U.S. DEPARTMENT OF LABOR Employment and Training Administration Washington, D. C. 20210	CLASSIFICATION UI
	CORRESPONDENCE SYMBOL TEU
	ISSUE DATE August 20, 1992
RESCISSIONS None	EXPIRATION DATE August 31, 1993

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 45-92

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

FROM

:

DONALD J. KULICK
Administrator
for Regional Management

SUBJECT

:

Unemployment Compensation Amendments of 1992 (P.L. 102-318) - Provisions Affecting the Federal-State Unemployment Compensation (UC) Program

Purpose. To advise State agencies of the provisions of the amendments made by the Unemployment Compensation Amendments of 1992 which affect the Federal-State UC Program.
References. Sections 107, 201, 202, 301, 302, 303, 304, 401, and 531 of P.L. 102-318; Titles III and IX of the Social Security Act (SSA); the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA 70), the Federal Unemployment Tax Act (FUTA); Sections 32 and 6050B (b) of the Internal Revenue Code of 1986 (IRC); Sections 101 and 214 of the Immigration and Nationality Act (INA); Section 194 of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982; UIPL 1-82; GAL 4-92, Change 4; GAL 10-92.
Background. On July 3, 1992, the President signed into law the Unemployment Compensation Amendments of 1992, P.L. 102-318, which contained many provisions affecting the UC program. States have already been advised of those provisions affecting the Emergency Unemployment Compensation (EUC) program in GAL 4-92, Change 4, and the Trade Act of 1974 in GAL 10-92. This issuance describes the provisions affecting the Federal-State UC program, including changes to the Extended Benefits (EB) program, and the FUTA and the SSA which pertain to the Federal-State UC program. Following is a brief summary of these amendments:
Action Required. SESAs are requested to take the necessary action to assure consistency with Federal requirements as amended by P.L. 102-318. The effective dates for implementation of these amendments are found in Attachment I.
Inquiries. Inquiries should be directed to your Regional Office.
Attachments.
ATTACHMENT I TO UIPL 45-92

TEXT, EXPLANATION AND INTERPRETATION OF CHANGES TO THE FEDERAL-STATE UNEMPLOYMENT COMPENSATION PROGRAM MADE BY THE UNEMPLOYMENT COMPENSATION AMENDMENTS OF 1992, P.L. 102-318
MODIFICATIONS TO THE EXTENDED BENEFITS PROGRAM
I. Section 201. Modification of Trigger Provisions.
    A. Text of Section 201
        (a) IN GENERAL.--Section 203 of the Federal-State Extended Unemployment Compensation Act of 1970 is amended by adding at the end thereof the following new subsection:

ALTERNATIVE TRIGGER

        " (f)(1) Effective with respect to compensation for weeks of unemployment beginning after March 6, 1993, the State may by law provide that for purposes of beginning or ending any extended benefit period under this section--
                       " (A) there is a State 'on' indicator for a week if--
                                  " (i) the average rate of total unemployment in such State (seasonally adjusted) for the period consisting of the most recent 3 months for which data for all States are published before the close of such week equals or exceeds 6.5 percent, and
                                  " (ii) the average rate of total unemployment in such State (seasonally adjusted) for the 3-month period referred to in clause (i) equals or exceeds 110 percent of such average rate for either (or both) of the corresponding 3-month periods ending in the 2 preceding calendar years; and
                       " (B) there is a State 'off' indicator for a week if either the requirements of clause (i) or clause (ii) of subparagraph (A) are not satisfied.
Notwithstanding the provision of any State law described in this paragraph, any week for which there would otherwise be a State 'on' indicator shall continue to be such a week and shall not be determined to be a week for which there is a State 'off' indicator.
                   " (2) For purposes of this subsection, determinations of the rate of total unemployment in any State for any period (and of any seasonal adjustment) shall be made by the Secretary."
(b) ADDITIONAL WEEKS OF BENEFITS AVAILABLE DURING PERIODS OF HIGH UNEMPLOYMENT.--Subsection (b) of section 202 of such Act is amended by adding at the end thereof the following new paragraph:
                   " (3)(A) Effective with respect to weeks beginning in a high unemployment period, paragraph (1) shall be applied by substituting--
                               " (i) '80 per centum' for '50 per centum' in subparagraph (A),
                               " (ii) 'twenty' for 'thirteen' in subparagraph (B), and
                               " (iii) 'forty-six' for 'thirty-nine' in subparagraph (C).
                  " (B) For purposes of subparagraph (A), the term 'high unemployment period' means any period during which an extended benefit period would be in effect if section 203(f)(1)(A)(i) were applied by substituting '8 percent' for '6.5 percent'."
                                (c) CONFORMING AMENDMENT.--Paragraph (2) of section 204 (c) of such Act is amended by inserting ", forty-six in any case where section 202 (b) (3) (A) applies" after "thirty-nine".

