UIPL_18-20_Change-1_acc.pdf

ETA Advisory File Text

EMPLOYMENT AND TRAINING ADMINISTRATION ADVISORY SYSTEM U.S. DEPARTMENT OF LABOR Washington D.C. 20210 CLASSIFICATION Unemployment Insurance CORRESPONDENCE SYMBOL OUI DFAS DATE August 12 2020 RESCISSIONS None EXPIRATION DATE Continuing ADVISORY UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 18-20 Change 1 TO STATE WORKFORCE AGENCIES FROM JOHN PALLASCH s Assistant Secretary SUBJECT Amendments to the Coronavirus Aid Relief and Economic Security CARES Act of 2020 Emergency Unemployment Relief for State and Local Governmental Entities Certain Nonprofit Organizations and Federally- Recognized Indian Tribes 1. Purpose. To provide states with instructions for implementing the recent statutory changes to the emergency unemployment relief for state and local governmental entities certain nonprofit organizations and Federally-recognized Indian Tribes provided in the Protecting Nonprofits from Catastrophic Cash Flow Strain Act of 2020 Protecting Nonprofits Act Public Law Pub. L. 116-151 which amends Section 903 i of the Social Security Act SSA 42 U.S.C. 1103 i . Section 903 i SSA was created by Section 2103 of the CARES Act Pub. L. 116-136 . 2. Action Requested. The U.S. Department of Labor s Department Employment and Training Administration ETA requests State Workforce Administrators to provide the information contained in this Unemployment Insurance Program Letter UIPL to appropriate program and other staff in state workforce systems as they implement the unemployment insurance UI -related provisions that respond to the economic effects of the Coronavirus Disease 2019 COVID-19 pandemic. 3. Summary and Background. a. Summary On March 27 2020 Section 903 i was added to the SSA 42 U.S.C. 1103 i with the enactment of the CARES Act providing emergency relief by way of reimbursement for amounts owed by state and local governmental entities certain nonprofit organizations and Federally-recognized Indian Tribes reimbursing employers . On August 3 2020 the President signed into law the Protecting Nonprofits Act. The Protecting Nonprofits Act amends Section 903 i SSA by changing the method of emergency relief provided to reimbursing employers and makes a small number of technical amendments. This UIPL discusses the amendments made by the Protecting Nonprofits Act and provides operating guidance to states. 2 Prior to the enactment of the Protecting Nonprofits Act states were required to use the transfer of federal funds provided for emergency relief under Section 903 i SSA exclusively to reimburse employers for amounts paid in lieu of contributions. Thus after any state liability relief was applied a bill specifying the amount due in lieu of contributions was provided to the employer. The employer must have paid this bill in full after which the state would provide a reimbursement using federal funds in an amount up to 50 percent of the amount of unemployment compensation UC paid by the state to the claimant as described in Sections 4.a. and c. of UIPL No. 18-20 . Under the amendments made by the Protecting Nonprofits Act states are required to use the transfer of federal funds provided under Section 903 i SSA exclusively to reduce the amount required to be paid by reimbursing employers in lieu of contributions. Thus the state may reduce the amount required to be paid in lieu of contributions by up to 50 percent of the amount of compensation paid before providing the employer with a bill for any remaining amount owed. Attachment I provides the statutory language. b. Background Section 2103 of the CARES Act authorized emergency unemployment relief for reimbursing employers. Section 2103 b of the CARES Act added a new Section 903 i SSA 42 U.S.C. 1103 i . The Department issued UIPL No. 18-20 on April 27 2020 to provide guidance to the states on how to implement Section 2103 of the CARES Act. 4. Guidance. The Protecting Nonprofits Act eliminates the requirement described in UIPL No. 18-20 that reimbursing employers must first pay the amount due in lieu of contributions to obtain emergency relief with the federal funds provided under Section 903 i SSA. States must now use the federal funds provided under Section 903 i SSA exclusively to reduce the amount required to be paid by the reimbursing employer in lieu of contributions. This guidance discusses the impact of the changes made in the Protecting Nonprofits Act. Attachment II of this UIPL provides four examples demonstrating the practical effects of such emergency relief to reimbursing employers. Timing of Funds Transfer from the Federal Unemployment Account FUA Section 903 i 1 A SSA 42 U.S.C. 1103 i I A . Section 903 i 1 A SSA authorizes the transfer of funds from FUA to the unemployment fund accounts of the states in the unemployment trust fund. Section 2 a 1 of the Protecting Nonprofits Act amends this section to allow for a transfer of funds with respect to the applicable period instead of only during the applicable period. The applicable period covered by Section 903 i SSA includes weeks of unemployment beginning after March 12 2020 and ending on or before December 31 2020 even if the unemployed individual is not unemployed as a result of COVID-19. However states will likely not be able to process the billing of payments due in lieu of contributions for this entire time period by December 31 2020. This amendment allows the transfer of funds from FUA to occur after December 31 2020 to provide emergency relief for benefits paid during the applicable period. 