of assisting such individuals in establishing a business and 
becoming self-employed;
    ``(2) The allowance payable to individuals pursuant to paragraph 
(1) is payable in the same amount, at the same interval, on the same 
terms, and subject to the same conditions, as regular unemployment 
compensation under the State law, except that--
    ``(A) State requirements relating to availability for work, 
active search for work, and refusal to accept work are not 
applicable to such individuals;
    ``(B) State requirements relating to disqualifying income are 
not applicable to income earned from self-employment by such 
individuals; and
    ``(C) Such individuals are considered to be unemployed for the 
purposes of Federal and State laws applicable to unemployment 
compensation, as long as such individuals meet the requirements 
applicable under this subsection;
    ``(3) Individuals may receive the allowance described in 
paragraph (1) if such individuals--
    ``(A) Are eligible to receive regular unemployment compensation 
under the State law, or would be eligible to receive such 
compensation except for the requirements described in subparagraph 
(A) or (B) of paragraph (2);
    ``(B) are identified pursuant to a State worker profiling system 
as individuals likely to exhaust regular unemployment compensation; 
and
    ``(C) are participating in self-employment assistance activities 
which--
    ``(i) include entrepreneurial training, business counseling, and 
technical assistance; and
    ``(ii) are approved by the State agency; and
    ``(D) are actively engaged on a full-time basis in activities 
(which may include training) relating to the establishment of a 
business and becoming self-employed;
    ``(4) the aggregate number of individuals receiving the 
allowance under the program does not at any time exceed 5 percent of 
the number of individuals receiving regular unemployment 
compensation under the State law at such time;
    ``(5) the program does not result in any cost to the 
Unemployment Trust Fund (established by section 904(a) of the Social 
Security Act) in excess of the cost that would be incurred by such 
State and charged to such Fund if the State had not participated in 
such program; and
    ``(6) the program meets such other requirements as the Secretary 
of Labor determines to be appropriate.''.
    (b) Conforming Amendments.--
    (1) Section 3304(a)(4) of such Code is amended--
    (A) In subparagraph (D), by striking ``; and'' and inserting a 
semicolon;
    (B) In subparagraph (E), by striking the semicolon and inserting 
``; and''; and
    (C) By adding at the end the following new subparagraph:
    ``(F) Amounts may be withdrawn for the payment of allowances 
under a self-employment assistance program (as defined in section 
3306(t));''
    (2) Section 3306(f) of such Code is amended--
    (A) In paragraph (3), by striking ``; and'' and inserting a 
semicolon;
    (B) In paragraph (4), by striking the period and inserting ``; 
and''; and
    (C) By adding at the end the following new paragraph:
    ``(5) amounts may be withdrawn for the payment of allowances 
under a self-employment assistance program (as defined in subsection 
(t)).''.
    (3) Section 303(a)(5) of the Social Security Act (42 U.S.C. 
503(a)(5)) is amended by striking ''; and'' and inserting '': 
Provided further, That amounts may be withdrawn for the payment of 
allowances under a self-employment assistance program (as defined in 
section 3306(t) of the Internal Revenue Code of 1986); and''.
    (c) State Reports.--Any State operating a self-employment 
program authorized by the Secretary of Labor under this section 
shall report annually to the Secretary on the number of individuals 
who participate in the self-employment assistance program, the 
number of individuals who are able to develop and sustain 
businesses, the operating costs of the program, compliance with 
program requirements, and any other relevant aspects of program 
operations requested by the Secretary.
    (d) Report to Congress.--Not later than 4 years after the date 
of enactment of this Act, the Secretary of Labor shall submit a 
report to the Congress with respect to the operation of the program 
authorized under this section. Such report shall be based on the 
reports received from the States pursuant to subsection (c) and 
include such other information as the Secretary of Labor determines 
is appropriate.
    (e) Effective Date; Sunset.--
    (1) Effective Date.--The provisions of this section and the 
amendments made by this section shall take effect on the date of the 
enactment of this Act.
    (2) Sunset.--The authority provided by this section, and the 
amendments made by this section, shall terminate 5 years after the 
date of the enactment of this Act.