            B. Discussion.
                (1) Optional New Trigger Method. Section 203(d), EUCA 70, provides methods for determining whether an extended benefit (EB) period exists in a State. Under the language of EUCA 70, these methods determine whether there is an "on" indicator or an "off" indicator in a State. These methods are more commonly referred to as the "on" or "off" triggers.
The two "on" and "off" triggers in existence prior to the enactment of P.L. 102-318 have not been changed. These triggers are based on the rate of insured unemployment (IUR). Under the first trigger, which is required to be in State law, a State must trigger "on" if the IUR for a 13 consecutive week period in the State is 5 percent or higher and if such IUR equaled or exceeded 120 percent of the average of the IURs for the corresponding 13-week periods in each of the preceding two calendar years. Under the second trigger, which is an option for a State, a State may trigger "on" with an IUR of 6 percent regardless of the IUR in the preceding two years. The State will trigger "off" when the "on" trigger is no longer met, provided certain conditions are met.
Section 201 of P.L. 102-318 now allows a State to trigger "on" using the seasonally adjusted total unemployment rate (TUR) as determined by the Secretary of Labor. Specifically, new paragraph (f) of Section 203, EUCA 70, provides for a State to trigger "on" for a week if the TUR for the most recent three months for which data for all States is published (before the close of such week) equals or exceeds 6.5 percent and the average TUR in the State equals or exceeds 110 percent of the TURs for either or both of the corresponding three month periods in the two preceding calendar years. Except as noted below, the State will trigger "off" EB when either the TUR falls below 6.5 percent or the requirements pertaining to the TUR in the previous two years are not satisfied. The determination of the TUR in any State for any period (and of any seasonal adjustment) will be made by the Secretary of Labor.
As is the case with the other EB triggers, the EB period in a State will begin on the first day of the third calendar week after the EB trigger requirements are satisfied and will end on the last day of the third week after the first week for which the trigger requirements are not met. (Section 203 (a), EUCA 70.) The amendment does not change the requirements in Section 203 (b), EUCA 70, that a State must trigger "on" EB for at least 13 weeks and remain triggered "off" for at least 13 weeks.
The amendment also provides that, if under any other provision of State law the State would remain triggered "on," then the State will remain triggered "on" until no triggering method is met. For example, if the State no longer meets the new TUR method, but does meet another method provided for in State law, the State will not trigger "off" EB. States should note this identical requirement already exists for the optional trigger based on a 6.0 percent IUR.
The use of the new trigger method by States is optional. However, if a State desires to trigger "on" EB using this new trigger, State law must provide for the use of this new trigger.
                (2) Payment of Additional Weeks of EB. States electing to use the new trigger method must also provide for the payment of additional weeks of EB during a "high unemployment period" which occurs during an EB period. These additional weeks of EB are available only when State law provides for triggering "on" using the new trigger method. We will refer to these additional weeks of EB as "HEB," short for "high (unemployment) EB."
Paragraph (1) of Section 202 (b), EUCA 70, provides for the establishment of an EB account; the amount in the account will be the least of one of three specified amounts. Section 201 (b) of P.L. 102-318 adds new paragraph (3) to Section 202 (b), EUCA 70, to increase the amount in these accounts during a high unemployment period. The amount payable in a high unemployment period is equal to whichever of the following is the least:
The term "high unemployment period" is defined in new Section 202(b)(3)(B), EUCA 70, as any period during which an EB period would be in effect if the optional trigger were based on an 8 percent TUR. Specifically, if the TUR for the most recent three months for which data for all States are published equals or exceeds 8 percent and the average TUR in the State equals or exceeds 110 percent of the TURs for either or both of the corresponding three month periods in the two previous calendar years, then a high unemployment period will exist.
A State determines whether an HEB period exists in accordance with provisions of State law implementing Sections 202 (b) (3) and 203 (f), EUCA 70, and using the seasonally adjusted TUR determined by the Secretary of Labor. When this determination is made, the State will follow the requirements of Sections 203 (a) and (b), EUCA 70, for determining the first and last week for which HEB is payable. Specifically, an HEB period will begin on the first day of the third calendar week after the HEB trigger requirements are satisfied and will end on the last day of the third week after the first week for which the HEB trigger requirements are not met. Further, a State must trigger "on" HEB for at least 13 weeks and remain triggered "off" HEB for at least 13 weeks.
                C. Effective Date. By its terms, new Section 203 (f) is "[e]ffective with respect to compensation for weeks of unemployment beginning after March 6, 1993." (Emphasis added.) Thus, an EB period may begin in the State for weeks beginning March 7, 1993 if there is an "on" indicator based on the new optional method for the week ending February 20, 1993.
There is no specific effective date in P.L. 102-318 for new Section 202 (b) (3). However, since this amendment relates to Section 203 (f), the amendment will be effective with respect to compensation for weeks of unemployment beginning after March 6, 1993.

II. Section 202. Modification of Eligibility Requirements for Unemployment Benefits.
     A. Text of Section 202.
          (a) EARNINGS TEST.--
                (1) In general.--Paragraph (5) of section 202 (a) of the Federal-State Extended Unemployment Compensation Act of 1970 is amended by striking "which one of the foregoing methods" and inserting "which one or more of the foregoing methods".
                (2) EFFECTIVE DATE.--
                      (A) IN GENERAL.--Notwithstanding any other provision of law, the amendment made by paragraph (1) shall apply for purposes of extended unemployment compensation and emergency unemployment compensation to weeks of unemployment beginning on or after the date of the enactment of this Act.
                      (B) WAIVER OF RECOVERY OF CERTAIN OVERPAYMENTS.--On and after the date of the enactment of this Act, no repayment of any emergency unemployment compensation shall be required under section 105 of the Emergency Unemployment Compensation Act of 1991 (Public Law 102-164, as amended) if the individual would have been entitled to receive such compensation had the amendment made by paragraph (1) applied to all weeks beginning before the date of the enactment of this Act.
            (b) SUSPENSION OF CERTAIN ELIGIBILITY REQUIREMENTS.--
                (1) IN GENERAL.--Section 202(a) of such Act is amended by adding at the end thereof the following new paragraph:
                "(7) Paragraphs (3) and (4) shall not apply to weeks of unemployment beginning after March 6, 1993, and before January 1, 1995, and no provision of State law in conformity with such paragraphs shall apply during such period."
                (2) STUDY.--The Federal Advisory Council established under section 908 of the Social Security Act shall conduct a study of the provisions suspended by the amendment made by paragraph (1). Not later than February 1, 1994, such Council shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate, a report of its recommendations on such suspended provisions (including whether such provisions should be repealed or revised).
            B. Discussion.
                (1) EB Earnings Test.
                     (a) In general. Section 202 (a) (5), EUCA 70, provides three methods of measuring employment and earnings for purposes of determining an individual's monetary eligibility for EB. These methods are:
            + 20 weeks of full-time insured employment in the base period which served as the basis for the individual's EB claim.
            + Base period earnings covered by the State law for compensation purposes which exceed 40 times the individual's most recent weekly benefit amount.
            + 1 1/2 times the individual's insured wages in the calendar quarter of the base period in which the individual's insured wages were the highest.

