DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 3-91
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	DONALD J. KULICK Administrator for Regional Management
SUBJECT	:	Governor's Requests for Repayable Title XII Advances from the Federal Unemployment Account

1. Purpose. To provide updated procedural requirements for the preparation of requests for Title XII advances or voluntary repayments submitted by States. This directive replaces UIPL 48-86 dated July 11, 1986.

2. References. Title XII, Social Security Act, as amended; Section 3302, Federal Unemployment Tax Act as amended; and UIPL 5-90.

3. Background. Section 1201 of the Social Security Act permits the Governor of a State to request repayable advances from the Federal unemployment account for any 3-month period during which State unemployment fund reserves are inadequate to meet current needs for the payment of benefits. Amounts needed for each month during the 3-month period must be shown separately. The amount approved for any month will be transferred to the State's account in the Unemployment Trust Fund (UTF) on a day-to-day basis as needed to accommodate agency requisitions from its trust fund account for benefit payments.

   The certification to the Secretary of the Treasury will specify that amounts so transferred during any month will not exceed the dollar amount requested by the Governor for that month. If the amount actually used is less than the amount approved for that month, the unused amount will revert to the Federal unemployment account as of the close of business of that month.

   Under this approach, the total amount of Title XII advances charged to a State during any month may be less than the requested amount, but will not exceed it.

4. Requests for Advances. Section 1201(a)(1)(A) of the Social Security Act provides that advances shall be made to a State for the payment of compensation in any 3-month period if the Governor of the State applies therefor no earlier than the first day of the month preceding the first month of such 3-month period; and provided further that all other qualifying requirements for obtaining advances are met.

   1. The Governor, at his/her discretion, may delegate the authority to formally request Title XII advances to the head of the State employment security agency or some other State official, in accordance with authority provided by State law.

   2. To initiate the process, a letter from the Governor to the Secretary of Labor must be forwarded enclosing a certified copy of the document evidencing such delegation, together with a facsimile signature of the official to whom such authority has been delegated. Additional evidence or certification of the Governor's authority to so delegate will not be necessary; such authority will be assumed from the certified document.

   3. A new or redelegation of authority when a new Governor takes office is not necessary unless required by State law. A new redelegation of authority must be submitted by the Governor if the person to whom the original (or-subsequent) delectation is changed.

   4. The Governor, or the person to whom such authority has been delegated by the Governor, will submit a single request to the Secretary of Labor covering a 3-month period. If an advance is required for one or two months of the 3-month period, the request must cover the entire 3 months. Months during which no advances are required should indicate zero dollars needed. If it later becomes necessary to borrow for these months, an amended or supplemental request must be submitted.

   5. Requests for advances are to be received in the Office of the Secretary of Labor 15 working days before the first day of the applicable 3-month loan period in order to provide sufficient time for review. An advance copy of the formal request should be sent to the Employment and Training Administration, Attention: TEUMI, Room C-4514, 200 Constitution Avenue N.W., Washington, D.C. 20210. This will alert the National Office that a request is in transit and help expedite the processing of such requests. No funds will be transferred until the original request signed by the Governor, or the person to whom such authority has been delegated by the Governor, is received in the Office of the Secretary.

   6. The Director of the Unemployment Insurance Service will decide if the request is justified, and if approved, will certify to the Secretary of the Treasury the, amount to be transferred during each of the 3 months covered in the formal request. Transfer of funds to the State's account in the UTF will be made on a daily basis, as needed to meet requisitions for benefit payments, based on the State's balance in the UTF less amounts previously certified as valid Reed Act obligations and therefore considered not available for the payment of benefits (see UIPL 5-90 dated November 15, 1989), and including all confirmed deposits received by Treasury through the date of transfer.

   7. Amounts certified as available to a State in any month which are not required to meet that month's requisitions for payment of benefits will cease to be certified as available as of the close of business the last day of that month. Unused balances will not be carried forward into the next month. The State will be charged interest only on that portion of certified advances which are actually drawn down by the State.

   8. The Governor or his/her delegate may submit a supplemental request for any month in which it is later determined that the previously approved amount is insufficient to meet benefit payment obligations. A Governor or his/her delegate may telegraph or transmit an electronic facsimile FAX copy of supplemental or emergency advance requests to the Secretary of Labor, but these must be verified immediately by a formal written request over an authorized signature.

      Emergency requests should include (1) the dollar amount requested, (2) the date on which the Governor or his/her delegate estimates the funds will be needed, and (3) a statement that the signed formal request is being sent on the same day as the telegram or FAX message. Actual transfer of funds will be completed only when the formal signed request is received. The appropriate Regional Office and the National Office (TEUMI - telephone-number 202-5350216) should be immediately notified by telephone that a telegraphic or FAX emergency request is enroute.

