[Federal Register Volume 86, Number 199 (Tuesday, October 19, 2021)]
[Notices]
[Pages 57856-57859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22704]


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DEPARTMENT OF LABOR

Employment and Training Administration


Notice Announcing the Methodology To Distribute Outcome Payments 
to States for the Unemployment Insurance (UI) Reemployment Services and 
Eligibility Assessments (RESEA) Program in Accordance With Title III, 
Section 306(f)(2) of the Social Security Act (SSA)

AGENCY: Employment and Training Administration (ETA), Department of 
Labor.

ACTION: Announcement of the methodology to distribute outcome payments 
to States for the UI RESEA program for states meeting or exceeding 
program goals.

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SUMMARY: The Department is announcing the final methodology to 
distribute RESEA outcome payments to states each fiscal year (FY) after 
FY 2020 as required by the SSA. On May 7, 2020, ETA published a notice 
in the Federal Register requesting public comment concerning the 
proposed methodology to distribute RESEA outcome payments to states 
each fiscal year (FY) after FY 2020. The notice presented a description 
of the proposed methodology and public comments were requested. The 
comment period closed on June 8, 2020. This notice summarizes and 
responds to the comments received and publishes the final allocation 
formula that will be used for FY 2021.

DATES: The RESEA outcome payments distribution methodology will be used 
for FY 2021 and will be based on FY 2020 RESEA program performance.

ADDRESSES: Questions about this notice can be submitted to the U.S. 
Department of Labor, Employment and Training Administration, Office of 
Unemployment Insurance, 200 Constitution Avenue NW, Room S-4524, 
Washington, DC 20210, Attention: Lawrence Burns, or by email at [email protected].

FOR FURTHER INFORMATION CONTACT: Lawrence Burns, Division of 
Legislation, Office of Unemployment Insurance, at 202 693-3141 (this is 
not a toll-free number), TTY 1-877-889-5627 (this is not a toll-free 
number), or by email at [email protected].

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Federal-State UI program is a required partner in the 
comprehensive, integrated workforce system. See Workforce Innovation 
and Opportunity Investment Act (WIOA) section 121(b)(1)(B)(xi) (29 
U.S.C. 3151(b)(1)(B)(xi). Individuals who have lost employment through 
no fault of their own and have earned sufficient wage credits, may 
receive unemployment compensation (UC) if they meet initial and 
continuing eligibility requirements. Beginning in 2005, the Department 
and participating state workforce agencies began addressing the 
individual reemployment needs of UC claimants and working to prevent 
and detect UC improper payments through the voluntary UI Reemployment 
and Eligibility Assessment (REA) program. In FY 2015, the voluntary 
Reemployment Services and Eligibility Assessment (RESEA) program 
replaced the REA program.
    The Bipartisan Budget Act of 2018 (Pub. L. 115-123) (BBA), enacted 
on February 9, 2018, amended the SSA to create a permanent 
authorization for the RESEA program. A total of 49 states and 
jurisdictions operated a RESEA program in FY 2020. The primary goals 
for the RESEA program are: To improve employment outcomes for 
individuals that receive unemployment compensation and to reduce 
average duration of receipt of UC through employment; to strengthen 
program integrity and reduce improper payments of UC by states through 
the detection and prevention of such payments to individuals who are 
not eligible for such compensation; to promote alignment with WIOA's 
broad vision of increased program integration and service delivery for 
job seekers, including claimants for UC; and to establish RESEAs as an 
entry point into other workforce system partner programs for 
individuals receiving UC.

