[Federal Register Volume 60, Number 211 (Wednesday, November 1, 1995)]
[Notices]
[Pages 55604-55611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27101]



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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 (UC) as part of 
its role in the administration of the Federal-State UC program. These 
interpretations are issued in Unemployment Insurance Program Letters 
(UIPLs) to the State Employment Security Agencies (SESAs). The UIPLs 
described below are published in the Federal Register in order to 
inform the public.

UIPL 29-83 Change 2

    Secondary adjustments are a part of many State experience rating 
plans. This UIPL provides States with additional guidance concerning 
those secondary adjustments which may be used in determining reduced 
rates for employers.

UIPL 22-87, Change 1

    UIPL 22-87, issued in 1987, consolidated several issuances 
concerning the treatment of pensions received by claimants for UC. This 
Change 1 to UIPL 22-87 provides further guidance on the subject. 
Specifically, it deals with the requirements concerning pensions when 
amounts are rolled over into eligible retirement plans. It was issued 
in response to numerous questions on the subject which were raised by 
States trying to determine how to deal with rollovers.

UIPL 17-95, Change 1

    Public Law 103-465, commonly known as the legislation on ``GATT''--
The General Agreement on Tariffs and Trade, included a provision that, 
effective with weeks beginning after January 1, 1997, requires States 
to deduct and withhold Federal income tax from UC if the individual so 
elects. UIPL 17-95 explained the change in UC law, discussed its 
effective date and provided model language for States to use in 
amending State UC law. Change 1 to UIPL 17-95 advised States of the 
Department of Labor's position concerning priorities when a claimant 
subject to withholding required under State law also requests the 
withholding of income tax.

UIPL 35-95

    As a result of the increased use of telephone or other electronic 
methods of UC tax collection and benefit claimstaking, the Department 
has found it necessary to issue this UIPL in order to ensure that 
States are aware of the Department's position concerning the use of the 
new technology as it relates to the UC program. This UIPL sets forth 
the Department's position on the various issues involved and interprets 
the relevant law and regulation.

UIPL No. 1-96

    The Department issues several types of directives in order to set 
forth official agency policy concerning the programs administered by 
the Department. Questions have been raised by several groups regarding 
what weight these directives carry as interpretations of Federal law. 
As a result, this directive was issued to clarify the status of these 
directives.

UIPL 2-96

    It came to the Department's attention that several States restrict 
the approval of training to that which is provided within the State. 
Since 1974, it has been the express position of the Department that 
such restrictions are contrary to the requirements of the Federal 
Unemployment Tax Act. This directive was issued to restate and 
reinforce that position.


[[Page 55605]]

    Dated: October 26, 1995.
Timothy M. Barnicle,
Assistant Secretary of Labor.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI
Correspondence Symbol: TEURL
Dated: September 28, 1995
Directive: Unemployment Insurance Program Letter of No. 29-83 Change 2
To: All State Employment Security Agencies
From: Mary Ann Wyrsch, Director, Unemployment Insurance Service
    Subject: Experience Rating--Permissible Secondary Adjustments
    1. Purpose. To provide States with additional guidance concerning 
those secondary adjustments which may be used in determining reduced 
rates for employers.
    2. References. The Federal Unemployment Tax Act (FUTA); the Social 
Security Act (SSA); Unemployment Insurance Program Letter (UIPL) No. 
29-83, dated June 23, 1983 and UIPL No. 29-83, Change 1, dated 
September 24, 1991 (both published at 56 Fed. Reg. 54891 (October 23, 
1991)); and Employment Security Memorandum (ESM) No. 9, dated July 
1940.
    3. Background. Secondary adjustments are a part of many State 
experience rating plans. They are adjustments, permissible under 
limited conditions, to the measure of an employer's experience which 
bear no relation to the employer's experience. The most typical example 
of a secondary adjustment is the triggering of a particular rate 
schedule due to the unemployment fund's balance. Recently a question 
has been raised as to whether payments by employers to funds other than 
the State's unemployment fund may be used as secondary adjustments. 
This UIPL provides the Department's position.
Rescissions: None
Expiration Date: September 30, 1996
    4. Discussion.
    a. Federal law. As a condition of employers in a State receiving 
the additional credit, the State's law must be certified as meeting the 
requirements of Section 3303, FUTA, which provides, in pertinent part, 
as follows--

    (a) STATE STANDARDS.--A taxpayer shall be allowed an additional 
credit under Section 3302(b) with respect to any reduced rate of 
contributions permitted by a State law, only if the Secretary of 
Labor finds that under such law--
    (1) no reduced rate of contributions to a pooled fund or to a 
partially pooled account is permitted to a person (or group of 
persons) having individuals in his (or their) employ except on the 
basis of his (or their) experience with respect to unemployment or 
other factors bearing a direct relation to unemployment risk during 
not less than the 3 consecutive years immediately preceding the 
computation date * * *.

    The term ``pooled fund'' is defined in Section 3303(c)(2), FUTA, as 
``an unemployment fund or any part thereof * * * into which the total 
contributions of persons contributing thereto are payable, in which all 
contributions are mingled and undivided, and from which compensation is 
payable to all individuals eligible for compensation from such fund.'' 
Similarly, Section 3303(c)(3), FUTA, defines ``partially pooled 
account'' as a ``part of an unemployment fund * * *.'' Section 3306(f), 
FUTA, defines ``unemployment fund'' as ``a special fund * * * for the 
payment of compensation * * *.'' These provisions establish an explicit 
linkage between experience rating and payments to the unemployment fund 
from which unemployment compensation (UC) is paid.
    b. Secondary Adjustments. As noted in ESM No. 9 UIPL No. 29-83, 
the Department and its predecessor agencies have approved experience 
rating plans using secondary adjustments which are not related to an 
employer's experience. The following explanation of secondary 
adjustments (derived in part from ESM No. 9) is from page 10 of the 
attachment to UIPL 29-83:

    The requirement that a reduced rate must be based on the 
employer's experience makes it necessary to maintain the influence 
of that experience in the determination of the reduced rate granted 
to an employer. The measurement of experience may be subjected to 
adjustments by the application of other factors bearing no relation 
to an employer's experience only if the basic experience factor has 
not been so impaired by combination with such other factors that the 
employer's own experience is no longer the basic determinant of his 
reduced rate.
* * * * *
    A secondary adjustment that results in a reduction of rates has 
been found not to be an unreasonable distortion of the experience 
factor if the reduction is the same for all rated employers and if 
the reduction is not applied to employers not otherwise entitled to 
a reduced rate based on their own experience. [Emphasis in 
original.]