Prior to the amendment made by P.L. 102-318, the concluding sentence of Section 202 (a) (5) provided that "[t]he State shall by law provide which one of the foregoing methods of measuring employment and earnings shall be used in that State." (Emphasis added.) Thus, States were required to specify by law which one of the three methods would apply to all EB claims in the State. States which did not have an approved method which all individuals must meet to qualify for regular compensation were required to amend their State law to specify which one method was applicable to all claims for EB. (See UIPL 1-82, dated October 26, 1981.)
Section 202 (a) (1) of P.L. 102-318 amended the last sentence of Section 202 (a) (5), EUCA 70, to read "[t]he State shall by law provide which one or more of the foregoing methods of measuring employment and earnings shall be used in that State." (Emphasis added.) Under the amendment, States may now apply more than one of the three methods to EB claims. States may now use one method, two methods or all three methods.
If the qualifying requirements for regular compensation equal or exceed those provided for in Section 202 (a) (5), EUCA 70, the State will automatically meet the requirements of Section 202 (a) (5), EUCA 70. For example, if a State requires all individuals to have 1.6 times high quarter wages or 50 times the individual's weekly benefit amount to qualify for regular compensation, the requirement of Section 202 (a) (5), EUCA 70, is satisfied and no special provision is required for EB qualifying purposes.
State law may not use any method not provided for in Section 202 (a) (5), EUCA 70, to qualify for EB. For example, a method based on a ratio of the individual's base period wages to the average annual wage in the State does not satisfy the requirements of Section 202(a) (5), EUCA 70. Section 202 (a) (5), as amended, continues to require that State law must specifically provide for the determination of EB eligibility using one or more of the three methods.
The amendment authorizing the use of more than one method is not retroactive for EB purposes. In addition, the provision authorizing the waiver of recovery of certain overpayments does not apply to EB overpayments. This waiver applies only to overpayments made under the EUC program. (See Section 202 (a) (2) (B), P.L. 102-318, and GAL 4-92, Change 4.)
Since the amendment to Section 202 (a) (5) only authorizes States to use more than one method, it is an option for States and amendments to State law are not required if all of the methods that are authorized are consistent with Section 202 (a) (5), EUCA 70.
                                    (b) Effective Date. Under Section 202 (a) (2) (A) of P.L. 102-318, "[n]otwithstanding any other provision of law," the amendment is applicable to weeks of unemployment beginning on or after the date of enactment, which was July 3, 1992.
                               (2) Suspension of Other EB Eligibility Requirements.
                                    (a) In General. Section 202 (a) (3), EUCA 70, provides that no payment of EB will be made to an individual for any week of unemployment during which the individual fails to apply for or accept an offer of suitable work or fails to actively engage in seeking work. Section 202 (a) (3) establishes criteria for meeting these requirements and requires the imposition of a "4 by 4" disqualification for failure to meet these requirements. Section 202 (a) (4), EUCA 70, provides that an individual will not be eligible for EB unless a disqualification for a voluntary quit, a discharge for misconduct, or a refusal of suitable work is terminated by employment subsequent to the date of disqualification.
Section 202 (b) (1), P.L. 102-318, adds new paragraph (7) to Section 202 (a), EUCA 70, which suspends the requirements of Sections 202 (a) (3) and (4), EUCA 70, for weeks of unemployment beginning after March 6, 1993, and before January 1, 1995. Section 202 (b) (2), P.L. 102-318, requires the Advisory Council on Unemployment Compensation (referred to in Section 202 (b) (2) as the "Federal Advisory Council" established under Section 908, SSA) to study and make recommendations concerning the suspended provisions in a report to Congress. This report is to be submitted by February 1, 1994.
Under new Section 202 (a) (7), EUCA 70, "no provision of State law in conformity with such paragraphs shall apply during such period." In other words, any provision of State law implementing the requirements of paragraphs (3) and (4) of Section 202 (a), EUCA 70, will not apply during the suspension period.
States do not have the option of applying Sections 202 (a) (3) and (4), EUCA 70, during the suspension period. Instead, the requirements of paragraph (2) of Section 202 (a), EUCA 70, will apply:
            Except where inconsistent with the provisions of this title, the terms and conditions of the State law which apply to claims for regular compensation to the payment thereof shall apply to claims for extended compensation and to the payment thereof.
Thus, under the requirements of Section 202 (a) (2), EUCA 70, States are required to apply the provisions of State law applicable to claims for regular compensation in lieu of the suspended provisions.
States will need to review their laws to determine if amendments are necessary to suspend the above provisions. If so, then amendments are necessary to assure the law remains in conformity with Federal law. States needing to amend their laws may wish to consider adding provisions giving them the flexibility to apply provisions of State law consistent with EUCA 70 at all times.
                        (b) Effective Date. By its own terms, new paragraph (7) of Section 202 (a) is applicable to weeks of unemployment beginning after March 6, 1993, and before January 1, 1995.

III. Section 107. Financing Provisions.
        A. Text of Section 107.
Section 104 of the Emergency Unemployment Compensation Act of 1991 (Public Law 102-164, as amended,) is amended by adding at the end thereof the following new subsection:
            "(e) TRANSFER OF FUNDS.--Notwithstanding any other provision of law, the Secretary of the Treasury shall transfer from the general fund of the Treasury (from funds not otherwise appropriated)--
                "(1) to the extended unemployment compensation account (as established by Section 905 of the Social Security Act) such sums as are necessary to make payments to States under this Act by reason of the amendments made by sections 101 and 102 of the Unemployment Compensation Amendments of 1992, and
                "(2) to the employment security administration account (as established by section 901 of the Social Security Act) such sums as may be necessary for purposes of assisting States in meeting administrative costs by reason of the amendments made by sections 101, 102, 201, 202 of the Unemployment Compensation Amendments of 1992.
There is hereby appropriated from such accounts the sums referred to in the preceding sentence and such sums shall not be required to be repaid."
        B. Discussion. Section 107 of P.L. 102-318 added subsection (e) to Section 104 of the Emergency Unemployment Compensation Act of 1991 (P.L. 102-164) to provide that amounts necessary for purposes of assisting States in meeting administrative costs incurred by certain amendments, including Section 201 (pertaining to the new optional trigger) and Section 202 (pertaining to the monetary qualifying methods and suspension of other EB requirements), will be paid from general revenues.
Since the EUC program created by P.L. 102-164 is not effective for weeks beginning after June 19, 1993, the Department deems Section 107 of P.L. 102-318 to be effective only through June 19, 1993.
        C. Effective Date. Since P.L. 102-318 does not contain an effective date for Section 107, that provision took effect on the date of enactment, July 3, 1992. Therefore, expenditures of administrative funds from general revenues are authorized for weeks of unemployment beginning after July 3, 1992 in the case of Section 202 (a), P.L. 102-318, and for weeks of unemployment beginning after March 6, 1993 in the case of Sections 201 and 202 (b), P.L. 102-318.

