[Federal Register Volume 73, Number 111 (Monday, June 9, 2008)]
[Notices]
[Pages 32603-32604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-12810]



[[Page 32603]]

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DEPARTMENT OF LABOR

Employment and Training Administration


Publication of Unemployment Insurance Program Letters (UIPLs): 
UIPL 09-08--Immediate Deposit and Withdrawal Standards--Intercept of 
Refunds of Erroneous Employer Contributions; and UIPL 14-08--Treatment 
of Fees Collected by State Child Support Agencies

AGENCY: Employment and Training Administration, Labor.

ACTION: Notice.

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SUMMARY: The Employment and Training Administration interprets Federal 
law requirements pertaining to unemployment compensation (UC). These 
interpretations are issued in Unemployment Insurance Program Letters 
(UIPLs) to the State Workforce Agencies. The UIPLs described below are 
published in the Federal Register in order to inform the public.

UIPL 09-08--Immediate Deposit and Withdrawal Standards--Intercept of 
Refunds of Erroneous Employer Contributions

    Recently, the question has arisen whether refunds of erroneously 
paid employer contributions may be intercepted to pay liabilities the 
employer owes the state rather than directly refunding the employer. 
Many state laws currently permit intercept of state income tax refunds 
or lottery winnings to pay other liabilities owed the state. This UIPL 
is issued to inform states of the Department's interpretation of 
Federal law requirements.
    States are permitted to intercept the refund rather than directly 
refund it to the taxpayer.

UIPL 14-08--Treatment of Fees Collected by State Child Support Agencies

    States have long been required to deduct and withhold certain child 
support obligations from UC. In 2005, Section 7310 of the Deficit 
Reduction Act amended Federal law to mandate that state child support 
agencies impose an annual fee of $25 for collecting child support 
obligations under certain circumstances. In response to this mandate, 
some states have chosen to amend their laws and regulations. This UIPL 
is issued to assist the states in assuring that any such amendments are 
consistent with Federal UC law.

    Signed in Washington, DC, this 2nd day of June, 2008.
Brent R. Orrell,
Acting Assistant Secretary, Employment and Training Administration.

Appendices

Appendix A

January 29, 2008

    Advisory: Unemployment Insurance Program Letter No. 9-08.
    To: State Workforce Agencies.
    From: Douglas F. Small, Deputy Assistant Secretary.
    Subject: Immediate Deposit and Withdrawal Standards--Intercept of 
Refunds of Erroneous Employer Contributions.
    1. Purpose. To provide guidance regarding the Department of Labor's 
(Department's) interpretation of Federal law regarding the intercept of 
refunds of erroneous employer contributions to offset other employer 
liabilities to the state.
    2. References. Sections 3304(a)(4), and 3306(h) of the Federal 
Unemployment Tax Act (FUTA); Section 303(a)(5), of the Social Security 
Act (SSA); Unemployment Insurance Program Letter (UIPL) No. 45-89.
    3. Background. Section 3304(a)(4), FUTA, requires, as a condition 
of employers in a state receiving credit against the Federal 
unemployment tax, that:

all money withdrawn from the unemployment fund of the State shall be 
used solely in the payment of unemployment compensation, exclusive 
of expenses of administration, and for refunds of sums erroneously 
paid into such fund * * * [Emphasis added.]

    The same withdrawal standard is found in Section 303(a)(5), SSA, as 
a condition for a state to receive administrative grants.
    Recently, the question has arisen whether refunds of erroneously 
paid employer contributions may be intercepted to pay liabilities the 
employer owes the state rather than directly refunded to the employer. 
Many state laws currently permit intercept of state income tax refunds 
or lottery winnings to pay other liabilities owed the state. This UIPL 
is issued to inform states of the Department's interpretation of 
Federal law requirements.
    4. Intercept of Refunds. Federal law authorizes the state 
unemployment compensation (UC) agency to ``refund'' the amounts 
erroneously paid by employers into the state unemployment fund. Federal 
law does not specify that the refund must be made directly to the 
employer. As a result, the state UC agency may intercept the refund and 
apply it to obligations the employer may owe the state.
    The Department notes that permitting the UC program to participate 
in state-wide intercept programs may enhance the UC fund if the funds 
intercepted by the state through other sources are permitted to be used 
to satisfy past due employer contributions to the unemployment fund.
    Unlike refunds of amounts erroneously paid by employers, Federal 
law requires the payment of compensation to the individual whose 
unemployment is being compensated. Section 3306(h), FUTA, defines 
compensation to mean ``cash benefits payable to individuals with 
respect to their unemployment.'' (Emphasis added.) As explained in UIPL 
45-89, under the withdrawal standard:

all unemployment compensation must be paid directly, as a matter of 
right, to the individual whose unemployment is being compensated, 
except for some narrowly limited statutory exceptions. * * * To 
deduct compensation to pay debts, or to otherwise provide for 
payment to someone other than the claimant personally, would defeat 
the intent and purpose of the program.