    Although UIPL 29-83 is broadly written, it should not be read to 
permit the introduction of any factor unrelated to an employer's 
experience. It is the position of the Department that, to meet the 
requirements of Section 3303(a)(1), FUTA, secondary adjustments must 
directly serve the purpose of the unemployment fund.
    A secondary adjustment, by definition, involves the intrusion of a 
factor unrelated to experience into the State's experience rating 
system. It does not follow that any intrusion is permissible. In fact, 
these intrusions have in the past been limited as described in UIPL 29-
83. As discussed in item 4.a. above, experience rating is explicitly 
linked to payments to the unemployment fund. Therefore, the 
introduction of a factor which does not directly serve the purpose of 
the unemployment fund (i.e., the payment of UC) is an unacceptable 
intrusion into experience rating.
    A payment to fund other than the unemployment fund is not a factor 
directly serving the unemployment fund's purpose and may not be used in 
determining the rate of an individual employer. This applies to 
payments to State general funds (for example, income or sales tax 
payments) as well as to payments which could potentially be used for 
payments of UC.\1\ Similarly, the balance in another State fund may not 
be used to trigger rate schedules for the unemployment fund since the 
other fund does not directly serve the purpose of the unemployment 
fund.

    \1\The principal in certain State funds (often called reserve 
funds) may be used for any or all of the following purposes: the 
payment of UC, loans to the State's unemployment fund, or the 
payment of interest on advances made under Title XII, SSA. Reserve 
fund interest is used for non-UC purposes such as training or 
economic development activities. To date, all State reserve funds 
have been created with a concurrent reduction in the amount payable 
to the State's unemployment fund. Thus, the reserve funds have 
deprived the unemployment fund of assets and interest earnings. 
Moreover, there is no guarantee that the State will not amend its 
law to authorize use of reserve fund moneys for non-UC purposes. 
This is because, unlike unemployment funds, reserve funds are not 
subject to the ``immediate deposit'' with ``withdrawal'' standards 
of Sections 3304(a) (3) and (4), FUTA, and Sections 303(a) (4) and 
(5), SSA, which assure unemployment fund moneys will be used for the 
payment of UC. Finally, payment of interest on advances made under 
Title XII, SSA, from the unemployment fund is prohibited by Section 
303(c)(3), SSA, and Section 3304(a)(17), FUTA. Thus, payments of 
interest do not serve the purposes of the unemployment fund.
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    A review of previously approved secondary adjustments indicates 
that the Department has limited approval only to adjustments directly 
serving the purpose of the unemployment fund.\2\ 

[[Page 55606]]
For example, the triggering of rate schedules generates sufficient 
revenues for the payment of UC. Factors related to socialized costs, 
including the experience factor in benefit-wage ratio States, serve to 
make the fund whole for costs which are not otherwise funded through 
experience rates. These costs include UC not charge to a specific 
employer or charged to an employer who has gone out of business.

    \2\Voluntary contributions were originally considered to be 
acceptable secondary adjustments since they are paid into the 
unemployment fund, thereby directly servicing the fund's purpose. 
Since Section 3303(d), FUTA, now contains specific authorization for 
voluntary contributions, their status as secondary adjustments is 
moot. Section 3303(d) was added to FUTA in 1947 to ``give express 
statutory sanction to the administrative interpretation which has 
permitted voluntary contributions . . .'' and to ``provide for a 
definite period within which voluntary contributions must be made . 
. .'' (H. Rep. No. 759, 80th Cong., 1st Sess. (1947)).
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    5. Action Required. State agency administrators are requested to 
review existing State law provisions to ensure that Federal law 
requirements as set forth in this UIPL are met. Prompt action, 
including corrective legislation, should be taken to assure Federal 
requirements are met.
    7. Inquiries. Direct questions to the appropriate Regional Office.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI
Correspondence Symbol: TEURL
Dated: June 19, 1995
Directive: Unemployment Insurance Program Letter No. 22-87 Change 1
To: All State Employment Security Agencies
From: Mary Ann Wyrsch, Director, Unemployment Insurance Service
Subject: Whether Unemployment Compensation must be Reduced when Amounts 
are Rolled Over into Eligible Retirement Plans