IV. Section 301. Information Required With Respect To Taxation of Unemployment Benefits.
        A. Text of Section 301.
            (a) INFORMATION ON UNEMPLOYMENT BENEFITS.--
                (1) GENERAL RULE.--The State agency in each State shall provide to an individual filing a claim for compensation under the State unemployment compensation law a written explanation of the Federal and State income taxation of unemployment benefits and of the requirements to make payments of estimated Federal and State income taxes.
                (2) STATE AGENCY.--For purposes of this subsection, the term "State agency" has the meaning given such term by section 3306(e) of the Internal Revenue Code of 1986.
            (b) EFFECTIVE DATE.--The amendment made by subsection (a) shall take effect on October 1, 1992.
        B. Discussion. Since 1978, UC has been taxable for income tax purposes. It has not been certain that all individuals receiving UC were aware that UC was considered taxable income. Section 301 of P.L. 102-318 requires each State to provide a written explanation of Federal and State income taxation of UC and the requirements pertaining to making estimated tax payments to each individual filing a claim for compensation. Section 301 does not amend any provision of Federal law relating to certification for tax credits or administrative grants.
The phrase "filing a claim for compensation" is not defined. The Department interprets this phrase to mean that information must be provided at the time the initial claim is filed or at the time the individual files a claim for the first week. In addition, because only individuals who receive UC must pay income tax, the requirements of this new section will be satisfied if the State first advises the individual of the required information at the time the first check is issued.
As this provision relates to the administration of a State's UC law, grants provided for the administration of the UC program (i.e., "Title III grants") may be used to supply this information. Penalty mail may be used to transmit this information. States agencies may not, however, use Title III grants or penalty mail to transmit other tax information, except as described in V. below.
Although the new provision was not added to sections of the FUTA or SSA relating to certification for tax credits or administrative grants, the Department does not believe that this indicates any Congressional intent that the provision not be enforced. Congress was aware that the Secretary has broad authority to implement and enforce provisions of Federal law; presumably Congressional silence on a specific enforcement provision was based on that awareness. Because Section 301 relates to the administration of the State's UC law, the Department will treat it as a conformity/compliance requirement under Section 303 (b), SSA, and 20 C.F.R. Part 601.
It is anticipated that States will not need to amend their laws to implement this provision. If an amendment is necessary, States should seek any necessary legislation.
A suggested information sheet is attached as Attachment III.
            C. Effective Date.
Under Section 301 (b) of P.L. 102-318, this amendment takes effect on October 1, 1992. Therefore, States must provide the required information as described above beginning October 1, 1992. As of this date, providing the information is a conformity/compliance requirement.

V. Section 302. Mailing of Certain Information Permitted.
    A. Text of Section 302.
        (a) GENERAL RULE.--Section 302 of the Social Security Act (42 U.S.C. 502) is amended by adding at the end thereof the following new subsection:
        "(c) No portion of the cost of mailing a statement under section 6050B (b) of the Internal Revenue Code of 1986 (relating to unemployment compensation) shall be treated as not being a cost for the proper and efficient administration of the State unemployment compensation law by reason of including with such statement information about the earned income credit provided by section 32 of the Internal Revenue Code of 1986. The preceding sentence shall not apply if the inclusion of such information increases the postage required to mail such statement."
        (b) EFFECTIVE DATE.--The amendment made by subsection (a) shall take effect on the date of enactment of this Act.
    B. Discussion. Section 302, SSA, requires the Secretary of Labor to certify for payment to each State which has a UC law approved under FUTA, "such amounts as the Secretary of Labor determines to be necessary for the proper and efficient administration of such law . . . ." These amounts are commonly referred to as Title III grants. Section 303(a)(8), SSA, limits the use of such funds "solely for the purposes and in the amounts found necessary by the Secretary of Labor for the proper and efficient administration of such State law . . . ."
Section 6050B (b), IRC, requires the State agency to provide a statement to each individual who has received at least $10 in UC showing what information has been reported to the Internal Revenue Service (IRS) concerning receipt of UC for income tax purposes. (This information is provided to the taxpayer on the IRS Form 1099-G.) The cost of providing this information has been accepted as part of the administration of the State's UC law and is, therefore, payable from Title III grants. The earned income credit (EIC) established under Section 32, IRC, is not, however, related to the administration of a UC law. Therefore, as discussed in IV. above, prior to this amendment Title III grants and penalty mail could not be used to prepare or mail this information.
Section 302 (a) of P.L. 102-318 amends Section 302, SSA, to provide that no portion of the cost of mailing UC tax information shall be treated as not being a cost of administration by reason of including EIC information in the UC tax mailing. This exception does not, however, apply if the inclusion of EIC information increases the postage required to mail the IRS Form 1099-G. The practical effect of the amendment is that, unless additional postage costs are incurred, costs of mailing EIC information may be treated as a cost of administering the UC program. This amendment applies only to costs of mailing EIC information, including staff and/or machine time spent on handling or inserting the information into envelopes. It does not apply to other costs such as the preparation or printing of the information. Penalty mail may be used to transmit this information with the IRS Form 1099-G.
States agencies may not use Title III grants or penalty mail to transmit any tax information other than that expressly referred to in Sections 301 (a) and 302 (a) of P.L. 102-318.
It is not necessary for States to take any action to implement this amendment.
    C. Effective Date. Under Section 302 (b) of P.L. 102-318, this amendment takes effect on the date of enactment. Therefore, the amendment is effective July 3, 1992.

