UIPL_21-20_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 DUIO DATE May 3 2020 RESCISSIONS None EXPIRATION DATE Continuing ADVISORY UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 21-20 TO STATE WORKFORCE AGENCIES FROM JOHN PALLASCH s Assistant Secretary SUBJECT Coronavirus Aid Relief and Economic Security CARES Act of 2020 Short-Time Compensation STC Program Provisions and Guidance Regarding 100 Percent Federal Reimbursement of Certain State STC Payments. 1. Purpose. To provide states with an overview of STC program provisions in Title II Subtitle A of the CARES Act Public Law Pub. L. 116-136 and to provide guidance regarding 100 percent federal reimbursement of certain state STC payments. 2. Action Requested. The U.S. Department of Labor s Department Employment and Training Administration ETA requests that State Workforce Administrators provide the information in this Unemployment Insurance Program Letter UIPL and all attachments to appropriate program and other staff in state workforce systems as they implement the Unemployment Insurance UfF-related provisions that respond to the economic effects of the Coronavirus Disease 2019 COVIa-19 . 3. Summary and Background. a. Summary On March 27 2020 the President signed into law the CARES Act which was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways. The CARES Act includes the Relief for Workers Affected by Coronavirus Act set out in Title II Subtitle A. The UI-related provisions are summarized in UIPL No. 14-20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Summary of Key Unemployment Insurance UI Provisions and Guidance Regarding Temporary Emergency State Staffing Flexibility issued on April 2 2020. Section 2108 of the CARES Act provides for temporary 100 percent federal financing of STC payments in a state with a STC program as defined in section 3306 v of the Federal Unemployment Tax Act FUTA in its law whether that program is new or pre- existing. Section 2108 also makes a technical correction to section 3306 v 6 FUTA by striking Workforce Investment Act of 1998 and inserting Workforce Innovation and Opportunity Act. Section 2109 provides for a state without a qualifying STC 2 program in its law to enter into an agreement with the Secretary of Labor Secretary to operate a temporary federal STC program for which the state will receiv e federal reimbursement equaling one half of the benefit costs . Section 2110 provides 100 million in grants to support states in implementing and administering STC programs in their laws and promoting and enrolling employers including conducting outreach to employers to promote the use of STC . Section 2111 provides that the Depar tment will provide assistance and guidance to states implementing STC programs. This UIPL provides states with an overview of the STC program provisions in the CARES Act and guidance regarding 100 percent federal reimbursement of certain state STC payments . As explained in UIPL No. 15 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Federal Pandemic Unemployment Compensation FPUC Program Operating Financial and Reporting Instructions issued on April 4 2020 individuals who are r eceiving STC payments are entitled to receive an additional 600 per week from the Federal Pandemic Unemployment Compensation program with respect to weeks of unemployment ending on or before July 31 2020. b. Background The STC program also known as worksharing or shared work is a lay -off aversion program in which an employer under a state -approved plan reduces the hours for a group of workers and these workers in turn receive a reduced unemployment benefit payment. In the context of re -opening businesses closed temporarily by a pandemic STC can also serve as a means of bringing most or all of a temporarily laid - off workforce back to the job even if social -distancing measures a decline in business or other factor s prevent operating at full staffing levels full time. Specifically this benefit may be made available to individuals returning to work with reduced hours who worked for the employer prior to the temporary lay -off due to COVID -19. This program preserves employees jobs and employers trained workforce s during a disruption to the firm s regular business activity by reducing hours of work for an entire group of affected employees rather than by laying off some employees while others continue to work full time. The STC benefit payment cushions the adverse effect of the reduction in business activity on workers and by maintaining their connection to their employers ensures that these workers will be available to resume prior employment when business demand increases. The Middle Class Tax Relief and Job Creation Act of 2012 Pub. L. 112 -96 included several STC -related provisions. UIPL No. 22 -12 Short -Time Compensation Provision s in the Middle Class Tax Relief and Job Creation Act of 2012 issued on June 18 2012 provides an overview of these provisions. UIPL No. 22 -12 Change 1 issued on December 21 2012 provides states with model legislative language that conforms to the new definition of STC in sect ion 3306 v FUTA 26 U.S.C. 3306 v . UIPL No. 22 - 12 Change 2 issued on February 7 2014 informs states that the Secretary approved nine optional provisions under section 3306 v 10 FUTA which provide states some addi tional flexibilities regarding their STC programs . For additional information p lease see materials on the STC landing page on WorkforceGPS at https stc.workforcegps.org . 