II. Background

    The RESEA provisions are contained in Section 306 of the Social 
Security Act (SSA) (42 U.S.C. 506). In addition to program 
requirements, Section 306, SSA, contains provisions for the funding of 
the RESEA program. The law specifies three uses for the funding and 
designates the proportion of annual appropriations to be assigned to 
these uses: (1) Base funding for states to operate the RESEA program 
(89 percent for fiscal years 2021 through 2026, and 84 percent for 
fiscal years after 2026); (2) outcome payments designed to reward 
states meeting or exceeding certain criteria (10 percent for fiscal 
years 2021 through 2026, and 15 percent for fiscal years after 2026); 
and (3) up to one percent for the Secretary of Labor to conduct 
research and provide technical assistance to states. Additionally, the 
law requires the Department to develop a methodology to allocate and 
distribute base funding and outcome payments to states beginning in FY 
2021. On August 8, 2019 the Department published a notice announcing 
the methodology for distribution of base funding at 84 FR 39018.
    Section 306(f)(2)(A), SSA, requires ETA to make ``outcome 
payments'' to states that meet or exceed the outcome goals for reducing 
the average duration of receipt of UC by improving employment outcomes. 
The law specifically states:

    IN GENERAL.--Of the amounts made available for grants under this 
section for each fiscal year after 2020, the Secretary shall reserve 
a percentage equal to the outcome reservation percentage for such 
fiscal year for outcome payments to increase the amount otherwise 
awarded to a State [for base funding under paragraph (f)(1)]. Such 
outcome payments shall be paid to States conducting reemployment 
services and eligibility assessments under this section that, during 
the previous fiscal year, met or exceeded the outcome goals provided 
in subsection (b)(1) related to reducing the average duration of 
receipt of unemployment compensation by improving employment 
outcomes.

    As described further in Section IV, ETA will be using several data 
sources to identify states eligible for RESEA outcome payments. These 
data sources include the ETA 5159 ``Claims and Payment Activities'' 
Report (OMB No. 1205-0010, expires April 30, 2022), which will be used 
to determine changes in UC duration, and RESEA data reported by the 
Wagner-Peyser Act-funded Employment Service program (ES program). The 
Wagner-Peyser data is transmitted to ETA via the Workforce Integrated 
Performance System (WIPS), and the specific data elements and reporting 
format are specified by the Participant Individual Record Layout 
(PIRL), (ETA Form 9172 (OMB No. 1205-0521, expires June 30, 2024)). 
RESEA-specific data reported under Wagner-Peyser Employment Service 
reports will be used to identify states with improved employment 
outcome for RESEA participants.

[[Page 57857]]

III. Response to Public Comments

    ETA received a total of six comments from four commenters 
concerning the RESEA outcome payment distribution methodology. These 
comments include: Three comments expressing concerns regarding the 
unknown impact of the COVID-19 pandemic on RESEA program performance 
and requesting that ETA either delay implementation of RESEA outcome 
payments or develop a temporary alternative methodology; one comment 
expressing concerns about ensuring that states have sufficient time to 
prepare reporting and other process changes that may be necessary to 
implement performance outcome payments; one comment requesting ETA 
consider excluding exhaustion rates in its proposed regression formula 
that will be used to determine RESEA targets because variations in 
states' UI adjudication processes may impact performance calculations; 
and one comment requesting that ETA consider assessing UI duration 
using RESEA participant data only. The following is a summary of these 
comments and ETA's responses.

A. Delayed Implementation or Alternative Allocation Methodology

    Three commenters expressed general concern regarding implementation 
of performance based outcome payments during a time when the total 
impact of the COVID-19 pandemic on RESEA program performance is 
unknown. One of the commenters requested ETA to provide broad 
considerations to states negatively impacted by COVID-19 pandemic. Two 
commenters recommended that ETA delay implementation of performance 
based payments or consider alternatives such as allocating outcome 
payments across all states or modifying the award methodology to expand 
potential eligibility to more states.
ETA Response
    As described in Section II above, the timeline for implementing 
performance based outcome payments is established in the SSA. ETA does 
not have authority to delay implementation of RESEA outcome payments. 
ETA is using a modified implementation strategy as discussed more fully 
below. This modified strategy includes a transition period that 
leverages RESEA data already collected by the ES program and previously 
negotiated performance targets for the ES program to inform outcome 
payments. ETA will continue to use available RESEA-subset information 
from the ES program data to build regression models based solely on 
RESEA data that take into account state-specific variables from other 
UI performance reports as applicable. These RESEA regression models 
will be used to set RESEA specific targets for future outcome payments.

