Steve Massey UI Program Specialist Federal-State Unemployment Compensation (UC) Legislative Seminar Administrative Requirements and Payment When Due Steve Massey UI Program Specialist

Federal-State Unemployment Compensation (UC) Legislative Seminar Certification Section 302(a), SSA, requires the Secretary of Labor: “…from time to time certify to the Secretary of the Treasury for payment to each State which has an unemployment compensation law approved by the Secretary of Labor under the Federal Unemployment Tax Act, such amounts as the Secretary of Labor determines to be necessary for the proper and efficient administration of such law…”. Section 303(a), SSA, requires the Secretary of Labor to make: “…no certification for payment to any State unless he finds that the law of such state … includes provision for…” certain specifically enumerated requirements.

Conformity Requirements Federal-State Unemployment Compensation (UC) Legislative Seminar Conformity Requirements

Other conformity requirements Federal-State Unemployment Compensation (UC) Legislative Seminar Other conformity requirements

Substantial Compliance Federal-State Unemployment Compensation (UC) Legislative Seminar Substantial Compliance Certification may be withheld as provided in sections 303(b) and (c), SSA. Section 303(b), SSA - Secretary of Labor shall make no further payments when, after providing notice and an opportunity for a hearing, finds that in the administration of the state law: a denial, in a substantial number of cases, of UC to individuals entitled to benefits under the state law; or a failure to comply substantially with any provision specified in section 303(a), SSA.

Substantial Compliance Federal-State Unemployment Compensation (UC) Legislative Seminar Substantial Compliance Three additional reasons that the Secretary may withhold certification for the administrative grant. Section 303(c), SSA, provides that no certification for payments to the state agency whenever the Secretary, after reasonable notice and opportunity for hearing, finds: the state does not make its records available to the Railroad Retirement Board; the state is fails to reasonably cooperate with every agency of the U.S. charged with the administration of any UC law; or that interest on Title XII advances was not paid timely or was paid from the state's unemployment fund.

Federal-State Unemployment Compensation (UC) Legislative Seminar Payment When Due Section 303(a)(1), SSA, requires: “Such methods of administration (including after January 1, 1940, methods relating to the establishment and maintenance of personnel standards on a merit basis, except that the Secretary of Labor shall exercise no authority with respect to the selection, tenure of office, and compensation of any individual employed in accordance with such methods) as are found by the Secretary of Labor to be reasonably calculated to insure full payment of unemployment compensation when due. [emphasis added]”

Federal-State Unemployment Compensation (UC) Legislative Seminar Payment When Due The failure to substantially comply with section 303(a)(1), SSA may result in the loss of Title III administrative grants under section 303(b)(2), SSA. The Department interpreted the methods of administration requirement to establish certain operational standards for the proper and efficient administration of state UC laws. These standards include the Claims Filing Standard; the Claims Determination Standard; and the Fraud and Overpayment Detection Standard. These operational standards were made a part of the Employment Security Manual and were later added to regulations relating to unemployment programs.

Claims Filing Standard Federal-State Unemployment Compensation (UC) Legislative Seminar Claims Filing Standard Payment of UC only to individuals who are unemployed and who are able to work and available for work; Claimants are afforded such placement and other employment services as are necessary and appropriate to facilitate their return to suitable work as soon as possible; and Methods of administration which do not unreasonably limit the opportunity of individuals to establish their right to UC due under such state law.

Claims Determination Standard Federal-State Unemployment Compensation (UC) Legislative Seminar Claims Determination Standard States must provide information to permit individuals opportunity to know, establish, and protect their rights under the state UC law; and The state agency obtains and records in time for the prompt determination and review of benefit claims such information as will reasonably insure the payment when due.

Claims Determination Standard Federal-State Unemployment Compensation (UC) Legislative Seminar Claims Determination Standard UIPL 15-01 -- To implement the Claims Determination Standard, it is the responsibility of the agency to take the initiative in the discovery of information. This responsibility may not be passed on to the claimant or employers. If the information obtained in the first instance discloses no essential disagreement and provides a sufficient basis for a fair determination, no further investigation is necessary. If different, further contact required, including rebuttal opportunity.

