1. Short-Time Compensation Short-Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012 June 26, 2012 2:00 pm EST

2. 2 Short-Time Compensation Welcome to Workforce 3 One! Welcome to Workforce 3 One!

3. 3 Short-Time Compensation Submitting Questions: Open Chat Drop-Down Menu  To submit a question, type the question in the text field and press your Enter/Return key. ‒ Please enter the name to whom the question is directed.  To send questions only to the presenters, select Presenters from the drop-down menu before pressing your Enter/Return key.  Change Text Size and Chat Color… Text Field

4. 4 Short-Time Compensation  To submit a question, type the question in the text field and press your Enter/Return key. ‒ Please enter the name to whom the question is directed.  Your name and your question will appear on your screen, indicating successful submission.  Questions are directly transmitted to presenters—no other participants will see your questions. Submitting Questions: Closed Chat Text Field Gary, where can I find today’s PPT?

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6. 6 Short-Time Compensation How To Participate in a Poll

7. 7 Short-Time Compensation Access to Webinar Resources WEBINAR RESOURCES: Recordings and transcripts are available within 2 business days after the event.

8. 8 Short-Time Compensation Presenters Gay Gilbert, Administrator, Gay Gilbert, Administrator, Unemployment Insurance Suzanne Simonetta, Chief UI Legislation Ron Wilus, Chief Fiscal and Actuarial Services Betty Castillo, Chief UI Operations Scott Gibbons, Supervisor Fiscal and Actuarial Services

9. 9 Short-Time Compensation  Review the provisions of the Short-Time Compensation (STC) Unemployment Insurance Program Letter (UIPL) No. 22-12, Short-Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012  Provide technical assistance and answers to STC questions Webinar Agenda

10. 10 Short-Time Compensation During the webinar you may provide input in three ways:  Verbally  Via the Web Chat feature  Uploading Content Three Ways To Provide Input

11. 11 Short-Time Compensation Webinar Agenda  Review the provisions of the Short-Time Compensation (STC) Unemployment Insurance Program Letter (UIPL) No. 22-12, Short-Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012  Provide technical assistance and answers to STC questions

12. 12 Short-Time Compensation What is Short-Time Compensation? Short-Time Compensation  STC (also known as worksharing or shared work) preserves employee’s jobs and employers’ trained workforce during disruptions to a firm’s regular business activity by reducing the hours of work for an entire group of affected employees rather than laying off some employees while others continue to work full time.

13. 13 Short-Time Compensation Short-Time Compensation Benefits Short-Time Compensation Program Benefits  For Employers Retains skilled workers Temporarily, reduces labor costs  For Workers Provides economic stability Sustains employee morale

14. 14 Short-Time Compensation STC Equals Opportunity Why STC and why today?  UIPL No. 22-12, Short-Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012 (“Act”), issued June 18, 2012  The “Act” enacted on February 22, 2012 contains the Layoff Prevention Act of 2012 (Subtitle D), which does the following: –Modifies the STC definition; adds 3306(v), FUTA –Provides 100% Federal Reimbursement for state STC programs –Allows states to operate a Federal STC program –Provides STC grants to eligible states –Directs the Secretary of Labor to develop STC model legislation –Requires a report on implementation of these new STC provisions

15. 15 Short-Time Compensation Definition of Short-Time Compensation  The term “Short-Time Compensation” is defined in new subsection (v) of Section 3306, FUTA, which became effective on February 22, 2012.  States are not required to enact an STC program into law; however, states may not operate an STC program that does not conform to the new definition in 3306(v), FUTA.  States currently operating an STC program are provided a transition period of two years and six months (or until August 22, 2014) in order for laws to conform to the new definition and requirements.

16. 16 Short-Time Compensation Provisions of Section 3306(v), FUTA  3306(v), FUTA, contains nine specific requirements that define an STC program.  3306(v)(10), FUTA, provides authority for the Secretary of Labor to approve additional provisions of state STC laws.

17. 17 Short-Time Compensation 3306(v)(1), FUTA “the participation of an employer is voluntary;”  No change from prior law.  Employer participation has always been voluntary in STC programs.

18. 18 Short-Time Compensation 3306(v)(2), FUTA “an employer reduces the number of hours worked by employees in lieu of layoffs;”  This is a modification from the prior definition.  The previous definition required a reduction in hours worked by employees in lieu of temporary layoffs.  The removal of the term “temporary” enables a state UC agency to approve more applications by employers to participate in an STC program.  The use of the word “layoffs” means that the employing unit affect must consist of at least two workers.