    1. Purpose. To provide guidance concerning the Federal unemployment 
compensation (UC) law requirements relating to the deduction from UC of 
``rollovers'' of retirement funds.
    2. References. The Internal Revenue Code of 1986 (IRC), including 
section 3304(a)(15) of the Federal Unemployment Tax Act (FUTA) and 
section 402; and Unemployment Insurance Program Letter (UIPL) No. 22-
87, 52 Fed. Reg. 22546 (1987). UIPL 22-87 was released April 30, 1987, 
but erroneously dated April 30, 1988.
    3. Background. Section 3304(a)(15), FUTA, requires, as a condition 
for employers in a State to receive credit against the Federal 
unemployment tax, that the amount of UC payable to an individual be 
reduced for any week which begins in a period with respect to which the 
individual is ``receiving a governmental or other pension, retirement 
or retired pay, annuity, or any other similar periodic payment which is 
based on the previous work of such individual . . .'' This section of 
FUTA goes on to provide certain exceptions to this requirement not 
relevant to this Change 1.
Rescissions: None.
Expiration Date: June 30, 1996.
    Section 402(c), IRC, provides for the transfer of ``eligible 
rollover distributions'' from a ``qualified trust'' to an ``eligible 
retirement plan.'' (Section 402(c)(8) of the IRC provides definitions 
of ``qualified trust'' and ``eligible retirement plan.'' Section 
402(c)(4) defines ``eligible rollover distribution.'') If all the 
requirements of Section 402, IRC, are met, including that the transfer 
of the payment is made within 60 days of receipt by the individual, 
then the payments will not be included in gross income for Federal 
income tax purposes.
    In light of the retirement pay provisions of Section 3304(a)(15), 
FUTA, the question has arisen whether States are required to reduce UC 
when distributions are rolled over. This Change 1 is issued to provide 
the Department of Labor's position on this question.
    4. Effect of Rollovers. If a rollover from a qualified trust into 
an eligible retirement plan is not subject to Federal income tax, then 
it is not considered to be ``received'' by the individual for purposes 
of Section 3304(a)(15), FUTA. A non-taxable rollover does not represent 
a payment to the individual for purposes of retirement. Instead, it 
merely effectuates a change with respect to the retirement plan under 
which the amounts are maintained. Therefore, it is not considered to be 
``received'' and States are not required to reduce UC due to such 
rollovers. However, if any distribution (or part of a distribution) 
from a qualified trust is subject to Federal income tax, then that 
amount is considered to be ``received'' for purposes of the FUTA and UC 
must be reduced if otherwise required by Section 3304(a)(15).
    States should also be aware that, when any distribution is paid as 
a lump sum, FUTA does not require a reduction in UC. In this case, it 
is not necessary to determine if the payment is ``received'' by the 
individual. As discussed on page 6 of UIPL 22-87, FUTA does not require 
UC to be reduced due to the receipt of non-periodic, lump sum 
retirement payments. Further, FUTA only requires reduction of UC due to 
receipt of amounts based on the previous work of the individual. 
Therefore, for example, if a distribution is paid to a surviving 
spouse, the spouse's UC need not be reduced.
    5. Action Required. State Administrators should provide this 
information to appropriate staff.
    6. Inquiries. Inquiries should be directed to the appropriate 
Regional Office.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI
Correspondence Symbol: TEURL
Dated: September 28, 1995
Directive: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 17-95 CHANGE 1
To: ALL STATE EMPLOYMENT SECURITY AGENCIES
From: MARY ANN WYRSCH, Director, Unemployment Insurance Service
Subject: Priority of Withholding from Unemployment Compensation (UC)

    1. Purpose. To advise States of the Department of Labor's position 
concerning priorities when a claimant subject to withholding required 
under State law also requests the withholding of income tax.
    2. References. The Internal Revenue Code of 1986 (IRC), as amended, 
including the Federal Unemployment Tax Act; Title III of the Social 
Security Act (SSA); Section 702 of P.L. 103-465; 26 C.F.R. 31-3402(i)-
2; and Unemployment Insurance Program Letter (UIPL) 17-95.
    3. Background. UIPL 17-95, dated February 28, 1995, provided 
guidance concerning the withholding of income tax from UC. This Change 
1 provides guidance on a matter left unresolved in that UIPL: the 
priority of withholding when other amounts are also to be withheld from 
the same payment of UC.
    4. Discussion. Federal law requires withholding from UC in certain 
cases. Under Section 303(a)(1), SSA, States must have ``methods of 
administration'' for enforcing amounts owed to the unemployment fund. 
The principal ``method of administration'' for collecting these 
overpayments is the offsetting of amounts from future payments of UC. 
Also, States are required to withhold certain child support obligations 
under Section 303(e)(2), SSA.
Rescissions: None
Expiration Date: September 30, 1996
    Additional provisions of the SSA gives States the option of 
withholding other amounts from UC. Section 303(d)(2), SSA, provides for 
the withholding of Food Stamp 

[[Page 55607]]
overissuances from UC. Section 303(g), SSA, authorizes interstate 
offset of overpayments as well as offsets of overpayments between State 
UC and Federal UC programs where the State acts as an agent for the 
Department of Labor.
    Unlike the above forms of withholding, withholding of income tax is 
voluntary on the part of the claimant. Giving priority to the voluntary 
withholding of income tax would frustrate the ``involuntary'' 
withholding requirements.
    Section 3402(p)(2), IRC, provides that, for withholding purposes, a 
payment of UC shall be treated as if it were a payment of wages by an 
employer to an employee. Implementing regulations at 20 C.F.R. 
31.3402(i)-2 provide that an employee may request the employer to 
withhold an additional amount from the employee's wages. The employer 
must comply with the employee's request, but only to the extent that 
the requested amount does not exceed the amount remaining after the 
employer has withheld all amounts required to be withheld by Federal, 
State and local laws.
    Based on the above, the Department has concluded that amounts 
required to be withheld under State law must be withheld prior to any 
voluntary withholding requested by the claimant. The Department 
continues to leave to the States the matter of priorities among amounts 
that are required to be withheld. Although States are encouraged to be 
more specific on this point, Section (4) of the attached revised draft 
language does not specify any priorities among the required 
withholdings. States may, of course, also make any changes to the draft 
language necessary to conform with State usage.
    5. Action Required. State agencies should take action to assure 
that the above position is reflected in State law. States not using the 
draft language are reminded that they will need to submit a plan to the 
appropriate Regional Office no later than September 30, 1996.
    6. Inquiries. Inquiries should be directed to the appropriate 
Regional Office.
    7. Attachment. Revised Draft Language to Implement a Voluntary 
Withholding Program.

