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In general, the first special distribution relates to UC ``modernization incentive payments.'' The total amount available for all States is $7 billion. To obtain its share, the State must make an application to the Department of Labor demonstrating that its UC law contains certain benefit eligibility provisions. Attachment I discusses eligibility for these incentive payments and the application and approval process. Attachments II and III discuss these matters in greater detail. The last date on which an incentive distribution may be made is September 30, 2011, so applications must be received no later than August 22, 2011.

The second distribution is a ``special transfer'' of $500 million to the States' accounts in the UTF to be used for certain
administrative purposes. This administrative transfer is made regardless of whether the State qualifies for a modernization incentive payment. States do not need to apply to receive these amounts. Attachment IV discusses this administrative transfer and the permissible uses of the amounts transferred. Attachment VII contains the amounts distributed under this administrative transfer and each State's potential share under the modernization incentive payments.

Attachment V discusses the provisions related to suspension of interest on advances and the partial suspension of Federal income tax on UC. Attachment VI sets forth the text of the amendments discussed in this UIPL.

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

5. Inquiries. Questions should be addressed to your Regional Office.

6. Attachments.
Attachment IModernization Incentive PaymentsOverview
Attachment IIModernization Incentive PaymentsBase Period
ProvisionQuestions and Answers
Attachment IIIModernization Incentive PaymentsOther Eligibility ProvisionsQuestions and Answers
Attachment IVSpecial Administrative TransfersQuestions and Answers
Attachment VSuspensionsInterest on Advances and Federal Taxation of UC
Attachment VIText of Sections 2003 and 2004 of Public Law 1115 Attachment VIIUC Modernization DistributionsAmount
Attachment I
Modernization Incentive PaymentsOverview

In General

Section 2003(a) of Public Law 1115 added new subsection (f) to Section 903, SSA, to provide for incentive payments to States.

These incentive payments are calculated in the same manner as a ``Reed Act'' distribution. This means each State's share is based on its proportionate share of FUTA taxable wages multiplied by the $7 billion authorized by the amendments. For purposes of computing each State's proportionate share, the Secretary of Labor will use the taxable wages that would have been used for calculating any Reed Act distribution occurring on October 1, 2008. As provided by Section 903(f)(1)(B), SSA, tax year 2007 data is used for determining each State's share.

A State's share will be reserved in the Federal Unemployment Account (FUA) in the UTF for purposes of making incentive payments. As of the close of Federal fiscal year 2011 (that is, September 30, 2011), this limitation expires, and any unused amounts again become available for any FUA use.

A State's eligibility for its maximum incentive payment is conditioned on its law containing specific provisions:

State Applications

In General. The State must apply to the Department of Labor to receive any incentive payment. A complete application must document which provisions of State law meet the requirements for obtaining an incentive payment as interpreted by this UIPL. The application must also describe how the State intends to use any incentive payment to improve or strengthen the State's UC program. Attachment II discusses what constitutes a complete application for purposes of the base period provision and Attachment III discusses what constitutes a complete application for purposes of the other benefit eligibility provisions.

Applications are to be signed by the State agency administrator and addressed to: Cheryl Atkinson, Administrator, Office of Workforce Security, 200 Constitution Avenue, NW., Room S4231, Washington, DC 20210.

States may submit applications by mail, fax, or email. States may fax applications to 2026932874 to the attention of the Division of UC Legislation. Email submissions should be sent to
Atkinson.Cheryl@dol.gov with a cc to Hildebrand.Gerard@dol.gov. Copies should be provided to the appropriate Regional Office. For purposes of determining the date of receipt (as described immediately below), the date of receipt in the National Office will be used.

Review Process. Within 30 days of receipt by the Department of a State's complete application, the State will be notified whether it qualifies for an incentive payment. If it does, the Secretary of Treasury will transfer the amount of the incentive payment within seven days of receipt of the Department's certification. Since all incentive payments must be made before October 1, 2011, and since the Department must have adequate time to review any application, all applications must be received by the Department no later than August 22, 2011.

To expedite processing of applications and distribution of incentive payments to the States, the Department is providing for a twotiered application process under which a State may make one application regarding the base period provisions and a separate application regarding the other benefit eligibility provisions. Nothing prohibits States from making a single application. However, since the Department anticipates relatively swift action on base period applications, it may be advantageous for States to make two applications.

State Law Status. Applications should only be made under provisions of State laws that are currently in effect as permanent law and not subject to discontinuation. This means that the provision is not subject to any conditionsuch as an expiration date, the balance in the State's unemployment fund, or a legislative appropriationthat might prevent the provision from becoming effective, or that might suspend, discontinue, or nullify it.

There is one exception to this limitation. In some cases, a State might enact a new provision of law to qualify for the incentive payment, but delay its effective date due to implementation requirements. In these cases, if the State law provision takes effect within 12 months of the date of the Secretary of Labor's certification, then the provision will be considered to be in effect as of the date of the Secretary's certification to the Secretary of Treasury. In the case of a provision that is not effective until more than 12 months (which may be the case with ABP provisions) the State
[[Page 48604]]
should time its application so that the Secretary's certification will be made no more than 12 months prior to its law's effective date. Thus, for example, since the Secretary must rule on any application within 30 days, the application should be submitted no more than 13 months before the State law's effective date. Note, however, as discussed above, the Department will not consider applications received after August 22, 2011. As a result, the latest effective date of a provision must be on or before September 21, 2012.