B. Ensuring Sufficient Time for State Reporting and Program 
Modifications

    One commenter indicated that states will need adequate time to 
prepare for the reporting and process changes to accurately report if 
the Reemployment rate in the 2nd quarter after program exit targets 
were met or exceeded.
ETA Response
    ETA is using this notice to provide final notification of the 
outcome payment methodology. As described further in Section IV, the 
final outcome payment methodology uses data that is already being 
collected and does not introduce any new reporting requirements. States 
have a preexisting responsibility to maintain adequate processes and 
procedures to ensure the accurate and timely reporting of the data 
being used to determine the outcome payments.

C. Excluding Exhaustion Rates From Regression Analysis

    One commenter requested ETA to consider excluding exhaustion rates 
in its proposed regression formula that will be used to determine RESEA 
targets because variations in states' UI adjudication processes may 
impact performance calculations.
ETA Response
    ETA recognizes that there are variations across states in UI 
program requirements, processes, benefit levels, eligibility 
requirements, and state labor market conditions and that some of these 
variations may have an impact on RESEA performance. Recognizing the 
existence of these variations across states, ETA has selected a 
regression-model approach to setting state-specific RESEA targets 
because the regression model will reflect state specific variables that 
may be affected by economic conditions and state laws and policies.

D. Limiting Duration Data

    One commenter requested that ETA consider assessing UI duration 
using RESEA participant data only.
ETA Response
    UI duration is a statutorily required factor in determining 
eligibility for RESEA outcome factors. Given that improvements in UI 
duration resulting from reemployment interventions, such as RESEA, are 
small and typically range from a few days to a couple weeks, it is 
necessary to assess UI durations using a large sample size of data. 
Therefore, the measurement of improvements in duration currently uses 
data for all UI claimants. This approach may be reassessed if the 
number of claimants served by RESEA grows substantially in future 
years.

IV. Methodology To Determine States Eligible For Outcome Payments

    ETA developed a three-step approach to determine whether a state is 
eligible for RESEA Outcome Payments. The approach reflects RESEA's 
statutory purpose, as defined in Section 306(b)(1), SSA, to improve 
employment outcomes of individuals who receive UC and to reduce the 
average duration of receipt of UC through employment. The three-step 
approach includes:
    1. Evaluation of state reemployment performance using RESEA-subset 
data collected by the ES program and reported to ETA via WIPS using 
parameters identified in the PIRL to determine if a state met or 
exceeded the state-specific reemployment target. As an interim measure, 
ETA will use each state's Wagner-Peyser program negotiated target for 
the Reemployment Rate in the 2nd Quarter After Program Exit Quarter as 
the RESEA reemployment target. As more RESEA data is collected in the 
coming years and regression models are refined, ETA will develop RESEA-
specific targets and discontinue the use of the Wagner-Peyser 
negotiated target for Reemployment Rate in the 2nd Quarter after 
Program Exit Quarter (see Step 1 of this notice (below) for additional 
details).
    2. Evaluation of the state's Average UI duration to determine if 
the state met or exceeded the state-specific targets that have been 
established for UI Duration based on a regression model that is 
adjusted to reflect state-level variations that may impact performance, 
such as differing state UI processes and requirements and economic 
conditions (see Step 2 of this notice (below) for additional details).
    3. Award Allocation. ETA will base the assessment on the previous 
fiscal year (typically the full period of October 1 through September 
30). While this proposed assessment period for the outcome payments 
differs from the RESEA program performance year (January to December), 
it aligns with the assessment period described in Section 306(f)(2), 
SSA, and provides for the necessary time for data collection, 
reporting, analysis, and award within the authorized time period for 
federal