Attachment II to UIPL 94--

Draft Language to Implement a Self-Employment Assistance Program

    States wishing to amend their UC law to add the optional SEA 
program provisions may use the following draft language. A 
Commentary is provided in Attachment III.
    Section ________. Self-Employment Assistance Program
    (a) Definitions. As used in this section--
    (1) ``Self-employment assistance activities'' means activities 
(including entrepreneurial training, business counseling, and 
technical assistance) approved by the commissioner in which an 
individual identified through a worker profiling system as likely to 
exhaust regular benefits participates for the purpose of 
establishing a business and becoming self-employed.
    (2) ``Self-employment assistance allowance'' means an allowance, 
payable in lieu of regular benefits and from the unemployment fund 
established under section ________ [enter relevant section], to an 
individual participating in self-employment assistance activities 
who meets the requirements of this section.
    (3) ``Regular benefits'' means benefits payable to an individual 
under this Act (including benefits payable to Federal civilian 
employees and to ex-servicemembers pursuant to 5 U.S.C. chapter 85) 
other than additional and extended benefits.
    (4) ``Full-time basis'' shall have the meaning contained in 
regulations prescribed by the commissioner.
    (b) Amount of self-employment assistance allowance. The weekly 
allowance payable under this section to an individual will be equal 
to the weekly benefit amount for regular benefits otherwise payable 
under section ________ of this Act. The sum of (1) the allowances 
paid under this section and (2) regular benefits paid under this Act 
with respect to any benefit year shall not exceed the maximum 
benefit amount as established by section ________ with respect to 
such benefit year.
    (c) Eligibility for self-employment assistance allowance. The 
allowance described in subsection (a) shall be payable to an 
individual at the same interval, on the same terms, and subject to 
the same conditions as regular benefits under this Act, except 
that--
    (1) The requirements of sections ________ [enter relevant 
sections] relating to availability for work, active search for work, 
and refusal to accept work are not applicable to such individual;
    (2) The requirements of section ________ [enter relevant 
section] relating to self-employment income are not applicable to 
income earned from self-employment by such individual;
    (3) An individual who meets the requirements of this section 
shall be considered to be unemployed under section ________ [enter 
relevant section]; and
    (4) An individual who fails to participate in self-employment 
assistance activities or who fails to actively engage on a full-time 
basis in activities (which may include training) relating to the 
establishment of a business and becoming self-employed shall be 
disqualified for the week such failure occurs.
    (d) Limitation on receipt of self-employment assistance 
allowances. The aggregate number of individuals receiving the 
allowance under this section at any time shall not exceed 5 percent 
of the number of individuals receiving regular benefits. The 
commissioner shall, through regulations, prescribe such actions as 
are necessary to assure the requirements of this subsection are met.
    (e) Financing costs of self-employment assistance allowances. 
Allowances paid under this section shall be charged to employers as 
provided under provisions of this Act relating to the charging of 
regular benefits.
    (f) Effective date and termination date. The provisions of this 
section will apply to weeks beginning after the date of enactment or 
weeks beginning after any plan required by the United States 
Department of Labor is approved by such Department, whichever date 
is later. The authority provided by this section shall terminate as 
of the end of the week preceding the date when Federal law no longer 
authorizes the provisions of this section, unless such date is a 
Saturday in which case the authority shall terminate as of such 
date.

Attachment III to UIPL 94-

Commentary on the Draft Language to Implement a Self-Employment 
Assistance Program