Receipt and Use of Incentive Payments

Following the Secretary's certification for an incentive payment, the entire amount certified will be transferred to the State's account in the UTF. A State may use its incentive payment: (1) To pay UC (including dependents' allowances); or (2) upon appropriation of its State legislature, to pay UC and employment service administrative costs. The conditions for administrative use of the incentive payment are the same as those applicable to the $8 billion Reed Act distribution made in 2002. Refer to Q&As 9 through 19 and Q&A 21 in Attachment I to TEGL 1801 for guidance. Like the $8 billion Reed Act distribution, there is no time limit on the use of the incentive payment for benefit or administrative purposes. Incentive payments available for the payment of UC must, however, be expended before the State may obtain an advance to pay UC under Title XII, SSA. Paperwork Reduction Act (PRA) Statement

The public reporting burden for this collection of information is estimated to average approximately eight hours per response including time for gathering and maintaining the data needed to complete the required disclosure.

This UIPL contains a new collection of information in the form of an application for UC Modernization Incentive Payments. According to the Paperwork Reduction Act of 1995 (Pub. L. 10413), no persons are required to respond to a collection of information unless such collection displays a valid Office of Management and Budget (OMB) control number. The Department is planning to submit an Information Collection Request (ICR) to OMB requesting a new OMB Control Number. The Department notes that a Federal agency cannot conduct or sponsor a collection of information unless it is approved by OMB under the PRA, and displays a currently valid OMB control number, and the public is not required to respond to a collection of information unless it displays a currently valid OMB control number. See 44 U.S.C. 3507. Also, notwithstanding any other provisions of law, no person shall be subject to penalty for failing to comply with a collection of information if the collection of information does not display a currently valid OMB control number. See 44 U.S.C. 3512. The Department will notify States of OMB's decision upon review of the Department's ICR, including any changes that may result from this review process. Attachment II
Modernization Incentive Payments
Base Period Provisions

Questions and Answers

II1. Question. What provisions must my law contain to qualify for an incentive payment under the base period provision?

Answer. There are two options:

II2. Question: I believe my State law qualifies for the incentive payment. What should my application State?

Answer: The application must:

II3. Question: Is the Department aware of any existing ABP provisions that will not qualify for the incentive payment?

Answer: Yes. A provision providing that an ABP will be used only if the unemployment fund is above a certain ``solvency'' threshold would not qualify because the ABP is subject to discontinuation under a specified condition. Also, a State law that permits use of an ABP only after a specified number of days have elapsed since the end of the last completed quarter in order for wage records to be received would not qualify because it does not permit use of the ABP during the days immediately following the end of the quarter.
Attachment III
Modernization Incentive Payments
Other Eligibility Provision
Questions and Answers

In General

III1. Question: If my State qualifies for the onethird incentive payment related to its base period provision, what provisions must my law contain to qualify for certification for the remaining twothirds of its incentive payment?

Answer: In brief, a State law must contain provisions carrying out at least two of the following:

PartTime Workers

III2. Question: What is the parttime work option?

Answer: State law must provide that an individual will not be denied UC under any provision relating to availability for work, active search for work, or refusal to accept work, solely because such individual is seeking only parttime work as defined by the Secretary of Labor.

The State law may, however, deny benefits if a majority of the weeks of work in the individual's base period do not include parttime work. States are not required to have this exception in their laws in order to qualify for the incentive payment under this option. In fact, a State may determine that an individual who has previously worked full time may be eligible for UC even if the individual limits him/herself to seeking parttime work.

III3. Question: For purposes of ``seeking only parttime work,'' how does the Department define ``seeking only parttime work''?

Answer: For purposes of the incentive payment, the Department defines
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``seeking only parttime work'' as work meeting any one of the following situations:

The Department will approve a State's application if the State uses any one of the above definitions. The State may also use a combination of these definitions. For example, a State may define parttime work as work having comparable hours to the individual's work in the base period, except that an individual must be available for at least 20 hours of work per week.

A State may also have a broader definition of parttime work. For example, the State may require the individual to be available for only 10 or more hours per week. Of course, the State may not allow the individual to limit his or her availability to the extent that it constitutes a withdrawal from the labor market. (See 20 CFR 604.5(a)(1).)

III4. Question: My State law provides for payment to individuals seeking parttime work only if they have worked parttime during the entire base period. Would an application containing this limitation be certified?

Answer: No. To qualify for the incentive payment, a State law must permit an individual to seek parttime work, except that the State may deny benefits if a majority of weeks of work in the base period do not include parttime work (i.e., were fulltime). Requiring parttime work throughout the entire base period is more restrictive than the ``majority'' standard and would not qualify.