Attachment to UIPL 17-95, Change 1--Revised Draft Language To Implement 
a Voluntary Withholding Program

    (1) An individual filing a new claim for unemployment 
compensation shall, at the time of filing such claim, be advised 
that:
    (A) Unemployment compensation is subject to Federal, State and 
local income tax;
    (B) Requirements exist pertaining to estimated tax payments;
    (C) The individual may elect to have Federal income tax deducted 
and withheld from the individual's payment of unemployment 
compensation at the amount specified in the Federal Internal Revenue 
Code;
    (D) The individual may elect to have State income tax deducted 
and withheld from the individual's payment of unemployment 
compensation at the rate of ____ percent;
    (E) The individual may elect to have local income tax deducted 
and withheld from the individual's payment of unemployment 
compensation at the rate of ____ percent;
    (F) The individual may elect to have State and local income 
taxes deducted and withheld from the individual's payment of 
unemployment compensation for other States and localities outside 
this State at the percentage established by such State or locality; 
and
    (G) The individual shall be permitted to change a previously 
elected withholding status.
    (2) Amounts deducted and withheld from unemployment compensation 
shall remain in the unemployment fund until transferred to the 
Federal, State or local taxing authority as a payment of income tax.
    (3) The commissioner shall follow all procedures specified by 
the United States Department of Labor and the Federal Internal 
Revenue Service pertaining to the deducting and withholding of 
income tax.
    (4) Amounts shall be deducted and withheld under this section 
only after amounts are deducted and withheld for any overpayments of 
unemployment compensation, child support obligations, food stamp 
overissuances or any other amounts required to be deducted and 
withheld under this Act.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI
Correspondence Symbol: TEUMI
Dated: June 28, 1995
Directive: Unemployment Insurance Program Letter No. 35-95
To: All State Employment Security Agencies
From: Mary Ann Wyrsch, Director, Unemployment Insurance Service
Subject: The Department of Labor's Position on Issues and Concerns 
Associated With the Utilization of Telephone and Other Electronic 
Methods in the Unemployment Insurance (UI) Program

    1. Purpose. To advise State Employment Security Agencies (SESAs) of 
the Department of Labor's position regarding issues relating to 
telephone or other electronic methods of processing in the UI program.
    2. Background. Several SESAs are developing, exploring, or 
implementing a variety of innovative approaches to UI tax and benefit 
claimstaking and processing utilizing new and developing electronic 
information/communication technologies. The technologies include, but 
are not limited to, interactive voice response units (IVRs) for 
continued claims (inquiry and filing), telephone initial claimstaking, 
and electronic funds transfer for collecting UI taxes and paying 
benefits. These approaches continue the movement of the UI program 
toward a ``paperless'' system, thereby reducing office traffic and 
making it more easy and convenient for claimants and employers to 
transact UI business.
    Insofar as SESAs have planned for or implemented new methods of 
claimstaking, issues have arisen requiring a response from the 
Department. Since there has not been an authoritative statement of the 
Department's position on this matter, the Department's position is set 
forth below.
Rescissions: None
Expiration Date: June 30, 1996
    3. Position.
    The Department's overall position is to promote methods of 
administration which ensure that UI applicants are afforded prompt and 
efficient service, and also ensures that pertinent Federal requirements 
are met by the claimant and SESA. To this end, the Department believes 
that SESAs should move toward fully implementing telephone claimstaking 
or other electronic methods of filing (e.g., computer terminals at 
kosks in one-stop centers etc.) for both initial and continued claims 
filing processes. The UI Information Technology Support Center (ITSC) 
will support the nationwide expansion of telephone claims technology.
    Any system planned or implemented to provide ease and convenience 
for filing claims must, however, provide safeguards to meet the 
requirement of Section 303(a)(1) of the Social Security Act (SSA), that 
the State have in place such methods of administration reasonably 
calculated to insure the full payment of UI when due. In other words, 
there must be methods in place to protect against improper payments and 
fraud. Also, prior to filing an application (oral or IVR telephone 
system or other electronic method (touchscreen or computer keyboard)), 
claimants must be advised that the law provides penalties for false 
statements including penalties for perjury in regard to citizenship/
immigration status. Since the State is required to establish a 