[[Page 57858]]

obligation of RESEA funds. For example, FY 2021 RESEA funds must be 
obligated to states by December 31, 2021. See Consolidated 
Appropriations Act, Public Law 116-260, Division H, Title I, State 
Unemployment Insurance and Employment Service Operations (SUIESO) 
paragraph (1).
Step 1: RESEA Reemployment Measure
    To be considered eligible to receive an outcome payment, a state 
must first meet or exceed its state-specific reemployment target for 
the Reemployment Rate in the 2nd Quarter After Program Exit.
    Further details on the UI and RESEA performance measures, including 
the 2nd Quarter after Program Exit Quarter for RESEA Program 
Participants discussed above, are outlined in Unemployment Insurance 
Program Letter (UIPL) No. 7-21 at the following link: https://wdr.doleta.gov/directives/attach/UIPL/UIPL_7-21.pdf.
    Data used to assess RESEA reemployment performance is collected by 
the ES program and transmitted to ETA via WIPS. The PIRL (ETA Form 9172 
(OMB No. 1205-0521, expires June 30, 2024)) identifies specific data 
elements and the required reporting format for WIPS. The PIRL includes 
specific elements that enable ETA to excerpt RESEA-specific data from 
the Wagner-Peyser reports. RESEA operating guidance requires all RESEA 
participants to be co-enrolled in the ES program. Therefore, all 
individuals receiving services through the RESEA program should be 
represented in the ES data set. Additional information on the PIRL 
elements can be found in the ``DOL-only PIRL'' at the following link: 
https://www.dol.gov/agencies/eta/performance/reporting.
    As discussed in Section IV.i. of this notice, ETA will initially 
measure RESEA reemployment performance by using each state's negotiated 
levels of performance for ES program participants. These performance 
targets are generated by the WIOA Statistical Adjustment Model required 
under Section 116(b)(3)(viii), WIOA (29 U.S.C. 3141(b)(3)(viii)). The 
Department established this Statistical Adjustment Model as an 
objective statistical regression model to adjust individual state-
negotiated levels of performance using actual economic conditions and 
the characteristics of participants served at the end of the 
performance period. The model will be updated and refined with ongoing 
use and application as additional quarters of WIOA outcome data become 
available. More detailed information on the Statistical Adjustment 
Model is available at the Department website: https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=3430.
    ETA will announce the negotiated targets applicable to the 
performance period thorough separate guidance to be issued as a joint 
Unemployment Insurance Program Letter and a Training and Employment 
Guidance Letter. States that do not meet or exceed the criteria for 
this measure will be eliminated from the outcome payment pool and will 
not proceed to the next step of performance outcome analysis.
    Also as discussed in Section IV.i. of this notice, as more RESEA 
data is collected and regression models are refined, ETA will develop 
RESEA-specific targets. These performance targets that are more 
tailored to the RESEA program will then be used in place of the 
established Wagner-Peyser program targets prospectively.
Step 2: UI Duration
    States that meet or exceed their targets established for the RESEA 
Reemployment Measure (Step 1) must also demonstrate reduced average UI 
duration to be considered for outcome payments. Average UI duration is 
defined as ``The number of weeks compensated for the year divided by 
the number of first payments in the year.'' \1\ The performance period 
used to evaluate UI duration will be the same four-quarter period 
ending September 30 as the reemployment measure, and will be computed 
using data reported by states on the ETA 5159 Report (OMB No. 1205-
0010, expires April 30, 2022).
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    \1\ https://oui.doleta.gov/unemploy/content/data_stats/datasum99/4thqtr/gloss.asp.
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    Because UI duration can be impacted by factors such as changes in 
the economy or variations in state UI laws and processes, it is 
necessary to use a regression model to achieve consistency across 
states in setting state-specific targets. Therefore, ETA has developed 
a regression model to estimate a state's average duration that 
incorporates state-specific explanatory variables. The following 
variables allow the model to develop state estimates for UI duration 
that are unique to a state based on its localized economic conditions:
     Total Unemployment Rate--the number of unemployed people 
as a percentage of the labor force; \2\
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    \2\ https://www.bls.gov/cps/cps_htgm.htm#definitions.
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     Potential Duration of UC--the number of full weeks of 
benefits for which a claimant is eligible within a benefit year; \3\
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    \3\ https://wdr.doleta.gov/directives/attach/ETAH/ETHand401_5th.pdf, page I-2-24, Section 2(B)(a).
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     UI Exhaustion Rate-- the average monthly exhaustions 
divided by the average monthly first payments; \4\
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    \4\ https://oui.doleta.gov/unemploy/content/data_stats/datasum99/4thqtr/gloss.asp.
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     Average state weekly benefit amount payment--the total 
amount of benefits paid divided by the total number of weeks 
compensated; \5\ and
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    \5\ https://wdr.doleta.gov/directives/attach/ETAH/ETHand401_5th.pdf, page I-6-59, Section 2(B)(a)(1).
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     Year-to-year change in payroll employment (nonfarm 
payroll)--the total number of persons on establishment payrolls 
employed full- or part-time who received pay for any part of the pay 
period which includes the 12th day of the month.\6\
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    \6\ https://www.bls.gov/bls/glossary.htm#P.
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    The regression model generates the projected average UI duration 
for each state and compares it to each state's actual average UI 
duration. If a state's actual average UI duration is lower than the 
state's projected average UI duration provided by the regression model, 
the state will have demonstrated a reduction in UI duration. A state 
that does not demonstrate a reduction in UI duration as described above 
will be eliminated from the outcome payment pool. The regression model 
will be updated each year to incorporate changing state conditions.
Step 3: Award Allocation
    Once the pool of eligible states is identified after completing 
Steps 1 and 2, ETA will distribute the funds reserved for outcome 
payments. Recognizing that the intent of the outcome payments is to 
both award performance and serve as an incentive to states to improve 
service delivery, ETA will apply an award methodology that allocates 
funding in amounts that reflect the size of the RESEA programs 
operating in each state. Specifically, ETA will allocate outcome 
payments using a modified version of the RESEA base funding allocation 
methodology described in section IV of 84 FR 39018, the Federal 
Register Notice announcing the RESEA base allocation formula. This 
modified methodology will use the combined Insured Unemployment Rate 
(IUR)-Civilian Labor Force (CLF) weighting factor described in section 
IV of the Notice. However, the base funding provisions described in 
sections V-VII of the Notice (hold-harmless, minimum funding, and 
carry-over threshold) will not be applied because outcome payments are 
based on performance and will vary from year to year.
    ETA's approach of allocating outcome payments using a modified 
version of