3 Employer participation in an STC program is voluntary. An employer must submit a written plan to the state unemployment compensation UC agency which is subject to the state s approval. The employer s plan must specify the percentage reduction in the workweek for affected employee s and be consistent with employe r obligations under applicable f ederal and state laws. Employers must maintain to the same extent as other employees not participating in the STC program health benefits and retirement benefits under Sections 414 i and j of the I nternal Revenue Code IRC 26 U.S.C. 414 i and j for employees in the affected unit despite the reduced hours. Employees must be available for their workweek to meet the able and available for work requirements. The Department addressed permissible flexibility for states under existing federal law in response to the COVID -19 pandemic in UIPL No. 10 -20 Unemployment Compensation UC for Individuals Affected by the Coronavirus Disease 2019 COVID -19 issued on Mar ch 12 2020. This UIPL reminded states that STC can be an important resource for employers whose businesses temporarily decline. The President signed the Families First Coronavirus Response Act Pub. L. 116 -127 on March 18 2020 which includes the Emerg ency Unemployment Insurance Stabilization and Access Act of 2020 EUISAA set out in Division D. Section 4104 of EUISAA require d the Department to provide technical assistance and guidance to support states in establishing implementing and improving emp loyer awareness of the STC program however Section 4104 of EUISAA was repealed and superseded by Section 2111 of the CARES Act. Importance of Program Integrity. The programs and provisions in the CARES Act operate in tandem with the fundamental eligibility requirements of the federal -state UI program which remain in force . In addition some of the CARES Act programs include new eligib ility requirements that sta tes will need to apply. For example individuals are only entitled to benefits if they are no longer working through no fault of their own and are able and available to work. States play a fundamental role in ensuring the integrity of the UI program. While states have been provided some flexibilities as a result of COVID -19 those flexibilities are generally limited to dealing with the effects of COVID -19 as discussed in UIPL Nos. 10 -20 and 13 -20. States must ensure that individuals only receive b ene fits in accordance with the statutory provisions in the CARES Act . Further quitting work without good cause to obtain benefits under the regular UC program or any other UI program including those authorize d in the CARES Act is fraud. The Department i s actively working with states receiving funding under the CARES Act to provide benefits only to those who are entitled to such benefits. The Department will also be actively engaged with its Office of the Inspector General OIG to ensure program integrity. The Act includes an appropriation of 26 million to the Department s OIG to carry out audits investigations and other oversight act ivities related to states adherence to existing UI laws and policies as well as to the provisions of the CARES Act. 4 4. Temporary 100 Percent Federal Financing of Certain STC Payments in States with Programs in Law . A. In General . Section 21 08 of the CARES Act provides for 100 percent federal reimbursement of a state s STC benefit cost s if the state s STC law conforms to the program definition in Section 3306 v FUTA 26 U.S.C. 3306 v . A r eimbursement is av ailable for weeks of unemployment beginning on or after the date of enactment of the CARES Act March 27 2020 and ending on or before December 31 2020. If a state which does not already operate an STC program enacts a law providing for the pa yment of STC under a program that meets the defini tion in section 3306 v FUTA 26 U.S.C. 3306 v the s tate will be eligible for reimbursement of STC payments made with respect to weeks of unemployment beginning on or aft er the effective date of such enactment through weeks of unemployment ending on or before December 31 2020. To qualify for reimbursement of STC costs paid under state law pursuant to Section 2108 of the CARES Act the state s STC program is not required to be permanent. However a state will no t be eligib le for an STC grant under Section 2110 of the CARES Act if its STC law is subject to discontinuation . B. Limitations on Reimbursement . Section 2108 a 3 of the CARES Act sets out two limitat ions on reimbursement of state STC costs. First no reimbursement will be made when STC is paid to an individual during a benefit year in an amount that exceeds 26 times the amount of regular UC including dependents allowances payable for a week of total unemployment to such i ndividual . Second no reimbursement will be made for payment of STC if the individual is employed by the employer on a seasonal temporary or intermittent basis as defined under state law. This limitation does not include individuals normally employed on a part -time