   9. The Governor or his/her delegate will be promptly advised of action taken on requests for Title XII advances.

5. Voluntary Repayment of Advances. Section 1202(a) of the Social Security Act provides that the Governor of a State may at any time request that funds be transferred from the account of the State in the UTF to the Federal unemployment account in repayment of part or all of advances made to the State under Section 1201 of the Act.

   1. The Governor, at his/her discretion, may delegate to the head of the State employment security agency or some other State official, the authority to formally request transfers of funds from the account of the State in the UTF to the Federal unemployment account to voluntarily repay part or all of advances made to the State under Section 1201 of the Act, in accordance with authority provided by State law.

   2. To initiate the process, a letter from the Governor to the Secretary of Labor must be forwarded enclosing a certified copy of the document evidencing such delegation, together with a facsimile signature of the official to whom such authority has been delegated. Additional evidence or certification of the Governor's authority to so delegate will not be necessary; such authority to be assumed from the certified document.

   3. A new or redelegation of authority when a new Governor takes office is not necessary unless required by State law. Anew redelegation of authority must be submitted by the Governor if the person to whom the original (or subsequent) delegation is changed..

   4. Section 1202(b)(6)(A) of the Act provides that any voluntary repayment by a State under Section 1202(a) shall be applied against interest-bearing advances received by the State on a last made first repaid basis. Any other repayment of advances, such as voluntary repayment of non-interest-bearing advances received by the State prior to April 1, 1982, or repayment of such advances through reduced FUTA credits, shall be applied against all outstanding non-interest bearing advances on a first made first repaid basis.

   5. A request for voluntary repayment under Section 1202(a) of the Act must be made in a letter to the Secretary of Labor signed by the Governor or the official to whom this authority has been delegated by the Governor of the State.

      1. A telegram or FAX message may also be used to request a voluntary repayment subject to the following conditions:

         • The effective date of the requested transfer of funds may not be earlier than the date that the telegram or FAX message is received in the Office of the Secretary of Labor.

         • A confirming letter over the signature of the Governor, or the person to whom this authority has been delegated by the Governor of the State, must be forwarded promptly, and must be received in the Office of the Secretary of Labor within 5 business days (excluding Saturdays, Sundays; and Federal Holidays) of the date the telegram or FAX message was forwarded.

      2. Transfer of funds requested by telegram or FAX message will be accomplished on the date requested if the above conditions are met.

      3. If the confirming letter is not received within the 5-day timeframe, the effective date of the requested voluntary repayment will be the later of the date the confirming letter is received in the office of the Secretary of Labor or the date requested in the confirming letter.

   6. The effective date of a transfer of a voluntary repayment will be the later of the date specified in the letter signed by the Governor, or the person to whom such-authority has been delegated by the Governor of the State, or the date the letter is received in the Office of the Secretary of Labor. However, the effective date may be the earlier date of receipt of a telegram or FAX message in the office of the Secretary of Labor, if the conditions in item 5.e are met.

   7. The requested amount of repayment will be certified to the Secretary of the Treasury for transfer from the State's account in the Unemployment Trust Fund to the Federal unemployment account to be effective on the date as determined under items 5.e and 5.f above.

   8. The Governor or his/her delegate will be promptly advised of action taken on the request for voluntary repayment of Title XII advances.

   9. Scheduled partial repayments may be requested if the condition of the State unemployment reserve improves sufficiently to permit programmed repayments. A State may elect to voluntarily repay interest-bearing Title XII loans on a scheduled basis. The schedule will serve to advise the Treasury Department that authorization is being given to transfer specific amounts on designated, days during the period covered by the schedule. The total repayment stated in the Governor's (or his/her delegate's) letter must agree with the sum of all repayments specified in the schedule: The determination as to a State's ability to schedule repayments rests with the State. The State employment security agency (SESA) is responsible for assuring that sufficient funds are available in its account in the Unemployment Trust Fund to make each scheduled repayment (see item 5.k below).

   10. A SESA may receive Title XII advances and make voluntary repayments during the same month. However, such repayments must be made in accordance with the procedure contained in this directive. Blanket authorization arrangements which would result in an automatic transfer of funds for repayment controlled by a SESA's balance in the UTF on any day cannot be done under existing statutory requirements.

   11. If there are insufficient funds in the State's account to make the full repayment requested on the effective date as determined above, the Funds Accounting Branch in the U.S. Treasury will transfer, unless otherwise notified, from the account of the State in the UTF to the Federal unemployment account on the effective date the amount determined by them to be available for transfer on that day. The Funds Accounting Branch will also notify the SESA immediately of any reduction in requested repayments.