[[Page 57859]]

the base funding formula is intended to ensure awards are large enough 
to act as an incentive to states to improve RESEA performance but also 
prevent inundating small state programs with excessively large awards 
that cannot be expended within the period of performance or providing a 
large state program with a small award for which any potential benefit 
would be outweighed by the administrative burden of implementation.
Outcome Payments Distribution Timeline
    Section 306(f)(2)(A), SSA, requires the Department to make outcome 
payments based on RESEA outcomes reported for the previous fiscal year 
starting in FY 2021. There are several timing issues associated with 
calculation of the performance to enable the outcome payments. First, 
the period of performance for RESEA is January 1 through December 31. 
The reemployment outcomes data has a four-quarter lag (three quarters 
for reemployment outcomes to be available, and one quarter for state 
reporting). In order to allow time for necessary data collection and 
analysis, the distribution of outcome payments will occur in December 
of the FY following the year in which the RESEA grant funds are 
awarded. For example, the outcome payments for FY 2021 will be made to 
states by December 31, 2021.
    Due to the impact of COVID-19 on state RESEA program operations, 
the performance period was modified from the complete FY 2020 to 
October 2019 through March 2020 to capture state performance under 
normal pre-pandemic conditions. The following schedule applies solely 
to the award of FY 2021 outcome payments:
     Data for performance period October 2019 through March 
2020, which became available for ETA review in May 2021;
     The pool of eligible states will be determined using the 
methodology outlined in Steps 1 and 2 above; and
     Outcome payments will be distributed no later than 
December 31, 2021.

V. Conclusion

    The RESEA outcome payments distribution methodology articulated in 
this notice will be utilized with respect to FY 2021 for distribution 
in December 2021.

    Signed in Washington, DC.
Angela Hanks,
Acting Assistant Secretary for Employment and Training.
[FR Doc. 2021-22704 Filed 10-18-21; 8:45 am]
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