basis whose hours are reduced under an STC plan. Consistent with UIPL No. 22 -12 i f state law does not include definitions of these terms states will use the following definitions for purposes of determining which state STC benef its are subject to 100 percent f ederal reimbursement Seasonal Employment Employment with an employer that experiences at least a 20 percent difference between its highest level of employment during a particular season and its lowest level of employment during the off -season in each of the previous three years as reported to the state agency and or employment on a temporary basis by an employer that need s extra help during a particular season e.g. holiday season summer season etc. . Temporary Employment Employment where in an employee is expected to remain in a position for only a limited period of time and or is hired by a temporary agency to fill a gap for a limited period of time in an employer s workforce. 5 Intermittent Employment Employment that is not continuous but may consist of periodic intervals of weekly work and intervals of no weekly work. C. Charging of Federally Reimbursed STC Benefits . State laws provide for the financing of UC payments including STC in two ways i experience rated state unemployment taxes and ii for certain employers only reimbursement of benefit costs payment in lieu of contributions attributable to service with the employer. States typically would be required to charge STC benefit costs because e mployers participating in state STC programs are directly causing unemployment or STC payments are attributable to service with the employer by reducing the hours their employees work . However b ecause the associated STC costs are being 100 per cent reimbursed by the federal government the state may if permissible under state law choose not to charge or not to require payment in lieu of contributions for STC payments that are subject to 100 percent reimbursement by the federal government. W hen the 100 percent federal reimbursement ends states must resume applying their charging provisions to STC payments. The federal government will not reimburse states for payment s of STC in excess of 26 times the amount of regular compensation payable for a week of total unemployment or to individuals employed by a participating employer on a seasonal temporary or intermittent basis. Accordingly the state must consistent its own state law s charge the employer or require payment in lieu of contributions for such benefit amount s or if the state determines it is appropriate relieve employers from charging or from making payments in lieu of contributions if permissible und er its state law . Note that the 600 FPUC payment on top of the STC benefits is not considered when calculating payments for STC in excess of 26 times the amount of regular compensation payable for a week of total unemployment for purposes of the amount o f the federal reimbursement. When considering whether or not to relieve employers from charging or making payments in lieu of contributions if permissible under state law states should take into consideration the potential effect on the solvency of the ir accounts in the Unemployment Trust Fund UTF and for states that are receiving advances to pay benefits the additional advances and associated interest payments that may result. In addition as the schedule of state unemployment tax rates that is ef fective in a year is typically based on the balances in states accounts in the UTF states should be mindful that this decision may also impact the schedule of taxes that becomes effective in any given year. If s tate s charge or require payment in lieu of contributions STC benefits they must apply the provisions of state law for regular UC to all charges and payment in lieu of contributions . D. Agreement with the Department . To receive reimbursement pursuant to Section 2108 of the CARES Act each qualifying state must enter into a new agreement with the Secretary that describes the responsibilities of the parties . The agreement is included as Attachment II of this UIPL . This agreement may be signed by the appropriate state official with authority under state law to enter into an agreement with the Department . The date the agreement is signed does not impact the beginning of the period of time for which reimbursement will be made available though it does determine when the first payment will be accessible in the 6 Payment Management System PMS for a state s drawdown . Reimbursement s are av ailable for weeks of unemployment beginning on or after the date of enactment of the CARES Act March 27 2020 or the effective date o f a state enact ment of an STC program if one did not exist prior to the enactment of the CARES Act and ending on or before December 31 2020. Each state entering into an agreement with the Department will receive a Notice of Award NOA from the ETA Grant Officer for funding received as reimbursement for eligible STC payments made under state law through the Fiscal Year FY 2020 Annual Funding Agreement for the Unemployment Compensation UC programs covered under provisions of Subtitl e A of Title II of the CARES Act . States planning to enter into an agreement for reimbursement of state STC b enefit costs may