[[Page 55608]]
record of the claim, the claimant should also be advised that his/her 
answers will cause a record to be produced.
    A. Initial Claimstaking.
    (1) Verification of Claimant Identity/Signature.
    There is no Federal requirement that a claimant provide a signature 
on a claim form. Any such requirement would be pursuant to State law. 
However, Section 303(a)(1) of the SSA, requires that a State have such 
methods of administration to reasonably insure the full payment of 
unemployment compensation when due. In addition, Section 1137(a)(1), 
SSA, requires States to require the individual to furnish his/her 
Social Security Number as a condition of eligibility for benefits. 
These Federal provisions mean, among other things, that a State must 
have a system to reasonably insure that the name and Social Security 
Number used to establish eligibility for unemployment compensation 
belongs to the individual filing the claim.
    (2) Identification of Ethnic Background and Handicapped Status.
    The Department's regulations at 29 CFR Parts 31 and 32 require 
recipients of Department of Labor grant funds to collect, maintain and 
make available data as may be necessary to ascertain compliance with 
the requirements of the nondiscrimination statutes (Title VI of the 
Civil Rights Act of 1964, as amended; Section 504 of the Rehabilitation 
Act of 1973, and the Age Discrimination Act of 1975, as amended). 
Unemployment Insurance Program Letter UIPL) Nos. 46-89 and 46-89, 
Change 1, set forth the guidelines and requirements that State agencies 
must follow in collecting the data (at the time an individual files a 
new initial claim), and reporting the data relative to the unemployment 
insurance program.
    There is no Federal requirement regarding the method to be utilized 
by the State to obtain the information (i.e., orally to a claimstaker, 
IVR, self-entry at a computer keyboard or touchscreen, completing a 
response on a hardcopy document or other method (e.g., recorded on 
tape)). However, the information must be given voluntarily by the 
individual and the State agency may not change the response of the 
applicant. The applicant also has the right to refuse to provide the 
information and such refusal will not subject such individual to any 
adverse action or treatment. Therefore, any telephone or other 
electronic claims filing system must be able to accommodate a ``no 
response'' answer.
    (3) Child Support and Other Obligations.
    Section 303(e)(2)(A)(i) of the SSA requires each State agency to 
``require each new applicant for unemployment compensation to disclose 
whether or not such applicant owes child support obligations (as 
defined in the last sentence of paragraph (1).'' UIPL Nos. 1-82 and 15-
82 set forth the basic requirements for States to follow in 
implementing the statute. Essentially, the disclosure requires a 
``yes'' or ``no'' response to a question on any child support owed when 
individuals file a new initial claim.
    Effective January 1, 1997, among other Federal law amendments, 
Section 3304(a)(18) of the Federal Unemployment Tax Act (added by P.L. 
103-465 enacted December 8, 1994) requires States to offer voluntary 
withholding of Federal income tax for all unemployment compensation 
(includes State UI, UCFE/UCX, TRA, DUA, etc.) payments made after 
January 1, 1997. UIPL No. 17-95 advised State agencies of the 
provisions and furnished guidelines on implementation. States will need 
to include questions during the new initial claim filing process on 
whether the individual elects or declines to have income tax withheld 
(mandatory for Federal, and optional for State or local tax withholding 
if authorized by State law).
    Additionally, other Federal law provisions permit States, if the 
States have provisions in their State laws, to withhold amounts from 
unemployment compensation to pay health insurance premiums and food 
stamp over-issuances. Such provisions would also require asking 
claimants to provide responses to questions at the time of filing 
initial claims.
    For any of the above obligations, other than obtaining the needed 
information at the time of filing an initial claim, there is no Federal 
requirement for the method to be utilized by the State to obtain the 
information. The State agency may obtain the information orally, by 
IVR, keyboard or touchscreen entry, on a hardcopy document or other 
method.
    (4) Citizenship or National Status.
    Section 1137(d)(1)(A) of the SSA requires that each State require, 
as a condition of eligibility for unemployment compensation, ``a 
declaration in writing by the individual, (or, in the case of an 
individual who is a child, by another on the individual's behalf), 
under penalty of perjury, stating whether or not the individual is a 
citizen or national of the United States, that the individual is in a 
satisfactory immigration status.'' State laws require that individuals 
be able and available for work in order to be determined eligible for 
benefits. If an alien is not in ``satisfactory immigration status,'' 
such individual cannot be considered eligible for unemployment 
compensation. The Department issued guidance and instruction to States 
for implementation of Section 1137(d) and determining eligibility for 
aliens in UIPL Nos. 1-86; 12-87; 12-87, Change 1; and 6-89. The 
instructions provide that all applicants for unemployment compensation 
provide a ``yes'' or ``no'' response to a question on the new initial 
claim form or other form, asking if the applicant is a ``U.S. citizen 
or national.'' If the answer is ``no'', then an alien ID number is to 
be provided from registration documentation issued by the Immigration 
and Naturalization Service (INS) or such other documentation as the 
State determines constitutes reasonable evidence (Section 1137(d)(2). 
The above actions required of the applicant constitute ``in writing.''
    In the case of telephone or other electronic method initial claims 
filing, it is the Department's position, that if the claimant takes 
action to produce a record indicating citizenship and immigration 
status, such as entry of data through a touchtone phone (IVR system) or 
through a computer keyboard or touchscreen response (at a kiosk) in 
response to a question, such action is a ``declaration in writing by 
the individual.'' However, a claimant's oral response to a 
claimstaker's question, and then the claimstaker's entry onto a form or 
into an electronic format, does not constitute such a declaration 
because the individual claimant is not making the electronic record him 
or herself, but such record is being made by a third party where an 
error could be made unbeknown to the claimant. In other words, the 
claimant must make the ``declaration in writing,'' not the claimstaker. 
If the SESA utilizes the latter procedure to take initial claims, the 
SESA must have an alternate means of obtaining an answer from the 
claimant that will satisfy the Federal requirement. Examples of such 
alternate means include recording the conversation on tape or obtaining 
the claimant's ``declaration in writing'' on a continued claim or other 
hard copy document.
    In addition to the ``declaration in writing'' requirement of 
Section 1137(d)(1)(A), the provision also states that the declaration 
is made ``under penalty of perjury.'' However, it is the Department's 
position that State law must be followed regarding whether a claimant's 
statement (``declaration in writing'') is in a form that can uphold a 
perjury conviction. Therefore, the two tests for what constitutes a 
``declaration in writing'' and for what is needed 

[[Page 55609]]
under State law to uphold a ``penalty for perjury,'' must be met in 
order to comply with Section 1137(d)(1)(A) of the SSA. A SESA must 
consider both factors when designing and implementing a telephone or 
other electronic methods initial claims filing process.
    (5) Not a Citizen or National--Presentation of Documentation.
    Section 1137 (d)(2) of the SSA provides that if--

    An individual is not a citizen or national of the United States, 
there must be presented either--
    (A) alien registration documentation or other proof of 
immigration registration from the Immigration and Naturalization 
Service that contains the individual's alien admission number or 
alien file number * * *, or
    (B) Such other documents as the State determines constitutes 
reasonable evidence indicating a satisfactory immigration status.