    Thus, Federal law requires a state to limit withdrawals from its 
unemployment fund to compensation paid directly to the individual. 
However, there are a number of statutory exceptions, including one 
permitting withdrawals to pay refunds of sums erroneously paid into the 
fund. This exception for refunds does not require direct payment.
    5. Action. State administrators should distribute this advisory to 
appropriate staff.
    6. Inquiries. Questions should be addressed to your Regional 
Office.

Appendix B

March 12, 2008

    Advisory: Unemployment Insurance Program Letter No. 14-08.
    To: State Workforce Agencies.
    From: Brent R. Orrell, Acting Assistant Secretary.
    Subject: Treatment of Fees Collected by State Child Support 
Agencies.
    1. Purpose. To provide guidance regarding the application of 
Federal unemployment compensation (UC) law to the mandatory collection 
of fees related to child support collection.
    2. References. Sections 3304(a)(4) and 3306(h) of the Federal 
Unemployment Tax Act (FUTA); Sections 303(e)(2), 454(6)(B)(ii), and 
457(a)(3) of the Social Security Act (SSA); Unemployment Insurance 
Program Letter (UIPL) No. 45-89; and Section 7310 of the Deficit 
Reduction Act of 2005 (DRA), Public Law 109-171.

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    3. Background. States have long been required to deduct and 
withhold certain child support obligations from UC. (See Section 
(303)(e)(2), SSA, and UIPL No. 45-89.) In 2005, Section 7310 of the DRA 
amended Federal law to mandate that state child support agencies impose 
an annual fee of $25 for collecting child support obligations under 
certain circumstances. In response to this mandate, some states have 
chosen to amend their laws and regulations. This UIPL is issued to 
assist the states in assuring that any such amendments are consistent 
with Federal UC law.
    4. Federal Law. Section 3304(a)(4), FUTA, requires, as a condition 
for employers in a state to receive credit against the Federal tax, 
that state law provide that--

    All money withdrawn from the unemployment fund of the State 
shall be used solely in the payment of unemployment compensation, 
exclusive of expenses of administration, and for refunds of sums 
erroneously paid into such fund. * * *

    Section 303(a)(5), SSA, provides a similar requirement as a 
condition for a state to receive administrative grants. These 
provisions, known as the ``withdrawal standard,'' mean that money may 
only be withdrawn from the unemployment fund for payment of 
``compensation,'' with certain specified exceptions. Section 3306(h), 
FUTA, defines ``compensation'' as ``cash benefits payable to 
individuals with respect to their unemployment.'' One exception to the 
withdrawal standard is found in Section 303(e)(2)(A), SSA, which 
requires a state UC agency to ``deduct and withhold from any [UC] 
otherwise payable to an individual * * *'' amounts to pay ``child 
support obligations'' pursuant to part D of Title IV of the SSA.
    Section 7310 of the DRA added Section 454(6)(B)(ii) to the SSA, 
pertaining to state plans for child support, to require that, for each 
case where the custodial parent ``has never received'' Temporary 
Assistance for Needy Families, the state child support agency is to 
``impose an annual fee of $25 for each case in which services are 
furnished, which shall be retained by the State from support collected, 
* * * paid by the individual applying for the services, recovered from 
the absent parent, or paid by the State out of its own funds. * * *'' 
(Emphasis added.) The amendment also added Section 457(a)(3), SSA, to 
provide that ``the State shall distribute to the family the portion of 
the amount so collected that remains after withholding any fee. * * *'' 
(Emphasis added.) The DRA did not amend Federal UC law.
    5. Interpretation. Exceptions to the withdrawal standard are 
narrowly construed. Section 3 of UIPL No. 45-89 explained ``that 
deductions may be made only when authorized by Federal law.'' Paragraph 
4.b of the UIPL added that, with specified exceptions, state law must 
provide that UC benefit payments ``be exempt from levy, execution, 
attachment, order for the payment of attorneys fees or court costs, or 
any other remedy for the collection of public or private debts, prior 
to receipt by the claimant.'' Therefore, absent an explicit statutory 
authorization, states may not deduct and withhold a processing fee from 
UC. Since the DRA did not amend Federal UC law, states may not deduct 
and withhold a processing fee from a claimant's UC when deducting child 
support.
    The DRA did, however, amend Federal law to provide that 
``collected'' child support obligations may be used to pay the 
mandatory fee. As a result, after the full amount of the child support 
obligation has been deducted from a claimant's UC and sent to the state 
child support agency, the child support agency may, consistent with 
Section 7310, DRA, withhold the processing fee before sending the 
balance of the child support collected to the child support recipient.
    States are reminded that, when crafting legislation or regulations 
to implement the provisions of the DRA, care should be taken to ensure 
the requirements of the withdrawal standard, as interpreted in this 
UIPL, are met. In short, a state law or regulation may not authorize 
the payment of the child support fee directly from UC, but it may 
authorize the payment of the fee from child support collected by the 
state child support agency consistent with Section 303(e)(2), SSA.
    6. Action Required. State administrators are requested to review 
existing state law provisions and agency practices involving the child 
support intercept program to ensure consistency with Federal UC law 
requirements.

[FR Doc. E8-12810 Filed 6-6-08; 8:45 am]
BILLING CODE 4510-FN-P