3 Amount of Funds Transferred from FUA Section 903 i 1 B SSA 42 U.S.C. 1103 i I B . Section 903 i 1 B SSA authorizes transfers from FUA to state unemployment funds for one-half of the amount of compensation paid by the state attributable to services performed in the employ of state and local governmental entities certain nonprofit organizations and Federally-recognized Indian tribes that opt to make payments in lieu of contributions i.e. as noted above reimbursing employers . This process remains unchanged from UIPL No. 18-20. Amount of Emergency Relief Provided to the Employer Section 903 i 1 C SSA 42 U.S.C. 1103 i 1 C . The Protecting Nonprofits Act amends Section 903 i 1 C SSA to read Notwithstanding any other provision of law funds transferred to the account of a State under subparagraph A shall be used exclusively to reduce the amounts required to be paid in lieu of contributions into the State unemployment fund pursuant to such section by governmental entities and other organizations described in section 3309 a of such Code. Emphasis added . When read in conjunction with Section 903 i 1 B SSA states may use the federal funds provided under Section 903 i SSA exclusively to reduce the amounts required to be paid in lieu of contributions for up to one-half of the amount of compensation paid. a. Transition Period for State Administration. The Protecting Nonprofits Act provides states with a choice in processing emergency relief for weeks of unemployment beginning after March 12 2020 and ending before August 3 2020. States may choose to 1 bill reimbursing employers as described in UIPL No. 18-20 for the amount owed in lieu of contributions and then issue reimbursements using the federal funds provided under Section 903 i SSA or 2 use such federal funds to retroactively reduce the amounts required to be paid for such weeks as described in this UIPL. States choosing to issue reimbursements as described in UIPL No. 18-20 should follow the guidance provided in UIPL No. 18-20 as it relates to processing financial transactions Section 4.c. and reporting Section 4.g. for such weeks of unemployment. For all weeks of unemployment beginning on or after August 3 2020 states must use the federal funds provided under Section 903 i SSA exclusively to reduce the amounts required to be paid in lieu of contributions as described in this UIPL. b. Update on Processing Financial Transactions. Monthly transfers to the state unemployment fund accounts will represent 50 percent of the benefit disbursements for state and local governmental entities certain nonprofit organizations and Federally- recognized Indian tribes reported on lines 33 34 and 35 of the ETA 2112 report. Upon receipt of the report the Department will certify to the Secretary of Treasury for the transfer of amounts from FUA to the unemployment fund account of the state in the unemployment trust fund. 4 Withdrawal from the state unemployment account will be accomplished using the transaction EMERGENCY US RELIEF account on Treasury s Automated Standard Application for Payments ASAP system. Upon expiration of the applicable period for the provisions of Section 903 i SSA and state reconciliation of authorized amounts unused amounts of funding transferred remaining in state accounts will be transferred back to the FUA. c. Effect of State Liability Relief Provisions. As described in Section 5.b. of UIPL No. 21-80 Liability or non-liability of reimbursing employers is to be determined under principles as applied in the State law of attribution of benefits to service in the employ of particular reimbursing employers as provided in Section 3309 a 2 of the Federal Unemployment Tax Act FUTA . Such principles may be analogous to noncharging but they should be implementations under the State law of Section 3309 a 2 . State liability relief effectively reduces the amounts required to be paid on a state-by-state basis because of the fact that Section 3309 a 2 FUTA determines the amount of UC attributable to reimbursing employers under state law not as the full UC paid under this UIPL. As stated earlier federal funds provided under Section 903 i SSA shall be used exclusively to reduce the amounts required to be paid in lieu of contributions for up to one-half of the amount of compensation paid. As under the pre-amendment version of Section 903 i SSA states that choose to relieve employers of more than 50 percent of the amount owed will be required to return the balance of the federal funds to FUA. We encourage states to contact ETA through the covid-19 dol.gov inbox with a copy to the appropriate ETA Regional Office for technical assistance as they consider any changes. d. Federal Government as an Employer. As noted in UIPL No. 18-20 the Federal Government is not an employer included