III5. Question: My State law provides for payment to individuals seeking parttime work only if my agency determines the individual has a legitimate reason to limit employment to parttime work. Would an application containing this limitation be certified?

Answer: No. To qualify for the incentive payment, a State law must permit an individual to seek parttime work, except that the State may deny benefits if a majority of weeks of work in the base period do not include parttime work (i.e., were fulltime). Requiring agency approval is more restrictive.

III6. Question: My State law provides for payment to individuals who have a history of parttime work. Would an application containing this limitation be certified?

Answer: It depends on how the State interprets and applies this provision. To obtain certification, the State's application must demonstrate that, at a minimum, all individuals who work the majority of weeks in the base period in parttime employment will not be determined ineligible because they are seeking only parttime work.

III7. Question: My State will use the option that permits us to examine whether the majority of weeks of work in the individual's base period are in parttime work. If the individual worked 40 weeks in the base period and 21 weeks are parttime, must my State's law provide that this individual may limit his/her availability to only parttime work?

Answer: Yes, the State's law must provide that the individual may limit his/her availability to only parttime work under the facts as stated. Since the individual has worked the majority of weeks in the base period in parttime work, this individual must be allowed to seek only parttime work, as defined by the Department. For purposes of this option, a ``week of work'' is a calendar week.

III8. Question: My State law requires an individual to be available for the same schedule of work as previously worked. For example, if the individual worked (either parttime or fulltime) during specific hours Monday through Friday, the individual will be denied if he or she is not available for the same schedule on these calendar days. Will my State's application be certified if it contains this provision?

Answer: Yes. The Federal requirement is that an individual not be denied ``solely because the individual is seeking only parttime work.'' In this case, the State is placing another, additional test of availability on all individuals seeking work, regardless of whether the work is fulltime (as defined under State law) or parttime (as defined consistent with Q&A III3).

In cases where a test applies only to parttime workers, the Department will evaluate the test to determine if it is consistent with the definition of ``seeking suitable parttime work'' contained in this UIPL. For example, if a State required that only individuals seeking parttime work be available for the same work schedule, the State's application would be denied since this UIPL does not interpret ``suitable parttime work'' to include such a requirement. If a State test, although worded in a way that is applicable to both fulltime and parttime workers, is in fact applicable only to parttime workers, it will be reviewed as described in this paragraph.

Quits Due to Compelling Family Reasons

III9. Question: For purposes of qualifying for the incentive payment, what are ``compelling family reasons?''

Answer: To qualify for the incentive payment using the ``compelling family reason'' option, the State law must provide that an individual will not be disqualified for separating from work under any and all of the following circumstances:

III10. Question: An employer discharges an individual for chronic absenteeism that constitutes misconduct under my State's law. Only after the separation does the individual indicate that the absences were to care for a member of his/her immediate family. Would my State's application be denied if individuals in this situation were disqualified under a misconduct separation?

Answer: No. The Federal law provides that an ``individual shall not be disqualified from [UC] for separating from employment'' for compelling family reasons. In some cases, such as when the individual fails to advise the employer of an absence, the basis for the separation may go beyond ``compelling
[[Page 48606]]
family reasons.'' That is, misconduct may exist despite the existence of what otherwise would be compelling family reasons, and the State may deny the individual under its misconduct provisions.

To be certified, a State law must reasonably define misconduct. The fact that the employer initiated the discharge does not mean misconduct exists. For example, an individual who is hospitalized as a result of domestic violence may be unable to contact the employer. If the individual is discharged in such cases, the State law, to be certified, must consider the individual to have separated from work due to compelling family reasons. Similarly, if the employer discharges an individual who has informed the employer of expected absences to care for an ill child, the State law must consider the individual to have been separated from work due to compelling family reasons.

Many State misconduct provisions have been interpreted to require a willful and wanton disregard of the employer's interest. The Department anticipates that these State law provisions are generally expected to meet the conditions pertaining to compelling family reasons since separations for compelling family reasons do not in themselves constitute a willful and wanton disregard of the employer's interest. However, to assure the State's law does not provide for a denial due to misconduct for such separations, the State's application will need to address the application of its misconduct provisions to compelling family reasons.

III11. Question: For purposes of the domestic violence provision, what is meant by ``verified by such reasonable and confidential documentation as the State law may require?''

Answer: As in other UC adjudications, the State must gather sufficient facts to support any eligibility determination, which may include verification of the individual's belief that his/her continued employment would jeopardize the safety of the individual or a member of the immediate family. When the State verifies the individual's belief, the Department has determined the State may reasonably require a statement supporting recent domestic violence from a qualified professional from whom the individual has sought assistance such as a counselor, shelter worker, member of the clergy, attorney, or health worker.

The State must accept any other kind of evidence that reasonably proves domestic violence. The State may accept, but may not require, as evidence (1) an active or recently issued protective or other order documenting domestic violence, or (2) a police record documenting recent domestic violence as doing so will create an unreasonable bar to benefits.