contact the appropriate Regional Office to request a copy of the agree ment that has been signed by the Assistant Secretary for E mployment and Training before obtaining signatures from the ap propriate state officials. The agreement signed by both parties must be submitted via email to the following address COVID -19 dol.gov . E. Termination of Agreement . Either party upon 30 days writt en notice may terminate th is agreement. The Department also reserves the right to terminate this agreement if it determines that the state does not perform all of the functions and duties under the agreement in accorda nce with Section 2108 of the CARES Act the terms of the agreement operating instructions and or guidance issued by the Department. If the agreement is terminated no federal reimbursement of state STC payment may be made with respect to weeks of unempl oyment that begin after the date the termination of the agree ment is effective. However federal reimbursement of state STC payments is available with respect to weeks of unemployment ending on or before such termination date. F. Processing Financial Transactions . Eligible reimbursements for state STC benefit costs under Section 2108 of the CARES Act will be provided to each qualifying state on a monthly basis. At the beginning of each month estimated state STC benefit payments eligible for reimburs ement taking into account surpluses or shortfalls from prior months allocations will be made available in the PMS for state drawdown. After the ag reement discussed in subsection E is signed the first payment will be made available in the PMS in an amount equal to the estimated eligible state STC benefit payments for weeks of unemployment beginning on or after the date of enactment March 27 2020 through the month following the mont h in which this guidance is issued. Estimates for eligible amounts needed for any month will generally be equal to state STC amounts eligible for reimbursement in the mos t recent month for which data are reported on the ETA 5159 report adjusted for any excess or shortfall provided in prior months for which actual data available are above or below that month s allocation. The Grant Officer will assign a separate line on the UC program NOA allowing for issuance of obligational authority for state STC ben efit funds and a separate sub -account for STC will be established in the PMS for states to drawdown reimbursements of state STC benefit funds. This will function identically to benefit funding for Trade Readjustment Assistance and Wage Insurance benefits . 7 Funds should be withdrawn from the PMS as needed in compliance with C ash M anagement Improvement Act of 1990 CMIA requirements to meet state STC benefit expenses. Any deposits to state accounts in the UTF of previously disbu rsed STC benefits eligible for federal reimbursement should be communicated to the Bureau of Public Debt as a credit to State UI Withdrawal . An offsetting reduction to net UI unemployment insurance Benefits reported on the ETA 2112 line 31 column F should accompany such credits . This would effectively reverse the state transactions involving funds previously withdrawn and disbursed for STC benefits. G. Reporting . The ETA 5159 report for STC has one additional cell that must be reported. This cell describes the n umber of employers with STC agreements Section D cell C10 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. Each state recipient of STC reimbursement funding must submit a Quarterly Financial Report ETA 9130 containing information on obligations and expenditures of such funds. 5. Temporary Federal STC Programs Operated Under Agreement with Secretary . Section 21 09 of the CARES Act permits a state that does not have the statutory authority to operate an STC program under its law to enter into an agre ement with the Secretary to operate a temporary federal STC program which provid es federal benefits as opposed to state funded benefits that conforms to the requirements in section 3306 v FUTA 26 U.S.C. 3306 v . An agreement to operate a temporary federal STC program applies to weeks of unemployment beginning on or after the date of the signed agreement. Authority to operate the temporary f ederal STC program expires on December 31 2020. The state or the Department may terminate the agreement with 30 days advance written notice . If an STC program is later implemented under state law the state will no longer be eligible for reimbursements of benefits paid under the federal STC program wi th respect to weeks of unemployment beginning after the effective date of th e law authorizing the state STC program . Under the temporary f ederal program employer participation is voluntary. Under a temporary federal STC program agreement STC payments to an individual in a benefit year may not exceed 26 times the amount of regular UC payable for a week of total unemployment to such individual. In addi tion an STC plan approved by a state operating a temporary federal STC program cannot pro vide STC payments to individuals employed on a seasonal temporary or intermittent basis. Employers are required to pay the state an amount equal to one -half of the STC benefits paid to their employee s who participate in the temporary federal STC program. The a mounts collected from em ployers under this program must be deposited in the state s unemployment fund and may not be used for calculating the employer s contribution rate . Because t his payment by the employer is a reimbursement for f ederal STC benefits it may not be credited to the employer s reserve or applied as a voluntary contribution. 