    Therefore, neither Sections 1137(d)(2) (A) or (B) of the SSA may be 
satisfied by information obtained by telephone (orally or IVR) or entry 
via a computer keyboard or touchscreen.
    In order to satisfy the Federal law requirements, if a SESA 
utilizes a method of claimstaking other than in-person filing, and the 
claimant indicates a noncitizenship status, the SESA (State) must 
require that the claimant submit ``alien registration documentation or 
other proof of immigration registration from the INS that contains the 
individual's alien admission number or alien file number.'' 
(Requirement of Section 1137 (d)(2)(A).) Since an alien cannot allow 
his/her original INS documentation to leave his/her person, it is the 
Department's position that a photostatic copy of the document(s) 
submitted by mail or facsimile (FAX) transmission would suffice to meet 
the requirements of the Section in lieu of viewing the original 
document(s), particularly when taken in conjunction with the provisions 
of Section 1137 (d)(2)(B). That Section provides that the individual 
can submit such other documents as the State determines constitutes 
reasonable evidence indicating a satisfactory immigration status. This 
will allow the SESA to proceed with verification with INS required by 
Section 1137 (d)(3). The provisions of Section 1137(d)(2)(B) are also 
utilized when an individual cannot produce documentation that provides 
an alien admission or file number. Copies of such documents must then 
be sent to the INS for verification of status in accordance with 
Section 1137 (d)(4)(B)(i).
    The Department is in the process of resolving with the INS the 
differences between the Systematic Alien Verification for Entitlements 
(commonly called SAVE) program manual distributed by the INS requiring 
all entitlement agencies to have applicants present original documents 
(which must be kept on the person of the alien at all times) and the 
provision of Section 1137(d)(2)(B) that authorizes the State to accept 
such other documents as the State determines constitutes reasonable 
evidence indicating a satisfactory immigration status (which could be 
copies). The SAVE manual does not appear to giver any consideration to 
a method of filing other than in-person.
    B. Other Program Areas.
    (1) Unemployment Compensation for Ex-servicemembers (UCX) Claim--
Use of Form ETA-841 (Formerly ES 970).
    Form ETA-841 is an optional form and is not needed to establish UCX 
eligibility since all required information is on the DD Form 214 or 
information received from the Louisiana Claims Control Center (LCCC) 
based on a SESA's inquiry. Therefore, States implementing telephone or 
other electronic methods of initial claim filing do not have to 
complete and have the claimant sign Form ETA-841.
    (2) UCX Claim--Eligibility in the Absence of DD Form 214.
    Under a telephone or other electronic method of initial claim 
filing, if the claimant does not present copy no. 4 of his/her DD Form 
214 or SESA filing procedures do not require submittal of a copy, 
eligibility for UCX may be established based on an inquiry to the LCCC 
to verify the validity of data that was transmitted to the SESA in 
response to the SESA's original notification to the LCCC that a claim 
was filed. However, such eligibility may be established only if the 
LCCC provides a copy of copy no. 5 of DD Form 214 to the SESA. While it 
is not mandatory, the Department believes it is a preferable procedure 
to have the claimant present, or submit by mail or FAX, a copy of copy 
no. 4 of DD Form 214 to the SESA.
    (3) Trade Readjustment Allowances (TRA) Claim--Employer Signature 
on Form TRA-855A.
    Neither Federal law nor regulations require an employer's signature 
on the form. Therefore, the required information employers provide may 
be obtained by telephone or computer interface.
    (4) Extended Benefits (EB) and TRA--Tangible Evidence of Work 
Search.
    The Department's regulations at 20 CFR Part 615 implement the 
provisions of the Federal-State Extended Unemployment Compensation Act 
(EB Act). 20 CFR 615.8(g)(1) requires that an individual claiming EB 
shall make a systematic and sustained effort (as defined in 20 CFR 
615.2(0)(8)) to search for suitable work (as defined in 20 CFR 
615.8(d)(4)) each week after notification of his/her job prospects, and 
will furnish the State agency with each claim, tangible evidence of 
such efforts. The Department's regulations at 20 CFR 617.17(a) 
implementing the provisions of the Trade Act of 1974, as amended, 
require that the EB work test be satisfied for each week of TRA 
claimed. 20 CFR 615.2(o)(9) defines ``tangible evidence'' as a written 
record that can be verified that includes the actions taken, methods of 
applying for work, types of work sought, dates and places where work 
was sought, and the name of the employer or person contacted and the 
outcome.
    Most States' telephone or other electronic methods of claim filing 
systems will not suffice for the EB or TRA programs. Therefore, States 
utilizing a telephone or other electronic method of claims filing must 
have an alternative system in place to obtain the detailed information 
of a systematic and sustained search for work required as tangible 
evidence on weekly claims for EB and TRA to comply with the EB 
regulatory requirements. As examples, a State could set up a telephone 
tape system, which would enable claimants to describe their detailed 
work search over the phone, or, a State could require hard copy 
documents to be submitted for each week claimed that provide the 
required information.
    4. Action. SESA Administrators should inform appropriate staff of 
the Department's position set forth in this program letter. The 
position set forth should be followed by SESAs in the design or 
implementation of any telephone or other electronic claims filing 
method.
    5. Contact. Questions concerning this issuance should be directed 
to the appropriate Regional Office.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI
Correspondence Symbol: TEURL
Dated: October 5,1995
Directive: Unemployment Insurance Program Letter No. 1-96
To: All State Employment Security Agencies
From: Mary Ann Wyrsch, Director, Unemployment Insurance Service
Subject: The Legal Authority of Unemployment Insurance Program Letters 
and Similar Directives


[[Page 55610]]