If the State obtains one instance of information that adequately verifies the individual's belief, it would defeat the purpose of the new Federal provisions for the State to burden the individual by requiring additional information. Therefore, any application that indicates that multiple verifications are necessary will not be certified.

At a minimum, for purposes of holding information about domestic violence confidential, the Department's regulations at 20 CFR Part 603 addressing the confidentiality of UC information will apply, as it does to all confidential UC information. Given the sensitivity of the kind of information that may be needed to prove domestic violence, as well as the confidential sources from which it may have to be obtained, the Department views the language about ``confidential information'' as an authorization to seek information which may come from confidential sources and as a reminder that such information must be kept confidential.

III12. Question: For purposes of the domestic violence and illness/disability options, what is meant by ``immediate family member?''

Answer: At a minimum, a State must include spouses, parents and minor children under the age of 18 in its definition of ``immediate family member'' for its provision to qualify for certification. States may provide for a more inclusive definition (for example, including grandparents, sisters, brothers, domestic partners, adult children or foster children), but they are not required to do so for their provisions to be certified.

III13. Question: For purposes of the illness/disability option, what is meant by ``illness'' and ``disability?''

Answer: ``Illness'' means a verified illness which necessitates the care of the ill person for a period of time longer than the employer is willing to grant leave (paid or otherwise). Similarly, ``disability'' means a verified disability which necessitates the care of the disabled person for a period of time longer than the employer is willing to grant leave (paid or otherwise) for. ``Disability'' encompasses all types of disability, including (1) mental and physical disability; (2) permanent and temporary disabilities; and (3) partial and total disabilities. What is key is that the individual's illness or disability necessitates care by another individual and the employer does not accommodate the employee's request for timeoff.

This is a minimum standard for a State to receive its incentive payment. States may have broader eligibility provisions. However, a State law provision would not be certified if it has a narrower definition of illness or disability or provides for overly restrictive limits on the types of verification of illness. For example, if the State requires a medical doctor to verify an illness or disability when other sources of verification are available, the application would not be accepted. As another example, if a State law's provisions only apply when the family member is terminally ill, the provision will not be certified.

III14. Question: My State law pertaining to separations to care for family members is limited to cases where no reasonable, alternative care was available. Would this provision be certified?

Answer: No. The new Federal provisions broadly require, as a condition of certification, that the State law not disqualify an individual separating because of the ``illness or disability of a family member. * * *'' The Act does not permit a State to limit eligibility to particular circumstances surrounding a separation for this reason. Thus, a provision would not be certified if it applies only when no reasonable, alternative care is available.

III15. Question: For purposes of quitting to accompany a spouse to a new location from which it is impractical to commute, what is meant by ``impractical?''

Answer: What is ``impractical'' will be based on commuting patterns in the locality. States should assure that their provisions reasonably reflect these commuting patterns.

III16. Question: My State looks at whether it is impractical for the individual to commute from the new location. We do not examine the reason why the spouse relocated. Would this provision qualify for an incentive payment?

Answer: In this case, the State permits payment of UC in all situations required for the State to qualify for an incentive payment. State law may provide for broader eligibility than required for certification, such as where it is not practical to commute from the new location.

III17. Question: Do the provisions on compelling family reasons affect my State's availability requirements as a condition of claimant eligibility?

Answer: There is no effect. States must continue to require, at a minimum,
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that individuals be able to and available for work as defined by the Department's regulations at 20 CFR part 604. The new Federal provisions on compelling family reasons relate only to whether the reason for quitting work is disqualifying, and do not address issues related to the individual's continuing unemployment. Thus, for example, an individual who quits employment for a compelling family reason may not be disqualified for quitting, but the individual will be ineligible if unavailable for work.

Training Benefits

III18. Question: If a State elects the training benefit option, under what conditions must it be payable?

Answer: The State law must provide that a training benefit be payable to any individual who is unemployed (as determined under State law, including partial and parttotal unemployment), has exhausted all rights to regular UC, and is enrolled in and making satisfactory progress in either:

The State law must provide for payment of the training benefit to individuals who are enrolled in and making satisfactory progress in both of the above types of programs. However, the State law is not required to provide for payment of the training benefit to an individual who is receiving ``similar stipends'' or other training allowances which can be used for nontraining costs. (In addition, the State may treat such stipends as disqualifying income.) In this case, ``similar stipend'' means an amount provided under a program with similar aims, such as providing training to increase employability, and in approximately the same amounts.

WIA or other approved job training programs for which training benefits are paid may be limited to those that prepare an individual for entry into a highdemand occupation if the individual has been:

The requirements related to the job training program are minimum requirements for purposes of certification. If the State pays training benefits to a broader class of individuals participating in training than specified above, the State will meet the requirements for this option. For example, a State law may pay additional training benefits to any individual who is preparing for a job in a ``demand occupation'' as opposed to a ``highdemand occupation.'' However, a State law would not qualify for certification if it limits training benefits to a narrower class of individuals. For example, if the training benefits are payable only to individuals in job training programs leading to highwage occupations, the State law would not be certified because the Federal provision does not authorize a highwage restriction.