VI. Section 303. Extension of Existing Treatment of Certain Agricultural Workers.
        A. Text.
            (a) GENERAL RULE.--Subparagraph (B) of section 3306 (c) (1) of the Internal Revenue Code of 1986 is amended by striking "January 1, 1993" and inserting "January 1, 1995".
            (b) REPORT.--Not later than February 1, 1994, the Advisory Council on Unemployment Compensation shall submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on its recommendations with respect to treatment of agricultural labor performed by aliens.
        B. Discussion.
Section 3306 (c) (1) (B), FUTA, exempts from the definition of employment, and therefore from the tax established by the FUTA, agricultural workers who are aliens admitted to the United States to perform agricultural labor pursuant to Sections 214(c) and 101(a)(15)(H) of the Immigration and Nationality Act. These workers are commonly referred to as "H-2A" workers because they are admitted under 8 U.S.C. 1101 (a) (15) (H) (ii) (a).
Under current law, this exemption from the term employment applies only to agricultural labor performed before January 1, 1993. Section 303 (a) of P.L. 102-318, extends this exemption to services performed before January 1, 1995. In addition, the Advisory Council on Unemployment Compensation is required to submit a report with recommendations to the Congress concerning the treatment of agricultural labor performed by aliens. This report is due February 1, 1994.
        C. Effective Date. By its terms, the exemption made by Section 303 of P.L. 102-318 is applicable to taxable years beginning January 1, 1993. The exemption is applicable only to taxable years 1993 and 1994.

VII. Section 304. Extension of Period for Repayment of Federal Loans to State Unemployment Funds.
        A. Text of Amendments.
            (a) GENERAL RULE.--If the Secretary of Labor determines that a State meets the requirements of subsection (b), paragraph (2) of section 3302 (c) of the Internal Revenue Code of 1986 shall be applied with respect to such State for taxable years after 1991--
                (1) by substituting "third" for "second" in subparagraph (A) (i),
                (2) by substituting "fourth or fifth" for "third or fourth" in subparagraph (B), and
                (3) by substituting "sixth" for "fifth" in subparagraph (C).
            (b) REQUIREMENTS.--A State meets the requirements of this subsection if, during calendar year 1992 or 1993, the State amended its unemployment compensation law to increase estimated contributions required under such law by at least 25 percent.
            (c) SPECIAL RULE.--This section shall not apply to any taxable year after 1994 unless--
                (1) such taxable year is in a series of consecutive taxable years as of the beginning of each of which there was a balance referred to in section 3302 (c) (2) of such Code, and
                (2) such series includes a taxable year beginning in 1992, 1993, or 1994.
        B. Discussion. States may obtain advances (commonly called "Title XII loans") from the Federal Unemployment Account in the Unemployment Trust Fund for the payment of UC. If these advances are not repaid within a certain time, the credit available to employers against the FUTA tax is reduced. Specifically, if there is an outstanding balance of Title XII loans on January 1 for two consecutive years, and the loans are not repaid by November 10 of the taxable year, the available credit for that taxable year will be reduced by 5 percent of the tax imposed by Section 3301, FUTA. (That is, 5 percent of 6.0 percent, or 0.3 percent.) If there is an outstanding balance of Title XII loans on January 1 for three or more consecutive years, and the loans are not repaid by November 10 of the taxable year, the credit for the taxable year will be further reduced in accordance with the requirements of Sections 3302 (c) (2) (A) (ii) and 3302 (c) (2) (B) or (C), FUTA.
Section 304 of P.L. 102-318 provides that these credit reductions will be deferred for one year if, during calendar year 1992 or 1993, the State amended its UC law to increase estimated contributions required under such law by at least 25 percent. For example, the five percent reduction will occur only if there is an outstanding balance on January 1 for three (instead of two) consecutive years and the loan has not been repaid by the November 10 of the taxable year.
Section 304 of P.L. 102-318 applies only to increases in estimated employer contributions to the State's unemployment fund. The term "contributions" is defined in Section 3306 (g), FUTA, as "payments required by a State law to be made into an unemployment fund by any person on account of having individuals in his employ, to the extent that such payments are made by him without being deducted or deductible from the remuneration of individuals in his employ."
Law changes affecting contributions due include, but are not limited to, increasing the taxable wage base, raising assignable contribution rates, and establishment of special surtaxes to increase fund solvency. Changes to State law affecting employee payments to the unemployment fund or which decrease the amount of compensation paid (e.g., lowering benefit rates, imposing stricter eligibility requirements) do not increase contributions due and may not be used to obtain the deferral. Although a reduction in noncharging will result in increased contributions, this increase will not necessarily occur in the year following the tax year as required by Section 304. (See following paragraph.)
According to the Conference Report, the extension applies only "if the State amended its unemployment insurance law in 1992 or 1993 to increase estimated contributions by at least 25 percent in the first year after enactment of the State legislation." (Emphasis added.) Therefore, the extension is available only when the amendments resulting in an increase in estimated contributions are effective in the first year following enactment.
Section 304 requires that the State law change be made in "1992 or 1993." The Department interprets this language to authorize the State to use amendments made in both 1992 and 1993 to qualify for the extension. For example, a State amends its law in 1992. It does not achieve a 25 percent increase in 1993. The State then amends its law in 1993. The 1992 and 1993 amendments, taken together, are compared to the State law for 1994 that would have been in effect had neither amendment been made. (For purposes of this situation, the "first year after enactment" will be considered to be tax year 1994.) If the amendments result in a 25 percent increase in estimated contributions due for tax year 1994, then the extension is available for tax year 1993. This same approach will be used for States which amend their laws in 1992, but phase in the amendment through tax year 1994. A State may make amendments effective in the year of enactment.
To give States the full advantage of Section 304's provisions, calculations will be made on an accrual basis, that is with respect to taxable wages paid in a taxable year rather than contributions paid.
The Department will need to verify whether a State has met the requirements necessary to obtain a deferral. States will, therefore, be required to submit fully documented applications indicating how the State has increased estimated contributions by at least 25 percent. The application must contain an estimate of contributions due for the relevant year based on both the prior law and the amendments made in 1992 and/or 1993. Since the Department must supply information on credit reduction to the Department of Treasury as of November 10, the Department will require submission of this application by September 1 of the year for which the first deferral is sought. (E.g., deferrals for tax year 1992 are due September 1, 1992.)
The purpose of the amendment was to permit States which had taken action to improve solvency through an increase in contributions, an opportunity to obtain some relief from the Federal credit reduction. Therefore, if the State repeals the legislation creating the estimated increase in contributions, or modifies the legislation so that the estimated increase is less than 25 percent, there is no basis for the extension. For example, if a State enacts legislation in 1992 which results in an estimated 25 percent increase in contributions due for 1993, the State will qualify for the extension for tax year 1992. However, if the amendments are repealed or modified to reduce the increase in contributions to less than 25 percent in 1993, the State will lose the extension for 1992 and will be entitled to no extension for 1993 or subsequent years.
        C. Effective Date. Section 304 is effective for taxable years beginning after 1991. If a State has an outstanding advance on January 1991 and 1992, a State will qualify for the deferral for tax year 1992, provided that, in 1992, it increased estimated contributions by at least 25 percent effective for calendar year 1993.
Under Section 304(c), Section 304 is not effective for any taxable year after 1994 unless the year is in a series of consecutive taxable years (containing a taxable year beginning in 1992, 1993, or 1994) for which there was a balance of Title XII loans as of January 1 of such year.