in Section 3309 a FUTA 26 U.S.C. 3309 a and therefore is not included in the emergency relief under Section 903 i SSA. Thus Section 903 i SSA has no impact on claims under the Unemployment Compensation for Federal Employees UCFE and Unemployment Compensation for Ex- Servicemembers UCX programs. e. Update on the Applicability to Other UI Provisions in the CARES Act. As noted in UIPL No. 18-20 payments under the federal programs created by the CARES Act are not covered under this provision because those amounts are not owed by the reimbursing employer. These include Pandemic Unemployment Assistance PUA under Section 2102 of the CARES Act Federal Pandemic Unemployment Assistance FPUC under Section 2104 of the CARES Act and Pandemic Emergency Unemployment and Compensation PEUC under Section 2107 of the CARES Act. These programs do not result in assessments of payments due in lieu of contributions from employers and thus payments under these programs are not subject to emergency relief under Section 903 i SSA. 5 The Protecting Nonprofits Act provides for federal funds to be used directly by the states to reduce the amounts required to be paid by reimbursing employers in lieu of contributions rather than as a reimbursement to such employers. Therefore the applicability of Section 903 i SSA to other UC provisions in the CARES Act is updated from the guidance previously provided in UIPL No. 18-20. To the extent that payment of the first compensable week of regular UC or payment of Short-Time Compensation STC results in the assessment of a payment due in lieu of contributions under state law the amount due may be reduced using federal funds provided under Section 903 i SSA. f. Update on the Applicability to Federal Share of Extended Benefits EB . As noted in Section 4.f. of UIPL No. 24-20 EB costs attributable to state and local governmental entities and Federally-recognized Indian tribes are not sharable and thus not eligible for federal funding under Section 4105 of the Families First Coronavirus Response Act as set out in Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 EUISAA Pub. L. 116-127 . However to the extent that payment of EB results in the assessment of a payment due in lieu of contributions under state law the amount due may be reduced using federal funds provided under Section 903 i SSA. As noted in Section 4.d. of UIPL No. 24-20 EB costs attributable to 501 c 3 nonprofit organizations are sharable as defined in Section 204 of the Federal-State Extended Unemployment Compensation Act of 1970 EUCA and thus a state may qualify for 100 percent federal funding under EUISAA for the weeks of EB attributable to such service. See UIPL No. 13-20 for additional information on 100 percent federal funding of EB. g. Reporting. States should report the amount of the federal funds provided under Section 903 i SSA that are transferred into the state unemployment account on columns C and E of line 15 in the ETA 2112 report. 5. Inquiries. States should direct inquiries to the covid-19 dol.gov and copy the appropriate ETA Regional Office. 6. References. Protecting Nonprofits from Catastrophic Case Flow Strain Act of 2020 Protecting Nonprofits Act Pub. L. 116-151 Coronavirus Aid Relief and Economic Security CARES Act Pub. L. 116-136 including Title II Subtitle A Relief for Workers Affected by Coronavirus Act Families First Coronavirus Response Act Pub. L. 116-127 including Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 EUISAA Section 903 Social Security Act SSA 42 U.S.C. 1103 Federal-State Extended Unemployment Compensation Act of 1970 EUCA 26 U.S.C. 3304 note Section 3309 Federal Unemployment Tax Act FUTA 26 U.S.C. 3309 6 UIPL No. 24-20 Temporary Changes to the Federal-State Extended Benefits EB Program in Response to the Economic Impacts of the Coronavirus Disease 2019 COVID-19 Pandemic Emergency issued May 14 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 7132 UIPL No. 18-20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Emergency Unemployment Relief for State and Local Governmental Entities Certain Nonprofit Organizations and Federally-Recognized Indian Tribes issued April 27 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 5893 UIPL No. 13-20 Families First Coronavirus Response Act Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 issued March 22 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 8634 and UIPL No. 21-80 Secretary s Decision on Attribution of Benefit Liability to Reimbursing Employers in Proceedings as to Delaware New Jersey and New York issued February 29 1980 https oui.doleta.gov dmstree uipl uipl80 uipl 2180.htm.1 7. Attachment s . Attachment I Statutory Language of the Protecting Nonprofits from Catastrophic Cash Flow Strain Act of 2020 Pub. L. 116-151 . Attachment II Examples of the Impact of Section 903 i of the Social Security Act SSA as amended by the Protecting Nonprofits from Catastrophic Cash Flow Strain Act of 2020 Pub. L. 116-151 . 1 We note that the link to this document shows an expiration date of February 28 1981. However per Training and Employment Notice TEN No. 09-19 issued November 15 2019 this remains an active UIPL.