Whether an occupation is ``declining'' or ``highdemand'' will be determined by the State using available labor market information data.

III19. Question: How must the amount of training benefits be determined for purposes of this option?

Answer: The amount of UC payable for a week of unemployment must, at a minimum, equal the individual's weekly benefit amount (including dependents' allowances) for the most recent benefit year less any deductible income as determined under State law. The total amount of UC payable to any individual must equal at least 26 times the individual's average weekly benefit amount (including dependents' allowances) for the most recent benefit year.

III20. Question: What is meant by ``Stateapproved training program''?

Answer: A program that the State determines is reasonably expected to lead to employment in an occupation, including highdemand occupations.

III21. Question: What evidence may my State require for purposes of determining whether an individual is making satisfactory progress in the training program?

Answer: The State may require reasonable evidence of satisfactory progress, such as reports from training providers and evidence of attending training when attendance is a necessary part of such training.

III22. Question: My State has a training benefit provision, but amounts must be appropriated each year by the legislature. Will this provision qualify for the incentive payment?

Answer: No. To qualify for an incentive distribution, the State law provision may not be subject to discontinuation. A provision subject to appropriation may be capped with the result that it could be discontinued within the State's fiscal year for which the appropriation is made. Further, there is no guarantee any appropriation will be made for future years.

III23. Question: May the training benefit be paid after federally funded extensions of UC?

Answer: Yes. The training benefit may be paid after the individual exhausts eligibility under the current Emergency Unemployment Compensation program or under the permanent FederalState Extended Benefits program.

III24. Question: May eligibility for the training benefit be terminated by the expiration of a benefit year, or may it be limited to individuals who have not previously received it?

Answer: No. Federal law does not contain these limitations. Dependents' Allowances

III25. Question: What is meant by ``dependent'' for purposes of qualifying for an incentive payment under the option related to dependents' allowances, as well as in other provisions relating to incentive payments?

Answer: The term ``dependent'' is defined under State law for all of these purposes.

III26. Question: With respect to the dependents' allowances option, what dollar amounts must be paid as dependents' allowances to qualify for the incentive payment?

Answer: The State must pay an amount equaling at least $15 per dependent per week. However, the State may cap the total allowance paid to an individual for dependents at $50 per week of unemployment or 50 percent of the individual's weekly benefit amount for the benefit year, whichever is less.

The State is not, however, required to pay the full dependents' allowance when the individual has earnings for the week. Instead, the State may provide for a reasonable reduction in the amount of any such allowance for such week. A State law will qualify for certification under this ``reasonableness'' test if it provides for the same pro rata reduction in the dependents' allowance as was applied to the weekly benefit amount. For example, if the individual is eligible for onehalf of the weekly benefit amount, the State may reduce the dependents' allowance by onehalf. If a State applies another reduction test that it believes is reasonable, the State's application must explain why the test is reasonable.

III27. Question: My State does not pay a dependents' allowance if the individual qualifies for the maximum weekly benefit amount. Would my State's dependents' allowances provision qualify?

Answer: No. The new Federal provisions require, as a condition of certification, that a State pay dependents' allowances, but permits some limitation on their aggregation. Because this State provision places an
[[Page 48608]]
additional limitation on dependents' allowances, the Department would not certify it. Similarly, the Department would not certify a State provision that does not pay dependents' allowances to individuals who qualify for the minimum weekly benefit amount.

Regular Compensation

III28. Question: The options relating to parttime work, compelling family reasons, and dependents' allowances specify that they must be applied to ``regular compensation.'' Does this mean they are not required to be applied to other payments of UC?

Answer: For UC programs where benefits are funded by the Federal government, Federal ``equal treatment'' requirements apply. Therefore, except where the laws and regulations governing these programs provide otherwise, benefits for the following UC programs must be paid in the same amount, on the same terms, and under the same conditions as regular compensation:

However, unless a State's law contains an ``equal treatment'' requirement for ``additional compensation,'' it need not apply the requirements relating to parttime work, compelling family reasons and, with one possible exception for the training benefit (explained in the next paragraph), dependents' allowances in the payment of additional compensation. Additional compensation is not regular compensation, but, rather, compensation totally financed by a State and payable under State law by reason of high unemployment or other special factors. Thus, the limitation to ``regular compensation'' means, for example, that for a State's provision relating to parttime workers to be certified, the State law need not pay additional compensation to part time workers.

Note that benefits under the training benefits option are a form of additional compensation. However, as discussed above for the training benefits option, the State must include dependents' allowances in calculating the individual's weekly benefit amount for the training benefit. Those dependents' allowances must be calculated for the training benefit in the same manner as they are calculated for regular compensation. Thus, if a State selects its dependents' allowances provision for certification, it must apply it to the training benefit. Applications for Incentive Payments

III29. Question: I believe my State law qualifies for an incentive payment under two or more of the above options. What should my application State?

Answer: For each option under which the State is applying, the application must:

The following additional information is also required:

III30. Question: My State has submitted an application under the base period provision for the first onethird of its incentive payment. Should we wait until that application is approved prior to submitting an application for the remaining twothirds?