19. 19 Short-Time Compensation 3306(v)(3), FUTA “such employees whose workweeks have been reduced by at least 10 percent, and by not more than the percentage, if any, that is determined by the State to be appropriate (but in no case more than 60 percent), are not disqualified from unemployment compensation;”  This is a modification from the prior definition.  Employees participating in STC must not be disqualified from UC on account of their STC participation.  Federal law now establishes both a minimum (10%) and maximum (60%) percentage by which individuals’ workweeks may be reduced.

20. 20 Short-Time Compensation 3304(v)(4), FUTA “the amount of unemployment compensation payable to any such employee is a pro rata portion of the unemployment compensation which would otherwise be payable to the employee if such employee were unemployed;”  No change from prior law.  STC weekly benefit amounts have always been defined as a proportion of the UC weekly benefit amount payable for a week of total unemployment equivalent to the proportion of the workweek that had been reduced.

21. 21 Short-Time Compensation 3306(v)(5), FUTA “such employees meet the availability for work and work search test requirements while collecting short-time compensation benefits, by being available for their workweek as required by the State agency;”  No change from prior law.

22. 22 Short-Time Compensation 3306(v)(6), FUTA “eligible employees may participate, as appropriate, in training (including employer-sponsored training or worker training funded under the Workforce Investment Act of 1998) to enhance job skills if such program has been approved by the State agency;”  This is an expansion of the requirement in prior law.  A state UC agency is permitted to approve STC plans providing for both employer-sponsored training and Workforce Investment Act training to improve job skills.

23. 23 Short-Time Compensation 3306(v)(7), FUTA “the State agency shall require employers to certify that if the employer provides health benefits and retirement benefits under a defined benefit plan (as defined in section 414(j)) or contribution under a defined contribution plan (as defined in section 414(i)) to any employee whose workweek is reduced under the program that such benefits will continue to be provided to employees participating in the short-time compensation program under the same terms and conditions as though the workweek of such employee had not been reduced or to the same extent as other employees not participating in the short-time compensation program;”

24. 24 Short-Time Compensation 3306(v)(7), FUTA Cont.  This is a new requirement.  No employer may reduce the health or specified retirement benefits to individuals participating in the STC program.  This prohibition on reduction does not apply if a reduction in such health and specified retirement benefits also apply to employees not participating in STC.

25. 25 Short-Time Compensation 3306(v)(8), FUTA “the State agency shall require an employer to submit a written plan describing the manner in which the requirements of this subsection will be implemented (including a plan for giving notice, where feasible, to an employee whose workweek is to be reduced) together with an estimate of the number of layoffs that would have occurred absent the ability to participate in short-time compensation and such other information as the Secretary of Labor determines is appropriate;”

26. 26 Short-Time Compensation 3306(v)(8), FUTA Cont.  This is a new requirement.  An STC plan will now have to specify how workers will be notified of the STC plan in advance, if feasible, and provide an estimate of the number of workers who would be laid off if the employer does not participate in STC.

27. 27 Short-Time Compensation 3306(v)(9),FUTA “the terms of the employer’s written plan and implementation shall be consistent with employer obligations under applicable Federal and State laws;…”  This is a new requirement.  State STC law must require the employer to attest, as part of its STC application, that participation in the STC program is consistent with the employer’s obligations under state and Federal law.

28. 28 Short-Time Compensation 3306(v)(10), FUTA “upon request by the State and approval by the Secretary of Labor, only such other provisions are included in the State law that are determined to be appropriate for purposes of a short-time compensation program.”  The is a new provision intended to give states the flexibility to include additional STC requirements.  Many state STC laws contain additional requirements for employer and employee participation in the program.  Additional guidance will be issued to provide further instruction regarding this provision.

29. 29 Short-Time Compensation Transition Period  The Act provides for a transition period for states currently operating STC programs.  States may be reimbursed for current programs operating under state law that do not conform to 3306(v), FUTA, for up to 2 years and 6 months (or until August 22, 2014).  No further reimbursement will be made unless the law is amended to conform to 3306(v), FUTA.  State laws that are amended to conform to 3306(v), FUTA, are eligible to receive up to an additional six months of reimbursement for STC payments.