    1. Purpose. To advise States of the position of the Department of 
Labor (Department) regarding the legal authority for Unemployment 
Insurance Program Letters (UIPLs) and other Departmental directives 
which affect the Federal-State Unemployment Insurance (UI) Program.
    2. References. The Administrative Procedure Act (APA), 5 U.S.C. 
551-559; the Social Security Act (SSA); and the Federal Unemployment 
Tax Act (FUTA).
    3. Background. Departmental directives for the UI program include 
UIPLs, General Administration letters (GALs), Handbooks, the Employment 
Security Manual (ESM) and various transmittals of model legislation for 
implementing Federal law requirements. These directives are issued to 
the States under authority delegated by the Secretary of Labor.
    The Department issues directives to set forth official agency 
policy. These directives state or clarify the Department's position, 
particularly with respect to the Department's interpretation of the 
minimum Federal requirements for conformity or compliance, thereby 
assuring greater uniformity of application of such requirements by the 
States. Oftentimes these directives provide information in the public 
interest which is vital to guiding the States' courses of operations.
    States have raised questions regarding what weight these directives 
carry as interpretations of Federal law. These inquiries have come from 
State legislators, State Attorney General offices, other State 
officials and attorneys in Legal Services. It has sometimes been argued 
that, since the interpretations in these directives are not found in 
the Code of Federal Regulations, they have no legal effect. This UIPL 
is issued to advise States that these directives do, in fact, have 
legal effect.
Rescissions: None
Expiration Date: October 31, 1996
    4. Discussion. The APA contains requirements to determine which 
rules are subject to its notice and comment procedures (ultimately 
leading to publication in the Code of Federal Regulations) to have 
force and effect as well as provisions for those rules which are not 
subject to those procedures. The APA, originally enacted on June 11, 
1946, and later revised by P.L. 89-554 (5 U.S.C. 551-559) was passed in 
part to assist the various Federal Government agencies in their 
administration of statutes under their jurisdiction. The APA recognizes 
that some functions and some operations of Federal agencies do not lend 
themselves to a formal procedure. For this reason, the APA provides for 
different types of rules including ``substantive'' or ``legislative'' 
rules and ``interpretative'' rules. Section 553(b) of the APA, which 
requires that a general notice of proposed rule making must be 
published in the Federal Register, makes two exceptions to this 
requirement, one of which is relevant here as follows:

    Except when notice or hearing is required by statute, this 
subsection does not apply--
    (A) to interpretative rules, general statements of policy, or 
rules of agency organization, procedure, or practice; * * *.

    The test for determining if a rule is interpretative, and thus not 
subject to the requirement of a published notice of proposed rule 
making, is found in Gibson Wine Co., Inc. v. Snyder et al., 194 F.2d 
329 (D.C. Cir. 1952). In Gibson, the court addressed an interpretative 
ruling transmitted by the Deputy Commissioner of the Internal Revenue 
Service. The court stated on page 331:

    Administrative officials frequently announce their views as to 
the meaning of statutes or regulations. Generally speaking, it seems 
to be established that ``regulations,'' ``substantive rules'' or 
``legislative rules'' are those which create law, usually 
implementary to an existing law; whereas interpretative rules are 
statements as to what the administrative officer thinks the statute 
or regulation means. [Emphasis supplied.]

    Under Gibson, an interpretative rule is one which explains or 
defines particular terms in a statute or is an opinion of an official, 
having authority on a particular subject, as to the meaning of a 
statute or regulation. Id. at 331-332.
    British Caledonian Airways, Ltd. v. C.A.B., 584 F.2d 982 (D.C. Cir. 
1978), is a leading case concerning the use of interpretative rules. 
The court stated that the agency was ``construing the language and 
intent of the existing statute and regulations in order to * * * remove 
uncertainty'' which is ``a function peculiarly within the ability and 
expertise of the agency.'' Id. at 991. The agency's actions were 
entirely appropriate ``to illuminate the meaning'' of its regulations. 
Id. at 993. Another court has stated that, when interpretative rules 
reiterate or explain an explicit statutory obligation, they can even 
help ``make sense'' of inconsistent statutory direction created by acts 
of Congress as long as they do not impose a new procedure or obligation 
which is not derived from the language of the statute or regulation. 
American Hospital Association v. Bowen, 640 F. Supp. 453, 460 (D.D.C. 
1986).
    In Cabais v. Egger, 690 F.2d 234 (D.C. Cir. 1982), the court held 
that a UIPL was not subject to the APA notice and comment procedures 
when it construed the language and intent of a statute and reminded 
States of existing duties, and where the UIPL did not grant or deny 
rights nor impose obligations which did not already exist in 
statute.\1\

    \1\The Cabais court did, however, conclude that, in one area, a 
UIPL did create a substantive rule since, contrary to the broad 
latitude granted to the states in the statute, the UIPL imposed ``an 
obligation on the States not found in the statute itself.'' Id. at 
239.
---------------------------------------------------------------------------

    Even if an interpretative rule has a wide ranging effect or a 
``substantial impact'' on individuals, this does not mean it is subject 
to notice and comment procedures. Following the U.S. Supreme Court 
decision in Vermont Yankee Nuclear Power Corp. v. Natural Resources 
Defense Council Inc., 435 U.S. 519, 524 (1978) that courts are 
generally not free to impose on agencies requirements that exceed those 
required by the APA, courts have rejected the ``substantial impact'' 
test. See Cabais, 690 F.2d at 237-238); Rivera v. Becerra, 714 F.2d 887 
(9th Cir. 1983). The Rivera court, which specifically addressed UIPLs, 
stated that agencies are not required to comply with a notice and 
comment procedure for interpretative rules which have a substantial 
effect because Congress considered the matter and explicitly excepted 
interpretative rules and general statements of policy from this 
procedure. Id. at 890-891. The court observed that agencies now freely 
issue interpretative rules as guidance and that unnecessarily 
restrictive procedures should not be imposed beyond that contemplated 
by the APA. Id.
    5. Action Required. State Administrators are requested to provide 
the above information to the appropriate staff.
    6. Inquiries. Direct questions to the appropriate Regional Office.