Answer: No. It is not necessary to wait for approval of the base period application. However, the Department will not certify the State for the remaining twothirds until it certifies the base period provision.
Attachment IV
Special Administrative Transfers

Questions and Answers

IV1. Question: How was Federal law amended to authorize the special administrative transfer?

Answer: Section 2003(a) of Public Law 1115 added a new subsection (g) to Section 903, SSA, to make a special administrative transfer to all States totaling $500,000,000 within 30 days of the date of enactment, which was February 17, 2009. A State need take no action to receive its share of the distribution.

IV2. Question: How is my State's share of the special administrative transfer determined?

Answer: It is calculated in the same manner as a ``Reed Act'' distribution. This means each State's share is based on its proportionate share of FUTA taxable wages multiplied by the $500,000,000 authorized by the amendments. For purposes of computing each State's proportionate share, the Secretary of Labor will use the taxable wages that would have been used for calculating any Reed Act distribution occurring on October 1, 2008. As provided by the SSA, data for tax year 2007 is used for determining each State's share.

IV3. Question: What are the permissible uses of the administrative transfer?

Answer: The administrative transfer may be used only for

IV4. Question: Must my State legislature appropriate these special administrative transfers?

Answer: Federal law does not require such an appropriation. (This is unlike the incentive payments discussed in Attachment I, which must be appropriated by the State legislature before they can be used for administrative purposes.) However, nothing prohibits a State legislature from appropriating such money or from attaching more specific or limiting conditions to the use of such money.

IV5. Question: Do I need to amend my State's UC law?

Answer: Most State UC laws contain permanent provisions regarding the use of moneys transferred under Section 903, SSA. These provisions usually mirror the requirements of Section 903(c)(2), SSA, pertaining to ``traditional'' Reed Act distributions, including a provision that the moneys be used for the payment of UC unless appropriated by the legislative body of the State for the administration of the State's UC law or the State's system of public employment offices.

The special administrative transfer is not, however, available for the payment of UC and its administrative uses are more limited. As a result, if the State's UC law permits a broader use, the State must either (1) amend its UC law to reflect the more limited use of the special administrative transfer, or (2) interpret its UC law consistent with the limited uses specified in Section 903(g), SSA. States exploring the latter option may be able to base their interpretation on State UC law provisions that require interpretations of State UC law in a manner consistent with Federal law.

Attachment II to UIPL 3997 contains draft language for State Reed Act provisions, which many States used to create their permanent provisions. For these States, we recommend the following language be added:
(6) Notwithstanding paragraph (1), moneys credited with respect to the special transfer made under section 903(g), SSA, may be used solely for the purposes specified in such section and are not subject to appropriation by the legislature. [Emphasis added.] States should modify this language to accord with State usage and to assure correct State law citations. The emphasized language is necessary only if the State chooses to avoid the appropriation process for the special administrative transfer. As an alternative to this approach, States may also consider a broader amendment that automatically authorizes the State law to take into account any Federal law limitations on use not contained in State law.

IV6. Question: My State has an advance under Title XII, SSA, so that it can continue to pay benefits. Does this affect my

administrative transfer?

Answer: No. Eligibility for the transfer does not depend upon a State having no outstanding advance. Therefore, the entire amount of the special administrative transfer for a State will be transferred to the State's account in the UTF, notwithstanding any advance. Attachment V
Suspensions
Interest on Advances and Federal Taxation of UC

Interest Payments

V1. Question: How did the amendments made by Section 2004 of Public Law 1115 affect interest due on Title XII advances?

Answer: Section 2004 added new paragraph (10) to Section 1202(b), SSA. Under this new paragraph, any interest payment due during the period beginning on the date of enactment (that is beginning February 17, 2009) and ending on December 31, 2010, shall be ``deemed to have been'' paid by the State. This effectively waives all interest due during this period. Further, no interest accrues on any advance or advances made to a State during this period.

V2. Question: Will interest accrue on advances made prior to the date of enactment?

Answer: Yes. Although interest will accrue on such advances, any interest due within the period beginning February 17, 2009, and ending on December 31, 2010 will, as discussed in the previous Q&A, be waived. However, interest accrued after September 30, 2010, will not be due within this period. Instead, such accrued interest will be due no later than September 30, 2011.

V3. Question: How is interest after December 31, 2010, determined?

Answer: The normal rules for determining the amounts of interest accrued and the dates interest is due will again apply.

Partial Suspension of Federal Income Tax

V4. Question: How did the amendments made by Public Law 1115 affect the taxation of unemployment benefits?

Answer: For tax year 2009 only, the first $2,400 paid in unemployment benefits is not subject to Federal income tax. Amounts above $2,400 remain taxable.

V5. Question: Will this suspension require any operational changes by my agency?