30. 30 Short-Time Compensation Temporary Reimbursement of Eligible Short-Time Compensation Costs Temporary 100% reimbursement of eligible STC costs paid under state law being administered on February 22, 2012: Two Cases: 1.State has STC laws conforming to Section 3306(v), FUTA  Reimbursement available up to 156 weeks  Applicable period: 2/26/12 and ending 8/22/15 2.State’s STC laws does not conform to Section 3306(v), FUTA  Reimbursement available for only 130 weeks  Applicable period: 2/26/12 and ending 8/23/14  Enactment of conforming legislation during transition period permits 156 weeks of reimbursement - must be completed by 8/22/15

31. 31 Short-Time Compensation Temporary Reimbursement of Eligible Short-Time Compensation Costs Cont.  To qualify, States STC laws do not need to be permanent  States without STC law can operate an STC program under agreement with U.S. Department of Labor Secretary Eligible for 50% reimbursement of STC benefit costs 100% reimbursement available after effective date of legislation conforming to 3306(v) Total number of reimbursement weeks: 156 Reimbursement available through week ending: 8/22/15

32. 32 Short-Time Compensation Temporary Reimbursement of Eligible Short-Time Compensation Costs Cont. Limitations: 1.Reimbursement not made to an individual during a benefit year for amounts exceeding 26 x WBA (including dependent’s allowances) 2.Reimbursement not available for seasonal, temporary, or intermittent employees

33. 33 Short-Time Compensation Temporary Reimbursement of Eligible Short-Time Compensation Costs Cont. State law definitions apply, or Seasonal Employment: employment with employer who has at least a 20% difference between highest level of employment for a season and lowest during off season over prior 3 years. Workers hired temporarily for a particular season. Temporary Employment: Employment for a limited period Intermittent Employment: Episodic employment

34. 34 Short-Time Compensation Funding  Once agreements are singed, funding will be made available in the Payment Management System (PMS)  Initial funding will be for amounts estimated to qualify for reimbursement for weeks of unemployment beginning after the date of enactment through July  Beyond July, amounts will be deposited at the beginning of each month and will be equal to amounts reported on the ETA-2112 as eligible for reimbursement for the most recent month adjusted for excesses or deficiencies for prior months

35. 35 Short-Time Compensation Funding Cont.  Withdrawals from PMS must be deposited into a state’s Benefit Payment Account or the state’s account in the UTF – are subject to CMIA  Initial funding will cover several months and states will need to deposit some into the state account in the UTF – such deposits should be reported to BPD as a credit to “State UI Withdrawal” with offsetting reduction to “net UI Benefits” on ETA-2112

36. 36 Short-Time Compensation Charging of Short-Time Compensation Benefits  Since state trust funds are temporarily being reimbursed by the Federal government by an amount equal to 100 percent of the amount of STC paid to participating employees, states may (if permissible under state law) choose not to charge (or not to require reimbursement of) STC payments that are subject to the 100 percent reimbursement by the Federal government.  If a state permits payment of STC in excess of 26 times the amount of regular compensation, or to individuals employed by a participating employer on a seasonal, temporary, or intermittent basis, must charge the employer for these benefits (or require reimbursement) consistent with state law.

37. 37 Short-Time Compensation Charging of Short-Time Compensation Benefits Cont.  When 100 percent Federal reimbursement ends, states must again apply their charging provisions to STC payments.  States choosing to charge (or require reimbursement of) the STC benefits may not apply special rules to these STC payment.  When choosing whether or not to relieve employers from charging (or reimbursement), states should take into consideration: Potential effect on the solvency of UTF Impact on tax rate schedules

38. 38 Short-Time Compensation Agreements  Two agreements are required for reimbursement: Addendum to the Annual Funding Agreement and an agreement for 100% Reimbursement of STC  Primary purpose for the addendum is to assign allocated funds to a grant so they can be tracked for accounting purposes and to broadly outline the purposes for which they can be used. Signed by the governor or authorized signatory and Grant Officer

39. 39 Short-Time Compensation Agreements Cont.  Reimbursement agreement sets forth the responsibilities of the parties und the law Signed by Secretary Solis and authorized state official, e.g., agency head responsible for administering the UI program Copies of agreements pre-signed by the Secretary can be obtained from appropriate Regional Office  Signed agreements should be submitted via email addressed to: STC_Applications@dol.gov