6. Transmitting, Addressing and Delivering Requests for Advances or Repayments. All original and confirming letters, telegrams and FAX messages requesting Title XII advances or voluntary repayments must be sent to:

   The Honorable Elizabeth H. Dole (or current Secretary)
   Secretary of Labor
   U.S. Department of Labor
   Room S-2523
   200 Constitution Ave, N.W.
   Washington, D.C. 20210

   Telegrams and/or FAX messages and correspondence being hand carried to assure "same day" log-in and date stamping must be received in Room S-2523 prior to 5:30 P.M. (EST) on the date of delivery. If delivered after that time, log-in and date stamping will occur the following morning. The Governor of the State, or the person to whom the authority to request emergency interest-bearing repayable Title XII advances or voluntary repayments of advances has been delegated, may use the Department of Labor (DOL) electronic facsimile transmission (FAX) capability in lieu of commercial telegraphic services to request emergency or supplemental loans and voluntary repayments. The DOL FAX equipment is located in the Communications Center in the Frances H. Perkins DOL Building. The telephone number for the DOL FAX machine is area code 202-523-7312. In the event that the DOL FAX equipment is inoperable or inaccessible, backup capability is available in the Office of Regional Management (ORM) in the Employment and Training Administration. The telephone number of the ORM FAX machine is area code 202-535-0510. If a FAX message is transmitted, a confirming telephone call must be immediately made to TEUMI, area code 202-535-0216; advising of the existence of the FAX message, date and time sent, where it was sent, loan or repayment, amount, and effective date as appropriate. This will alert appropriate staff and trigger an immediate followup to acknowledge receipt for processing.

   Envelopes containing requests for loans or repayments not originating in the office of the Governor should be clearly labelled as a "Request for Advances" or "Voluntary Repayment" on the face of the envelope.

7. Federal Unemployment Tax Act (FUTA) Credit Reduction. If a balance of advances to a State under Section 1201 is outstanding on January 1, in two consecutive years and not fully repaid prior to November 10 of the second year, employers subject to contributions under such State's unemployment compensation law will be subject to additional Federal unemployment taxes determined by a formula of reductions in credit against the tax. Such credit reduction will apply beginning with the second consecutive January 1 as of the beginning of which there is a balance of such advances.

   The credit reductions, pursuant to Section 3302(c)(2) of FUTA, increase employers' Federal tax liability each year in 0.3 percent increments plus additional amounts based on the State's average tax rate or 5-year benefit cost rate in relation to 2.7 percent beginning with the second year in which the credit reduction applies. No additional tax is payable for any year in which there is no outstanding balance of advances in a State account as of the beginning of November 10 of such year.

   The amount equal to the reduced credits, excluding penalty and interest, will be applied to reduce the State's balance of advances (including advances made before April 1, 1982) on a first made first repaid basis. Revenue from reduced credits in excess of a State's balance of advances will be paid into the State's account in the Unemployment Trust Fund.

8. Limitation (Cap) on Credit Reductions. The Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35) amended FUTA by adding a new subsection (f) to Section 3302 which provides for a limitation on the amount of credit reduction applicable to a State making certain efforts to resolve its benefit financing problems. The limit or "cap" on tax credit reductions in a qualifying State is the higher of 0.6 percent or the last amount paid by employers in that State through reduced credits. Requirements to qualify for the cap are detailed in 20 CFR Part 606.

9. Avoidance of Tax Credit Reductions. Under the conditions expressed in Section 3302 g), FUTA, a State may avoid FUTA credit reductions in any year by paying an amount equal to the amount employers would pay through reduced credits for that year, and by voluntarily repaying all Title XII advances received in the 1-year period ending on November 9 of such year. Both payments would have to be: made before November 10 of the taxable year, and during the 1-year period ending on November 9 of such year.

   Also, the Secretary of Labor must determine that there will be sufficient funds available in the State unemployment fund to meet benefit payment requirements during the 3-month period beginning on November 1 of such taxable year, that there has been a net increase in the solvency of the State unemployment compensation system for that taxable year, and such net increase equals or exceeds the potential additional taxes for such taxable year.

10. Action Required. All States should follow the above procedures and submit the required documentation when requesting or repaying Title XII advances.

11. Inquiries. Direct questions to the appropriate Regional Office.

12. Attachments. 

    1. Sample letter from Governor to Secretary of Labor (Request for Advances)

    2. Sample letter to Governor advising of action taken (Request for Advances)

    3. Sample letter from Governor to Secretary of Labor (Request for Voluntary Repayment)

    4. Sample letter to Governor advising of action taken (Request for Voluntary Repayment)