VIII. Section 401. Treatment of Short-Time Unemployment Compensation Programs.
        A. Text of amendments.
            (a) AUTHORIZATION OF PROGRAMS.--
                (1) Paragraph (4) of section 3304(a) of the Internal Revenue Code of 1986 is amended by striking "and" at the end of subparagraph (C), by inserting "and" at the end of subparagraph (D), and by adding at the end thereof the following new subparagraph:
                    "(E) amounts may be withdrawn for the payment of short-time compensation under a plan approved by the Secretary of Labor;"
                (2) Subsection (f) of section 3306 of such Code is amended by striking "and" at the end of paragraph (2) by striking the period at the end of paragraph (3) and inserting "; and", and by adding at the end thereof the following new paragraph:
                    "(4) amounts may be withdrawn for the payment of short-time compensation under a plan approved by the Secretary of Labor."
                (3) Section 303(a)(5) of the Social Security Act is amended by inserting before "; and" the following": Provided further, That amounts may be withdrawn for the payment of short-time compensation under a plan approved by the Secretary of Labor".
            (b) ASSISTANCE IN IMPLEMENTING PROGRAMS.--In order to assist States in establishing and implementing short-time compensation programs--
                (1) the Secretary of Labor (hereinafter in this section referred to as the "Secretary") shall develop model legislative language which may be used by States in developing and enacting short-time compensation programs and shall propose such revisions of such legislative language as may be appropriate, and
                (2) the Secretary shall provide technical assistance and guidance in developing, enacting, and implementing such programs.
The initial model legislative language referred to in paragraph (1) shall be developed not later than January 1, 1993.
            (c) REPORTS.--
                (1) INITIAL REPORT.--Not later than January 1, 1995, the Secretary shall submit to the Congress a report on the implementation of this section. Such report shall include an evaluation of short-time compensation programs and shall contain such recommendations as the Secretary may deem advisable.
                (2) SUBSEQUENT REPORTS.--After the submission of the report under paragraph (1), the Secretary shall submit such additional reports on the implementation of short-time compensation programs as the Secretary deems appropriate.
            (d) DEFINITIONS.--For purposes of this section--
                (1) SHORT-TIME COMPENSATION PROGRAM.--The term "short-time compensation program" means a program under which--
                        (A) Individuals whose workweeks have been reduced by at least 10 percent are eligible for unemployment compensation;
                        (B) the amount of unemployment compensation payable to any such individual is a pro rata portion of the unemployment compensation which would be payable to the individual if the individual were totally unemployed;
                        (C) eligible employees are not required to meet the availability for work or work search test requirements while collecting short-time compensation benefits, but are required to be available for their normal workweek;
                        (D) eligible employees may participate in an employer-sponsored training program to enhance job skills if such program has been approved by the State agency; and
                        (E) there is a reduction in the number of hours worked by employees in lieu of imposing temporary layoffs.
                (2) STATE.--The term "State" includes the District of Columbia, the Commonwealth of Puerto Rico, and the Virgin Islands.

        B. Discussion. Under the provisions of Section 194 of P. L. 97-248, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), the Secretary of Labor was directed to develop model legislative language which could be used by the States in developing and enacting short-time unemployment compensation (STC) or "worksharing" programs. As a means of assuring minimum uniformity throughout the States, the Congress specified certain guidelines for those programs which it encouraged the States to utilize in carrying out the intent and purpose of Section 194. That purpose was to encourage the States to experiment in the implementation of an STC program. Section 194 was an experimental provision which was in effect for a three-year period beginning on September 4, 1982, and ending on September 3, 1985.
The TEFRA provisions gave the States broad authority to consider, as elements of an STC program, factors not related to the fact or cause of the individual's unemployment. When these provisions expired in 1985, the authority for introducing these factors also expired. A precedent for limiting relevant factors to the fact or cause of unemployment was a 1964 decision by the Secretary of Labor. In that decision, the Secretary ruled that a "condition of entitlement not reasonably related to the [unemployment] insurance program or to the insured risk, involuntary unemployment" is not consistent with the withdrawal standard in Sections 3304 (a) (4), FUTA, and 303 (a) (5), SSA.
Section 401 (a) of P.L. 102-318 amends the withdrawal standard, and the definition of the term "unemployment fund" found in Section 3306 (f), FUTA, to provide that amounts may be withdrawn from the unemployment fund of a State for the payment of STC under a plan approved by the Secretary. This amendment gives States authority to continue to operate STC programs approved by the Secretary of Labor as meeting the requirements of the withdrawal standard.
The term "short-time compensation" is defined in new subsection (t) of Section 3306, FUTA. STC is defined as cash benefits payable to individuals under a plan approved by the Secretary of Labor under which:
                (1) Individuals whose workweeks have been reduced by at least 10 percent are eligible for UC;
                (2) The amount of UC payable to such individual is based on a pro rata portion of the UC which would be payable if the individual were totally unemployed;
                (3) Eligible individuals are not required to meet availability or work search requirements while collecting STC, but are required to be available for their normal workweek;
                (4) Eligible employees may participate in an employer-sponsored training program to enhance job skills if the program has been approved by the State agency; and
                (5) There is a reduction in the number of hours worked by employees in lieu of imposing temporary layoffs.
States may not operate a program that does not meet criteria (1) through (3) and (5). Criterion (4), pertaining to employer-sponsored training programs, is optional; however, if included in an STC plan, such program must enhance job skills and be approved by the State agency. Finally, States are also prohibited from imposing any additional requirement inconsistent with the Secretary's 1964 decision.
Section 401 (b) of P.L. 102-318 directs the Secretary of Labor to develop model legislative language for use by the States in developing and enacting STC programs by January 1, 1993. Section 401 (c) requires an initial report be submitted to Congress by January 1, 1995 on the implementation of Section 401 as well as the submission of any additional reports as the Secretary deems appropriate.
The Department will issue a Change 1 to this UIPL providing a more detailed discussion of the above amendments, criteria which a State's STC plan must contain to be approved by the Secretary, and draft language for the STC program. In the meantime, no new STC plan may be put into effect. No plan in effect at this time has been approved under the new authority.
        C. Effective Date. Section 401 of P.L. 102-318 does not contain an effective date. The Department will therefore treat the date of enactment, July 3, 1992, as the effective date.