    This commentary should be used in conjunction with Section 4 of 
this UIPL.
    States will need to make adjustments in the draft language to 
accommodate State law conventions. Blanks have been provided for 
inserting cites to relevant sections of the State law.
    (a) Definitions.
    (1) Self-employment assistance activities. These activities are 
defined consistent with section 3306(t)(3)(C) and (D), FUTA. States 
should note that the approval of the State agency is limited to the 
self-employment ``activities'' themselves. States may not base a 
denial of approval on factors unrelated to the self-employment 
assistance activities.
    (2) Self-employment assistance allowance. This section defines 
the SEA allowance and establishes that such allowances are to be 
paid from the State's unemployment fund. States may also wish to 
consider whether to amend the section of State law which governs 
withdrawals from the unemployment fund.
    (3) Regular Benefits. A definition of ``regular benefits'' (or 
``regular compensation'') is necessary since SEA allowances are 
payable ``in lieu of'' regular compensation. State law may already 
contain a definition of regular benefits in which case the addition 
of this definition may not be necessary. Some State laws contain a 
definition of regular benefits in the sections pertaining to EB. In 
these cases, the State will need to determine whether the definition 
is limited to the EB section, and, therefore, whether a cross-
reference is necessary.
    (4) Full-time basis. Since the Department is not at this time 
providing a specific definition of ``full-time basis,'' it is 
recommended that States reserve the right to prescribe the 
definition in regulations in order to assure consistency with 
Federal law.
    (b) Amount of self-employment assistance allowance. This section 
governs the weekly and maximum amount of SEA allowance payable. It 
assures that SEA allowances are paid ``in the same amount'' as 
regular UC. It also clarifies the relationship between payments of 
regular UC and SEA allowances with respect to a benefit year.
    (c) Eligibility for self-employment assistance allowance. This 
section contains the ``equal treatment'' requirement of Section 
3306(t)(2), FUTA (except for the requirement that SEA allowances be 
paid ``in the same amount'' which is contained in subsection (b) 
above). It also contains the three exceptions to the ``equal 
treatment'' requirement which are found in subparagraphs (A) through 
(C) of section 3306(t)(2), FUTA.
    By cross referencing the definition of ``self-employment 
assistance activities,'' this provision should assure payment only 
to those participating in such activities. It also contains the 
requirement of section 3306(t)(3) (D) that the individual be 
actively engaged in a full-time basis in activities relating to the 
establishment of a business and becoming self-employed.
    States are free to establish their own disqualifications for 
failure to meet these requirements. States should note that, like 
unavailability for work, failure to participate may be only a 
temporary condition which should not necessarily result in an 
indefinite denial. Conversely, quitting the SEA program may be 
grounds for a duration disqualification. The draft language provides 
for a disqualification only for the week the failure occurred.
    States also have the option of dropping an individual from the 
SEA program for failure to meet SEA requirements. This may be 
appropriate if, for example, the individual misses training 
necessary to commence self-employment activities.
    (d) Limitation on receipt of self-employment assistance 
allowances. This section implements section 3306(t)(4), FUTA, which 
limits the number of individuals receiving SEA allowances at any 
given time to 5 percent of the number of individuals receiving 
regular UC. Giving the commissioner authority to create regulations 
to meet this requirement provides flexibility to the agency to 
assure that necessary data will be collected as required by this 
Department and that the five percent limit will not be exceeded.
    (e) Financing costs of SEA allowances. Since State UC law may 
provide only for the financing of regular UC and not SEA allowances, 
it may be necessary to describe the financing mechanism for the 
allowances. The draft language uses the same mechanism as is used 
for regular UC.
    Draft language for the noncharging of SEA allowances is not 
provided at this time as the Department is not addressing the issue 
of whether such allowances may be noncharged at this time.
    (f) Effective Date and Termination Date. Since SEA allowances 
may be paid only after enactment of State law and approval by this 
Department, it will be necessary to specify that the allowances will 
not become payable until both conditions are met. The draft language 
assures that SEA allowances will not become payable until the first 
week aster both conditions are met.
    Since the authority under NAFTA for SEA programs terminates five 
years after the date of enactment of NAFTA, it is recommended that 
States ``sunset'' any SEA provisions. The draft language provided 
does not provide a definite expiration date since States may wish to 
continue operating a SEA program if the Federal authority is 
extended either on a temporary or permanent basis. States may, 
however, wish to include a specific expiration date. The draft 
language takes into account an expiration of Federal legislative 
authority which falls on a weekday by providing that the program 
will terminate as of the end of the week preceding the week 
containing the ending date of the Federal authority. If, however, 
the ending date of the Federal authority as a Saturday, then the 
State must end its SEA program on later than midnight on such 
Saturday.

[FR Doc. 94-5889 Filed 3-11-94; 8:45 am]
BILLING CODE 4510-30-M