40. 40 Short-Time Compensation Current Reporting Requirements for Short-Time Compensation Programs  Monthly reporting, Claims and Payment Activities, the STC specific ETA 5159  Weekly reporting, initial and continuing claims, as well as equivalents, ETA 539  Monthly reporting of STC first payments time lapse, ETA 9050  Monthly reporting of STC continued weeks time lapse, ETA 9051

41. 41 Short-Time Compensation Revisions to Reporting Requirements for Short-Time Compensation Programs  Addition of cells to the ETA 2112 –Deposits Section, New Line 23b: Short Time Compensation - Federal. Enter in columns C and F Federal funds received as federal reimbursements for Short Time Compensation benefits. –Disbursements Section, New Line 42b: Short Time Compensation - Federal. Enter in columns C and F the net Short Time Compensation paid for which the Federal government is liable. Report in column F all benefits paid, including amounts transferred to the IRS for Federal income tax withholding. –Revised report should be available in state systems by early July –First report with new data due August 1 reflecting activity through June –First report of STC Federal disbursements should be aggregate for reimbursable activity from February 26 to current, and monthly afterwards. This total should be slightly less than what has been reported on row 302 of the STC-specific ETA 5159.

42. 42 Short-Time Compensation Revisions to Reporting Requirements for Short-Time Compensation Programs Cont.  Addition of single cell to the STC-specific ETA 5159 –New Section D, Workshare Coverage: Number of Participating Employers. Enter the total number of employers who have entered into agreements with the state that would provide for potential STC benefit payments to claimants. If a single employer has multiple agreements with the state, or multiple agreements within an establishment, count that employer only once. –States will need to do an initial inventory, and then update on a monthly basis, as appropriate. There will be no re-reporting for prior periods. –Revised report should be available in state systems by late July –First report with new data due August 15 reflecting activity in July

43. 43 Short-Time Compensation Coming Attractions Additional guidance is forthcoming  Temporary Federal STC program  STC grants for state programs  STC model legislation  STC study/evaluation But until then…

44. 44 Short-Time Compensation Federal Short-Time Compensation Program General Provisions  Temporary program; expires May 24, 2014  States must enter into an Agreement with the Secretary to operate a Federal STC program  Payment of STC is based on the Agreement with the Secretary not state law  State reimbursement for Federal STC is 50% and may be paid up to 104 weeks  Reimbursement for implementation costs of Federal STC will be available through the Supplemental Budget Request grant process

45. 45 Short-Time Compensation Federal Short-Time Compensation Program Cont. STC Employers  Must pay one-half the benefits costs of any STC claimant  The amounts collected must not be used for calculating the employer's contribution rate. STC Claimants  STC payments must not be made to an STC claimant in a benefit year that exceeds 26 times the amount of regular UC payable to the claimant for a week of total unemployment  STC claimants must not be employed on a seasonal, temporary, or intermittent basis

46. 46 Short-Time Compensation Short-Time Compensation Grants Types of Grants  There are two grants available to states: –a grant to implement or improve a state STC program, and –a grant to promote and enroll employers in the STC program.  States may apply for one or both of the grants

47. 47 Short-Time Compensation Short-Time Compensation Grants Cont. STC Grant Requirements  STC law must conform to Section 3306(v), FUTA  STC program may not be subject to discontinuation Application Deadline: December 31, 2014

48. 48 Short-Time Compensation Model Legislative Language  Based on feedback received during the Listening Sessions held on March 19 th and 20 th, the Department is drafting the model legislative language, which will be provided in subsequent guidance.

49. 49 Short-Time Compensation Short-Time Compensation Report STC Report: The Act requires that the Department submit a report to Congress and the President on the implementation of STC. The report must include:  Collection of best practices  Analysis of challenges to state STC enactment  Employer survey Due four years after the date of enactment:  February 22, 2016

50. 50 Short-Time Compensation Technical Assistance  Best practices via Unemployment Insurance Community of Practice (website will be back up June 29 th !)Unemployment Insurance Community of Practice  Upcoming Webinars: Federal STC program, STC grants, and best practices  Regional Offices/National Office support for law changes, questions, and information sharing

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53. 53 Short-Time Compensation Access to Webinar Resources WEBINAR RESOURCES: Recordings and transcripts are available within 2 business days after the event.

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55. 55 Short-Time Compensation www.workforce3one.org For more information about the Workforce Investment System:  Visit www.careeronestop.orgwww.careeronestop.org  Call 1-877-US2-JOBS