Fraud and Overpayment Detection Standard Federal-State Unemployment Compensation (UC) Legislative Seminar Fraud and Overpayment Detection Standard Detecting benefits paid through error by the agency or through willful misrepresentation or error by the claimant or others; and Deterring claimants from obtaining benefits through willful misrepresentation.

Federal-State Unemployment Compensation (UC) Legislative Seminar Recent Legislation Section 303(g)(1), SSA, mandatory offset for any UC overpayments, (Federal or other state program). Previously permissive.

Recent Legislation Cont. Federal-State Unemployment Compensation (UC) Legislative Seminar Recent Legislation Cont. Section 303(a)(11), SSA, 15% penalty for fraud, collection amount into UC fund.

Recent Legislation Cont. Federal-State Unemployment Compensation (UC) Legislative Seminar Recent Legislation Cont. Section 303(m), SSA, states must use Treasury Offset Program (TOP) to recover “covered unemployment debt.” Covered unemployment debt includes failure to report earnings (even if not fraudulent) or delinquent contributions.

Federal-State Unemployment Compensation (UC) Legislative Seminar Liability to the Fund The Department has interpreted section 303(a)(1), SSA, to require that state laws provide for reasonable means to enforce claimant and employer liabilities to the state UC fund. State may determine debt uncollectible after reasonable efforts to collect debt fail. Also deminimus or bankrupt employer write-off permitted.

Payment when Due - Performance Federal-State Unemployment Compensation (UC) Legislative Seminar Payment when Due - Performance Section 303(a)(1), SSA, in conjunction with the reporting requirement of section 303(a)(6), SSA, serve as the basis for the Department’s Benefit Accuracy Measurement program. See 20 CFR 602 for more information. It is also the basis for the performance measures which the states agree to meet each year when they sign the State Quality Service Plan (SQSP). These measures have covered benefit, tax, benefit payment control, and fund management activities.

Federal-State Unemployment Compensation (UC) Legislative Seminar Payment when Due - JAVA In each case, the claimant was initially found eligible and payments had begun, but payments were stopped when an employer filed an appeal to the determination that awarded benefits.

Federal-State Unemployment Compensation (UC) Legislative Seminar Payment when Due - JAVA Supreme Court applied a statutory analysis of whether this procedure was consistent with the “payment when due” requirement. UC payments may not be suspended during employer appeal.

Federal-State Unemployment Compensation (UC) Legislative Seminar Payment when Due - JAVA “We conclude that the word "due" in section 303(a)(1), when construed in light of the purposes of the Act, means the time when payments are first administratively allowed as a result of a hearing of which both parties have notice and are permitted to present their respective positions; any other construction would fail to meet the objective of early substitute compensation during unemployment.” UC is paid as wage replacement and stabilizer.

First Payment/Appeals Time Lapse Federal-State Unemployment Compensation (UC) Legislative Seminar First Payment/Appeals Time Lapse 20 CFR 640, Benefit Payment Promptness Standard 20 CFR 650 Appeals Promptness Standard

Waiver of Rights Prohibited Federal-State Unemployment Compensation (UC) Legislative Seminar Waiver of Rights Prohibited The Department has interpreted the Section 303(a)(1), SSA, payment when due requirement in conjunction with the withdrawal standard, and the definition of compensation “as a cash payment made to an individual with respect to his unemployment” to prohibit any waiver, assignment, pledge, or encumbrance of any right to unemployment compensation. (See UIPL 45-89) UIPL 34-85 was issued to reaffirm the interpretation that benefits may not be delayed or waived once a determination of entitlement has been made, even if the claimant voluntarily agrees to waive benefits pending the outcome of an employer appeal.

Statewide Personnel Actions Federal-State Unemployment Compensation (UC) Legislative Seminar Statewide Personnel Actions State-wide personnel actions, such as hiring freezes, furloughs and other actions on a State-wide basis, that do not take into account the service delivery needs of the UC program are not a method of administration “reasonably calculated to insure full payment of unemployment compensation when due” and may therefore put the state’s UC grant at risk. States must make a “showing” that such actions will not adversely affect UC administration.