Answer: States are to continue to (1) report UC payments on Form 1099 and (2) withhold Federal income tax from UC benefits when requested by the individual. States are encouraged to promptly update information provided to individuals about the taxation of UC so that individuals may make informed decisions about whether to elect (or continue) the withholding of Federal income tax from UC.
Attachment VI

Text of Sections 2003 and 2004 of Public Law 1115

Text may be found at: http://wdr.doleta.gov/directives/attach/UIPL/ UIPL1409f.pdf.
Attachment VII
UC Modernization DistributionsAmounts $500 M Admin $7.0 Billion State Distribution Distribution \1/3\ Share \2/3\ Share AK.............................. $1,115,660 $15,619,234 $5,206,411 $10,412,823 AL.............................. 7,176,668 100,473,351 33,491,117 66,982,234 AR.............................. 4,283,524 59,969,332 19,989,777 39,979,555 AZ.............................. 10,721,206 150,096,885 50,032,295 100,064,590 CA.............................. 59,905,736 838,680,283 279,560,094 559,120,189 CO.............................. 9,104,983 127,469,762 42,489,921 84,979,841 CT.............................. 6,272,238 87,811,338 29,270,446 58,540,892 DC.............................. 1,973,784 27,632,982 9,210,994 18,421,988 DE.............................. 1,562,028 21,868,398 7,289,466 14,578,932 [[Page 48610]]
FL.............................. 31,733,965 444,275,516 148,091,839 296,183,677 GA.............................. 15,734,725 220,286,144 73,428,715 146,857,429 HI.............................. 2,180,480 30,526,725 10,175,575 20,351,150 IA.............................. 5,058,171 70,814,387 23,604,796 47,209,591 ID.............................. 2,304,345 32,260,831 10,753,610 21,507,221 IL.............................. 21,510,763 301,150,687 100,383,562 200,767,125 IN.............................. 10,607,023 148,498,323 49,499,441 98,998,882 KS.............................. 4,926,439 68,970,143 22,990,048 45,980,095 KY.............................. 6,441,139 90,175,943 30,058,648 60,117,295 LA.............................. 7,027,524 98,385,331 32,795,110 65,590,221 MA.............................. 11,620,239 162,683,341 54,227,780 108,455,561 MD.............................. 9,053,580 126,750,124 42,250,041 84,500,083 ME.............................. 2,016,519 28,231,263 9,410,421 18,820,842 MI.............................. 14,877,327 208,282,572 69,427,524 138,855,048 MN.............................. 9,290,259 130,063,620 43,354,540 86,709,080 MO.............................. 9,522,006 133,308,082 44,436,027 88,872,055 MS.............................. 4,009,761 56,136,656 18,712,219 37,424,437 MT.............................. 1,394,697 19,525,764 6,508,588 13,017,176 NC.............................. 14,647,397 205,063,552 68,354,517 136,709,035 ND.............................. 1,039,443 14,552,205 4,850,735 9,701,470 NE.............................. 3,116,126 43,625,769 14,541,923 29,083,846 NH.............................. 2,242,944 31,401,220 10,467,073 20,934,147 NJ.............................. 14,773,097 206,823,364 68,941,121 137,882,243 NM.............................. 2,787,327 39,022,582 13,007,527 26,015,055 NV.............................. 5,495,529 76,937,412 25,645,804 51,291,608 NY.............................. 29,481,579 412,742,107 137,580,702 275,161,405 OH.............................. 18,893,471 264,508,588 88,169,529 176,339,059 OK.............................. 5,420,463 75,886,483 25,295,494 50,590,989 OR.............................. 6,112,474 85,574,641 28,524,880 57,049,761 PA.............................. 19,521,393 273,299,496 91,099,832 182,199,664 PR.............................. 2,946,268 41,247,756 13,749,252 27,498,504 RI.............................. 1,675,756 23,460,578 7,820,193 15,640,385 SC.............................. 6,961,392 97,459,490 32,486,497 64,972,993 SD.............................. 1,260,545 17,647,634 5,882,545 11,765,089 TN.............................. 10,129,145 141,808,031 47,269,344 94,538,687 TX.............................. 39,690,810 555,671,344 185,223,781 370,447,563 UT.............................. 4,356,943 60,997,206 20,332,402 40,664,804 VA.............................. 13,460,932 188,453,049 62,817,683 125,635,366 VI.............................. 143,065 2,002,911 667,637 1,335,274 VT.............................. 994,136 13,917,898 4,639,299 9,278,599 WA.............................. 10,470,988 146,593,828 48,864,609 97,729,219 WI.............................. 9,566,720 133,934,079 44,644,693 89,289,386 WV.............................. 2,369,759 33,176,630 11,058,877 22,117,753 WY.............................. 1,017,509 14,245,130 4,748,377 9,496,753

US.......................... 500,000,000 7,000,000,000 2,333,333,331 4,666,666,669 UIPL No. 1409, Change 1Special Transfers for Unemployment
Compensation Modernization and Administration and Relief From Interest on Advances

1. Purpose. To provide additional guidance to States concerning unemployment compensation (UC) modernization incentive payments, the recent special administrative transfers, and to correct guidance related to relief from interest on advances to State unemployment funds.