IX. Section 531. Modifications to Federal Unemployment Accounts.
        A. Text of Section 531.
            (a) MODIFICATIONS TO EXTENDED UNEMPLOYMENT COMPENSATION ACCOUNT.--
                    (1) TRANSFERS TO ACCOUNT.--Paragraph (1) of section 905(b) of the Social Security Act is amended to read as follows--
            "(b)(1) Except as provided in paragraph (3), the Secretary of the Treasury shall transfer (as of the close of each month), from the employment security administration account to the extended unemployment compensation account established by subsection (a), an amount determined by him to be equal to the sum of--
                    "(A) 100 percent of the transfers to the employment security administration account pursuant to section 901(b)(2) during such month on account of liabilities referred to in section 901 (b) (1) (B) [sic^*], plus
                    "(B) 20 percent of the excess of the transfers to such account pursuant to section 901 (b) (2) during such month on account of amounts referred to in section 901 (b) (1) (A) [sic^*] over the payments during such month from the employment security administration account pursuant to section 901 (b) (3) and (d).
If for any such month the payments referred to in subpararaph (B) exceed the transfers referred to in subparagraph (B), proper adjustments shall be made in the amounts subsequently transferred."
                    (2) INCREASE IN CEILING.--Subparagraph (B) of section 905(b)(2) of such Act is amended by striking "three-eighths of 1 percent" and inserting "0.5 percent".
            (b) REDUCTION OF CEILING ON FEDERAL UNEMPLOYMENT ACCOUNT.--Paragraph (2) of section 902(a) of such Act is amended by striking "five-eighths of 1 percent" and inserting "0.25 percent".
^* A version of the proposal which eventually became P.L. 102-318 would have amended Section 901 (b) (1), SSA, to create new subparagraphs (A) and (B). This amendment was not enacted. As Section 901 (b) (1), SSA, does not refer to any liabilities, new subparagraph (A) of Section 905 (b) (1) has no current effect.
            (c) BORROWING BETWEEN FEDERAL ACCOUNTS.--Title IX of such Act is amended by adding at the end the following new section:

"BORROWING BETWEEN FEDERAL ACCOUNTS

            "SEC. 910. (a) IN GENERAL.--Whenever the Secretary of the Treasury (after consultation with the Secretary of Labor) determines that--
                        "(1) the amount in employment security administration account, Federal unemployment account, or extended unemployment compensation account, is insufficient to meet the anticipated payments from the account,
                        "(2) such insufficiency may cause such account to borrow from the general fund of the Treasury, and
                        "(3) the amount in any other such account exceeds the amount necessary to meet the anticipated payments from such other account, the Secretary shall transfer to the account referred to in paragraph (1) from the account referred to in paragraph (3) an amount equal to the insufficiency determined under paragraph (1) (or, if less, the excess determined under paragraph (3)).
                "(b) TREATMENT OF ADVANCE.--Any amount transferred under subsection (a)--
                        "(1) shall be treated as a noninterestbearing repayable advance, and
                        "(2) shall not be considered in computing the amount in any account for purposes of the application of sections 901 (f) (2), 902 (b), and 905 (b).
                "(c) REPAYMENT.--Whenever the Secretary of the Treasury (after consultation with the Secretary of Labor) determines that the amount in the account to which an advance is made under subsection (a) exceeds the amount necessary to meet the anticipated payments from the account, the Secretary shall transfer from the account to the account from which the advance was made an amount equal to the lesser of the amount so advanced or such excess."
                (d) REPEAL OF EXPIRED PROVISIONS.--
                        (1) Paragraph (2) of section 901 (f) of such Act is amended--
                                (A) by striking "(A) Except as provided in subparagraph (B), the" and inserting "The", and
                                (B) by striking subparagraph (B).
                        (2) Section 901 of such Act is amended by striking subsection (g).
                        (3) Subsection (g) of section 904 is amended by striking all of such subsection that follows the 1st sentence.
                (e) EFFECTIVE DATES.--
                        (1) IN GENERAL.--Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of enactment of this Act.
                        (2) CHANGES IN CEILING AMOUNTS.--The amendments made by subsection (a) (2) and (b) shall apply to fiscal years beginning after September 30, 1993.

            B. Discussion. Section 531 of P.L. 102-318 amends Title IX, SSA, as it relates to aspects of the Unemployment Trust Fund (UTF). These amendments pertain only to the Federal management of the UTF and do not require any action on the part of the States. The following is provided for informational purposes only.
The amendments made by Section 531 affect three accounts in the UTF:   the Employment Security Administration Account (ESAA) which funds the administration of the UC and employment service programs; the Extended Unemployment Compensation Account (EUCA) which funds EB (and has been used to fund EUC); and the Federal Unemployment Account (FUA) which is the funding source for advances to States for the payment of UC.   These accounts are funded through revenues generated by the tax established by Section 3301(a), FUTA.
Title IX specifies a statutory ceiling for each of these three accounts.   If this ceiling is reached in a particular account, the excess is distributed according to the provisions of Title IX.   When the ceiling is reached in all three accounts, States receive the excess as a "Reed Act" distribution.
Under Section 531 (a) of P.L. 102-318, the ESAA will retain 80 (formerly 90) percent of the sums appropriated by Section 901 (b) (1), and 20 (formerly 10) percent is transferred to the EUCA. (The FUA continues to be funded through transfers from ESAA and EUCA.) In addition, Section 531 lowers the ceiling in the FUA from 0.625 percent to 0.25 percent of total annual wages and raises the ceiling on the EUCA from 0.375 percent to 0.5 percent of total annual wages.
Section 531 (c), P.L. 102-318, adds new Section 910 to Title IX of the SSA. This new section authorizes borrowing, in the form of noninterest-bearing repayable advances, between the ESAA, EUCA, and FUA when the Secretary of the Treasury (in consultation with the Secretary of Labor) determines that:
                        + The amount in the "borrowing" account is insufficient to meet anticipated payments;
                        + The "borrowing" account may need to borrow from general revenues; and
                        + The amount in the "lending" account exceeds the amount necessary to make anticipated payments from the "lending" account.
Any borrowed amount will not be considered in determining whether the borrowing account or lending account has reached its statutory ceiling. The borrowed amount will be repaid when the Secretary of Treasury (in consultation with the Secretary of Labor) determines that the amount in the borrowing account exceeds the amount necessary to meet anticipated payments from the account.
            C. Effective Dates. Under Section 531 (e) of P.L. 102-318, all changes made by Section 531, except the changes made in the ceiling amounts, are effective on the date of enactment, which is July 3, 1992. The changes in the ceiling amounts are effective for Federal fiscal years beginning after September 30, 1993.