Federal-State Unemployment Compensation (UC) Legislative Seminar Merit System Section 303 (a)(1), SSA, requires that state UC law include provision for “such methods of administration (including after January 1, 1940, methods relating to the establishment and maintenance of personnel standards on a merit basis, except that the Secretary of Labor shall exercise no authority with respect to the selection, tenure of office, and compensation of any individual employed in accordance with such methods) as are found by the Secretary of Labor to be reasonably calculated to insure the full payment of compensation when due;”

Federal-State Unemployment Compensation (UC) Legislative Seminar Merit System 5 CFR 900.603 requires systems of personnel administration consistent with the following merit principles: Recruiting, selecting, and advancing employees on the basis of their relative ability, knowledge, and skills, including open consideration of qualified applicants for initial appointments. Providing equitable and adequate compensation. Training employees, as needed, to assure high quality performance. Retaining employees on the basis of the adequacy of their performance, correcting inadequate performance, and separating employees whose inadequate performance cannot be corrected. Assuring fair treatment of applicants and employees in all aspects of personnel administration without regard to political affiliation, race, color, national origin, sex, religious creed, age or handicap and with proper regard for their privacy and constitutional rights as citizens. This “fair treatment” principle includes compliance with the Federal equal employment opportunity and nondiscrimination laws. Assuring that employees are protected against coercion for partisan political purposes and are prohibited from using their official authority for the purpose of interfering with or affecting the result of an election or a nomination for office.

Federal-State Unemployment Compensation (UC) Legislative Seminar Merit System The functions of the Secretary of Labor related to merit systems were transferred to OPM in 1971. OPM has the authority to determine whether a violation of merit standards exists. The Secretary of Labor, however, still makes any final determination on the withholding of administrative grants. OPM provided guidance regarding the role of Federal agencies in insuring the merit-staffing requirement is met as follows: …the respective statutes which require State or local governments to establish merit systems do so pursuant to proper and efficient grants administration. We believe that issues of merit systems compliance should be raised and addressed in the context of State or local government performance in grants administration, and that this is appropriately done by or under the direction of the Federal grantor agency. Therefore, OPM's policy will be to accept allegations of non-compliance with the standards only from grantor agencies. As required by the Act, OPM will continue to provide, when requested, interpretation, advice, and technical assistance when such issues arise.

Federal-State Unemployment Compensation (UC) Legislative Seminar Worker Profiling Section 303(j)(1)(A), SSA, requires states to “identify which claimants will be likely to exhaust regular compensation and will need job search assistance services to make a successful transition to new employment.” Section 303(j)(1)(B), SSA, requires that states refer claimants identified pursuant to subparagraph (A) to reemployment services, such as job search assistance services, available under any state or Federal law.

Federal-State Unemployment Compensation (UC) Legislative Seminar Worker Profiling Section 303(a)(10), SSA, includes a requirement that, as a condition of eligibility for regular compensation for any week, “any claimant who has been referred to reemployment services pursuant to the profiling system under subsection (j)(1)(B) participate in such services unless the state agency charged with the administration of the state law determines: such claimant has completed such services; or there is justifiable cause for such claimant’s failure to participate in such services.”

Federal-State Unemployment Compensation (UC) Legislative Seminar Cost Principles States must use grant money for allowable costs in administration of the state UC law. Section 302(a), SSA, provides that the Secretary of Labor shall certify for payment to a state such amounts as the Secretary determines to be necessary for the “prompt and efficient” administration of a state’s UC law. Section 303(a)(8), SSA, requires a to state use UC grant funds “solely for the purposes and in the amounts found necessary by the Secretary of Labor for the proper and efficient administration of a state’s UC law.”

Federal-State Unemployment Compensation (UC) Legislative Seminar Cost Principles Federal regulations govern what are allowable costs under a grant and how costs are to be allocated among funding sources when goods or services are shared by two or more programs/purposes. The determination of allowable costs under a grant is governed by regulations at 2 CFR Chapter I, Chapter II, Part 200, et al. - Uniform Administrative Requirements, Cost Principles, and Audit Allowed Cost /Cost Allocation - The regulation provides that “a cost is allocable to a particular cost objective [i.e., grant] if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received.” A discussion of the cost allocation requirement is contained in Training and Employment Guidance Letter 6-05.

Questions & Open Discussion Federal-State Unemployment Compensation (UC) Legislative Seminar Questions & Open Discussion