DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 33-92
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	DONALD J. KULICK Administrator for Regional Management
SUBJECT	:	UCX - State Law Provisions for Deductions of Federal Military Separation, Dismissal, or Severance Payments

1. Purpose. To inform State Employment Security Agencies (SESAs) that certain military personnel, under special authorized Department of Defense (DOD) programs, will be offered voluntary incentives in the form of bonus payments not to reenlist; to convey instructions the SESAs should follow in regard to UCX claims filed by these ex-servicemembers receiving such bonus pay ments; and to provide the SESAs with information on how a claimant's receipt of Federal military separation, dismissal, or severance payments affects his/her unemployment compensation (UC) claim.

2. References. Public Laws (P.L.) 83-591, as amended (the Federal Unemployment Tax Act (FUTA)), 101-510 and 102-190; 5 U.S.C. 8521; 20 CFR Part 614; ET Handbook No. 384; UIPL 25-83, Change 7; and UIPL 5-92.

3. Background. The DOD is planning to reduce the size of the Armed Forces by 25 percent over the next 5 years. As a result of this reduction, some military personnel who would prefer to remain in the Armed Forces will be discharged or released. Sections 661 and 662 of Public Law 102-190, dated December 5, 1991, established the Voluntary Separation Incentive (VSI) and Special Separation Benefit (SSB) to provide benefits and incentives to encourage individuals in overstaffed career fields, pay grades, etc., to voluntarily separate from the military.

   The voluntary separation programs are not early retirement programs. The VSI and SSB programs are intended to ease career changes for relatively young men and women from military service to the civilian work force.

   Benefit and incentive payments under these programs may be offered as lump-sum (SSB) or periodic payments (VSI). For UCX purposes, these payments should be considered as separation, dismissal, or severance payments (whichever term is applied to such payments under State UC laws). The positions occupied by ex-servicemembers participating in the VSI and SSB programs are eliminated.

   Attached to this directive is a listing of how each State's UC law provides for the deduction of separation, dismissal, or severance pay. This list was compiled based on information provided by the States.

4. Information on Participants in the VSI and SSB Programs, DD Forms 214.

   1. Block 18 of DD Form 214. Consistent with past practice, block #18 will be annotated to indicate ex-servicemembers' entitlement to these new types of severance pay and the amount of such pay. The remarks section, block #18 of the DD Form 214, will indicate the VSI payment amount and number of years payments will continue, or the lump sum amount provided for in the SSB. For example:

      SSB - 25,700.00 (paid lump sum)

      VSI - 4,310.00 (paid annually for 12 years)

   2. Block 28 of DD Form 214. The following narrative reasons for separation will be indicated in block #28, of DD Form 214 respectively as listed below.

      Early Release Program - Voluntary Separation Incentive (VSI)

      Early Release Program - Special Separation Benefit (SSB)

5. Effect of Federal Militar Separation, Dismissal or Severance Payments on UCX and Federal and/or State UC Claims. 

   1. Disqualifying Income. Federal law does not require that the receipt of separation pay related to the active military service will be disqualifying for UCX benefit purposes, or that UCX benefits will be reduced as the result of receipt of such pay. The UCX program regulations at 20 CFR 614.4(d), however, do provide that UCX shall be paid to an eligible ex-servicemember in the same amount, on the same terms and subject to the same conditions as compensation would be payable to civilian employees under the UC law of the applicable State. Therefore, Federal military separation, dismissal or severance pay is subject to the same terms and conditions that apply to separation pay under the disqualifying income provisions of the applicable State's UC law. This requirement is also contained in Chapter III of ET Handbook No. 384.

   2. Retirement. All Federal military separation, dismissal, or severance payments, including those under the VSI and SSB programs, are not retirement payments, and, consequently, such payments are not subject to State law provisions in conformity with Section 3304(x)(15) of the FUTA.

   3. Wages. 

      (1)  Federal military separation, dismissal, or severance payments, including those under the VSI and SSB programs, are not "Federal military wages" as defined at 20 CFR 614.2(h). These payments do not represent pay and allowances in cash or in kind for Federal military service, and are not computed on the basis of the pay grade of the individual at the time of his/her latest discharge or release in accordance with the Schedule of Remuneration applicable at the time his/her first claim is filed.

      (2)  A State is not entitled to payment under provisions of 20 CFR 614.15(x) for any UC payments made to ex-servicemembers whose UC claims included Federal military separation, dismissal, or severance pay as "base period wages." Therefore, if a State pays UC utilizing Federal military separation, dismissal, or severance pay as "base period wages," the State will not receive payment under provisions of 20 CFR 617.15(b) for the Federal military share (ratio) of the UC award.

6. Voluntary Separations from the Armed Forces. SESAs should adjudicate all voluntary separations from the Armed Forces of the United States by ex-servicemembers under the provisions of 5 U.S.C. 8521 and not under the voluntary quit provisions of State law. Thi-requirement is also applicable to UCX claims filed by ex-servicemembers who volunteer to participate in the VSI or SSB programs.

7. Action Required. SESA Administrators should provide the information in this directive to appropriate staff and immediately implement instructions to:

   1. Apply State law disqualifying income provisions to UCX claims filed by ex-servicemembers who have received separation, dismissal, or severance payments under the VSI and SSB programs; and

   2. Adjudicate all voluntary separations from the Armed Forces of the United States under the provisions of 5 U.S.C. 8521 and not under State law voluntary quit provisions.

8. Inquiries. Direct inquiries to the appropriate Regional Office.

9. Attachment. State Law Provisions for Deductions of Separation, Dismissal, or Severance Payments.