ATTACHMENT II TO UIPL NO. 45-92

Draft Language to Implement Section 201 of P.L. 102-318
States wishing to amend their Unemployment Compensation law to add the optional EB "on" and "off" indicator provided for by Section 201 of P.L. 102-318 may wish to use the following draft language.
This language replaces the draft language for paragraphs (2) through (5) of subsection (a) of an unnumbered section found on pages 75 through 77 of the Draft Language to Implement the Employment Security Amendments of 1976-P.L. 94-566. It also replaces subsection (e) of the same unnumbered section found on pages 125 through 127 of the Draft Language to Implement the Employment Security Amendments of 1970-H.R. 14705.
The following language incorporates both the required trigger mechanism and the two optional triggers and is designed to satisfy the requirements of EUCA 70, as amended, addressing the trigger methods. States wishing to use only one of the optional triggers, or neither of the optional triggers, should delete the language pertaining to the trigger(s) not used.
I. Section (a)(2) and (3)
    (a)(2) There is a State "on" indicator for a week if--
        (A) (i) the rate of insured unemployment under this Act for the period consisting of such week and the immediately preceding twelve weeks equaled or exceeded 120 percent of the average of such rates for the corresponding 13-week period ending in each of the preceding calendar years, and
              (ii) equaled or exceeded 5 percent; or
        (B) the rate of insured unemployment under this Act for the period consisting of such week and the immediately preceding twelve weeks equaled or exceeded 6 percent, regardless of the rate of insured unemployment in the two previous years; or
        (C) with respect to benefits for weeks of unemployment beginning after March 6, 1993 [or any later date selected by the State]--
              (i) the average rate of total unemployment (seasonally adjusted), as determined by the United States Secretary of Labor, for the period consisting of the most recent 3 months for which data for all States are published before the close of such week equals or exceeds 6.5 percent, and
              (ii) the average rate of total unemployment in the State (seasonally adjusted), as determined by the United States Secretary of Labor, for the 3-month period referred to in clause (i), equals or exceeds 110 percent of such average for either or both of the corresponding 3-month periods ending in the 2 preceding calendar years.
    (3) There is a State "off" indicator for a week only if, for the period consisting of such week and the immediately preceding twelve weeks, none of the options specified in paragraph (2) result in an "on" indicator.
II. Section (e)
    (e) Total extended benefit amount. (1) The total extended benefit amount payable to any eligible individual with respect to the applicable benefit year shall be the least of the following amounts:
        (A) fifty percent of the total amount of regular benefits (including dependents allowances) ¹ which were payable to the individual under this Act in the individual's applicable benefit year;
        (B) thirteen times his weekly benefit amount ² (including dependents' allowances) ¹ which was payable to an individual under this Act for a week of total unemployment in the applicable benefit year; or
        (C) ³ thirty-nine times the individual's weekly benefit amount ² (including dependents allowances) ¹ which was payable to such individual under this Act for a week of total unemployment in the applicable benefit year, reduced by the total amount of regular benefits which were paid (or deemed paid) to such individual under this Act with respect to the benefit year.
    (2) Provided, ⁴ That the amount determined under subsection (1) shall be reduced by the total amount of additional benefits paid (or deemed paid) to the individual under the provisions of section ⁵ of this Act for weeks of unemployment in the individual's benefit year which began prior to the effective date of the extended benefit period which is current in the week for which the individual first claims extended benefits.
    (3)(A) Effective with respect to weeks beginning in a high unemployment period, paragraph (1) shall be applied by substituting
                (i) "eighty percent" for "fifty percent" in subparagraph (A),
                (ii) "twenty" for "thirteen" in subparagraph (B), and
                (iii) "forty-six" for "thirty-nine" in subparagraph (C)
        (B) For purposes of subparagraph (A), the term "high unemployment period" means any period during which an extended benefit period would be in effect if subsection (a) (2) (C) were applied by substituting "8 percent" for "6.5 percent".

Notes on Draft Language

¹ In State laws with no provisions for payment of dependents' allowances references to such allowances should be omitted.
² If, under the State law, the weekly benefit amount may fluctuate during the benefit year, the word "average" should be added before the words "weekly benefit amount."
³ This paragraph is necessary only in a State law under which regular benefits payable to an individual in a benefit year may exceed 26 times the weekly benefit amount.
⁴ This proviso is pertinent only in States in which the State law provides for the payment of wholly State-financed additional benefits. Such States, under the Federal law, may (but do not have to) provide for the reduction of the total amount of extended benefit payable to an individual by the amount of additional benefits which were paid (or deemed paid) to the individual in his applicable benefit year before he becomes entitled to extended benefits.
⁵ Include reference to section of State law under which wholly State-financed additional benefits are payable.

ATTACHMENT III TO UIPL 45-92

Any Unemployment Compensation you receive is fully taxable provided you are required to file a tax return.
NOTIFY YOUR LOCAL EMPLOYMENT COMPENSATION OFFICE IF YOU CHANGE YOUR ADDRESS.
ADDRESS ALL QUESTIONS TO THE INTERNAL REVENUE SERVICE.

DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 45-92

TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES

FROM	:	DONALD J. KULICK Administrator for Regional Management

SUBJECT	:	Unemployment Compensation Amendments of 1992 (P.L. 102-318) - Provisions Affecting the Federal-State Unemployment Compensation (UC) Program