2. References. The Assistance for Unemployed Workers and Struggling Families Act, Title II of Division B of Public Law 1115, enacted February 17, 2009; the Social Security Act (SSA); the Federal Unemployment Tax Act (FUTA); and Unemployment Insurance Program Letter (UIPL) No. 1409.

3. Background. UIPL No. 1409 provided guidance to States on the UC provisions of Public Law 1115, including how to qualify for UC modernization payments. This UIPL, using a Question and Answer (Q&A) format, provides, among other things:

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

5. Inquiries. Questions should be addressed to your Regional Office.

6. Attachment. QUESTIONS AND ANSWERS
Attachment
Questions and Answers

UC ModernizationApplications Under ``Permanent'' Laws

CH 11. Question. UIPL No. 1409 provides that applications for incentive payments should only be made under provisions of State laws that are currently in effect as permanent law and not subject to discontinuation. Does this mean that my State may never repeal [[Page 48611]]
any of the provisions that qualified it for a UC Modernization payment?

Answer: No. If a State eventually decides to repeal or modify any of these provisions, it may do so, and it will not be required to return any incentive payments. However, in providing the incentive payments, Congress clearly intended to support States that had already adopted certain eligibility provisions and to expand eligibility to additional beneficiaries by encouraging other States to adopt these provisions. By specifying that the provisions must be in effect as permanent law, Congress also made clear its intention that the benefit expansions not be transitory. While States are free to change or repeal the provisions on which modernization payments were based subsequent to receipt of incentive payments, Congress and the Department rely on States' good faith in adopting the eligibility criteria, and the application must attest to this good faith as required by the following Q&A.

CH 12. Question: Are there any changes to the application procedure?

Answer: Yes. Each State's application for incentive payments must contain a certification that the application is submitted in good faith with the intention of providing benefits to unemployed workers who meet the eligibility provisions on which the application is based. UC ModernizationTraining Benefits

CH 13. Question: May my State establish a limitation on when the individual must enroll in training to be eligible for the training benefit?

Answer: Yes. As a general matter, individuals who were separated from declining occupations or businesses reducing operations, and who would benefit from job training, should be placed in appropriate training as soon as possible. A State law would qualify for certification if it provided that an individual must be enrolled in training no later than the end of the benefit year established with respect to the separation that makes the individual eligible for the training benefit. (That is, a separation from a declining occupation, or a separation due to a permanent reduction of operations at the individual's place of employment.) A State may provide for a longer period of time, but its application would not be certified if it provided for a period of time ending prior to the end of the individuals' benefit year.

States adopting this limitation must notify individuals of the limitation at the time the State approves their initial claims.

CH 14. Question: Q&A III24 in UIPL No. 1409 provides that eligibility for the training benefit may not be terminated by the expiration of a benefit year. Does this mean that my State may set no outside limits on payment of the training benefit?

Answer: No. Q&A III24 was intended to assure that an individual enrolled and making satisfactory progress in training did not have eligibility for the training benefit terminated because the benefit year ended. A State may, however, terminate an individual's training benefit after the individual has been provided a reasonable period to collect the entire training benefit. A State law would qualify for certification if it provided that no training benefits are payable one year following the end of the benefit year. If a State adopts a shorter termination date, its application must justify why the date is reasonable.

CH 15. Question: An individual voluntarily quit a job. May my law deny this individual the training benefit?

Answer: The answer depends upon the facts. Section 903(f)(3)(C)(ii), SSA, as amended, provides that the training benefit is payable to an individual who was either ``separated from a declining occupation, or [was] involuntarily and indefinitely separated from employment as a result of a permanent reduction of operations at the individual's place of employment. * * *'' Since these two conditions are in the disjunctive, a State must pay the training benefit if a claimant meets either one. Accordingly, the State must pay the training benefit to an individual who voluntarily quit a job in a ``declining occupation,'' because Federal law does not condition eligibility on the cause of the separation where the separation is from a declining occupation. Further, the State must pay the benefit where the individual was ``involuntarily and indefinitely separated from employment as a result of a permanent reduction of operations at the individual's place of employment. * * *'' However, the State may deny the benefit where neither condition is met: an individual voluntarily quit a job and the job was not in a declining occupation.

Special Administrative Transfers

CH 16. Question: Section 903(g)(3)(C) of the SSA provides that my State's share of the $500 million special administrative transfer is available for, among other things, ``improvement of unemployment benefit and tax operations, including responding to increased demand for unemployment compensation.'' Does this mean that my State may use this money to fund the hiring of additional staff due to increased workload?

Answer: Yes. Adding staff to respond to workload is ``responding to increased demand for unemployment compensation.''

CH 17. Question: May my State use its share of the $500 million special administrative transfer to pay costs individuals might otherwise incur in using their UC debit cards?

Answer: Yes. Reducing costs to individuals in accessing their UC payments is an ``improvement'' in UC benefit operations because it facilitates the payment of benefits.

CH 18. Question: When was the $500 million special administrative distribution transferred to States?

Answer: March 2, 2009.

Reporting

CH 19. Question: Where should transactions involving UC modernization incentive payments and the $500 million special administrative distribution be reported?

Answer: The transfer of an