Department of Labor

Employment and Training Administration, Washington, DC 20210

Classification: UI
Correspondence Symbol: TEURL
Dated: October 5, 1995.
Directive: Unemployment Insurance Program Letter 2-96
To: All State Employment Security Agencies
From: Mary Ann Wyrsch, Director, Unemployment Insurance Service
Subject: Approval of Training for Individuals who Reside in or File 
from Another State


[[Page 55611]]

    1. Purpose. To inform States of the Department of Labor's position 
relating to the approval of training for individuals who reside in or 
file an unemployment compensation (UC) claim from another State.
    2. References. Sections 3304(a)(8) and 3304(a)(9)(A) of the Federal 
Unemployment Tax Act (FUTA); Draft Legislation to Implement the 
Employment Security Amendments of 1970 * * * H.R. 14705 (1970 Draft 
Legislation), Unemployment Insurance Program Letter (UIPL) 1276, dated 
July 22, 1974; and 20 C.F.R. Part 616.
    3. Background. The Department has discovered that some States 
restrict the approval of training to that which is provided within the 
State. Since 1974, it has been the express position of the Department 
that such restrictions are contrary to the requirements of Sections 
3304(a)(8) and (9)(A), FUTA. This UIPL is issued to restate this 
position.
    4. Applicable Provisions of Federal Law. Section 3304(a)(8), FUTA, 
requires that a State law, as a condition of certification for credit 
against the Federal unemployment tax, provide that:

Rescissions: None
Expiration Date: October 31, 1996
    Compensation shall not be denied to an individual for any week 
because he is in training with the approval of the State agency (or 
because of the application, to any such week in training, of State 
law provisions relating to availability for work, active search for 
work, or refusal to accept work).

    The expressed intent of Congress in enacting this section was ``to 
act to remove the impediments to training which remains in our 
unemployment insurance system.'' (H.R. Rep. No. 612, 91st Congress, 1st 
Session 17).
    Section 3304(a)(9)(A), FUTA, further requires a State law to 
provide that:

    Compensation shall not be denied or reduced to an individual 
solely because he files a claim in another State (or a contiguous 
country with which the United States has an agreement with respect 
to unemployment compensation) or because he resides in another State 
(or such a contiguous country) at the time he files a claim for 
unemployment compensation.

    The expressed intent of Congress in enacting this section was to 
remove provisions of law ``which reduce the benefits, or otherwise 
penalize workers who reside elsewhere than in the State in which they 
worked and earned their right to benefits,'' because such provisions 
``are not only inequitable to the individual claimant and injurious to 
the proper function of the unemployment system but inhibit among 
workers a very desirable mobility which is important to our economy.'' 
(H.R. Rep. No. 612, 91st Congress, 1st Session 17).
    5. Department of Labor Position. Section 3304(a)(8), FUTA, 
prohibits the denial of UC to an individual undertaking training ``with 
the approval of the State agency.'' In the 1970 Draft Legislation, the 
Department stated that ``each State is free to determine what training 
is appropriate'' and ``what criteria are established for approval of 
training.'' As a result, the 1970 Draft Legislation provided only 
suggested criteria. Since then, the Department has, however, required 
that States apply ``reasonable'' criteria for the approval of training, 
and taken the position that the refusal of approval of training solely 
because the training is conducted in another State would be 
inconsistent with Sections 3304 (a)(8) and (a)(9)(a), FUTA. (See UIPL 
1276, Section (A)(4)).
    Limiting approval of training to that within a State would create 
an unreasonable burden on an individual residing in or filing a UC 
claim from another State, with the result that the individual would be 
discouraged from participating in training. In cases where such 
individuals cannot reasonably be expected to commute to training in a 
State in which they do not reside, individuals would have no choice but 
to choose between attending training or receiving UC. This result would 
be inconsistent with the expressed intent of Congress in enacting the 
approved training provision.
    Further, Section 3304(a)(9)(A), FUTA, precludes denial of UC to an 
individual who files a claim or resides in another State (or a 
contiguous country with which the United States has an agreement with 
respect to UC) at the time he or she files a claim for UC. A State's 
refusal to approve training solely because it is conducted in another 
State is plainly inconsistent with this requirement. This result is 
also plainly inconsistent with the expressed intent of Congress since 
it inhibits the individual's mobility.
    Limiting approval of training to institutions certified by the 
State Board of Education, or a similar State entity, also limits the 
approval of training to that undertaken within the State. This creates 
the same problems with Federal law as discussed in the two preceding 
paragraphs. States wishing to limit training to certified institutions 
must, therefore, provide for the approval of training taken at an 
institution certified by the State Board of Education or similar entity 
in the State in which the institution is located.
    If the individual is attending training in another State, 
sufficient information must be collected to determine if the individual 
is attending training which is approvable under the appropriate State 
law. For interstate claims, the authority to approve training rests 
with the liable State. However, the liable State may adopt a 
determination by the agent State approving training for a particular 
individual or delegate such authority to the agent State. In fact, 
liable States should place as much reliance as possible on the 
recommendation of the agent State since the agent State is usually in 
the best position to know the individual's personal situation and its 
own labor market. Similarly, in a combined-wage claim, the paying State 
has the authority to approve training. The paying State may also adopt 
a determination by another State or delegate the authority for approval 
of training to the other State. Further, a transferring State must 
transfer wages and reimburse the paying State as provided in 20 CFR 
Part 616, without regard to approval of training by the paying State. 
The paying State may not refuse to approve training solely because the 
individual has no (or insufficient) covered wages or employment to 
qualify for benefits in the paying State.
    6. Action Required. States are to examine their current law, 
regulations, and procedures relating to the approval of training for 
individuals who reside in another State or who have filed either 
interstate or combined-wage claims and determine whether the current 
law, regulations, and procedures conform to the requirements of Federal 
law. If they do not, the State must notify the appropriate Regional 
Office of the Department of Labor as to how and when the law will be 
amended or the regulations and procedures changed.
    7. Inquiries. Inquiries should be directed to your Regional Office.

[FR Doc. 95-27101 Filed 10-31-95; 8:45 am]
BILLING CODE 4510-30-M