8 The federal government will reimburse the state for the remaining one -half of f ederal STC benefit costs and for all administrative expenses associated with operating th is f ederal STC program . Additional guidance providing operating instructions for this program is forthcoming. States interested in operating a temporary STC federal program may contact the appropriate ETA Regional Office to initiate discussions about the requirements. 6. Grants for State STC Programs . Section 2110 of the CARES Ac t provides up to 100 million for grants to states with STC programs in their laws that conform to the requirements of section 3306 v FUTA 26 U.S.C. 3306 v . Grants are available for the implementation or improved administration of an STC program and for promotion and enrollment of employers in an STC program. The Secretary may use up to 0.25 percent of the 100 million to provide outreach and share best practices of STC programs. The deadline to apply for these grants is December 31 2023. Each state s share of the STC grants is calculated as provided under Section 2110 b 1 of the CARES Act To be equal to the amount obtained by multiplying 100 000 000 less the amount used by the Secretary under subsection e by the same ratio as would apply under subsection a 2 B of section 903 of the Social Security Act 42 U.S. C. 1103 for purposes of determining such State s share of any excess amount as described in subsection a 1 of such section that would have been subject to transfer to State accounts as of October 1 2019 under the provisions of subsection a of su ch section. This means each state s share is based on its proportionate share of FUTA taxable wages multiplied by the 10 0 000 000 less up to 0.25 percent . Attachment III contains a table of each state s potential share of the STC grant. One -third of a state s share is available for grants for implementation or improved administration of an STC program. The remaining two -thirds of a state s share is available for grants for the promotion and enrollment of employers in a conforming STC program. A state whose UC law is not certified under Section 3304 FUTA 26 U.S.C. 3304 or under Section 303 SSA 42 U.S.C. 503 is not eligible to receive a grant. Also to qualify for a grant a state s STC program may not be subject to discontinuation. If a state has a new STC enactment it must be effective within 12 months of the date of the Secretary s certification to the Treasury for transfer of grant funds to the state s account in the U TF . States will be notified within 30 days of receipt of a co mplete application whether they have been approved for a grant. If approved the Secretary of Treasury will transfer the grant amount to the state s account in the UTF within seven days of receipt of the Department s certification. 9 The Secretary will recoup any grant awarded to a state if during the five -year period beginning after the first date a grant was awarded to the state the state terminat es its STC program or fails to me et the requirements regarding the STC program . Addit ional guidance about these grants includi ng the eligibility criteria and application requirements is forthcoming. States must submit applications to the Secretary at such time and in such manner and form as the Secretary may require. States interested in applying for STC grants may contact the appropriate ETA Regional Office to initiate discussions about the requirements. 7. Assistance and Guidance in Implementing Programs . Section 2111 of the CARES Act requires the Secretary to assist states in establish ing and implementing STC programs that conform to the requirements of section 3306 v FUTA 26 U.S.C. 3306 v . This includes 1 develop ing model legislative language or disseminating existing model legislative language that may be used by states to enact such programs 2 providing technical assistance and guidance in developing enacting and implementing such programs and 3 establishing reporting requirements for states including the number of estimated averted layo ffs and the number of participating employers and workers. This model legislative language and guidance must allow sufficient flexibility by states and participating employers while ensuring accountability and program integrity. In addition the Secreta ry must consult with employers labor organizations state workforce agencies and other program experts regarding the model legislative language and guidance if prior model legislative language had not been developed through such a consultative process . In 2012 the Department developed model legislative language through a consultative process which also satisfies the requirement to issue model legislation in the CARES Act. UIPL No. 22 - 12 provides information about the Department s consultations with employers labor organizations state workforce agencies and other program experts about STC model legislative language guidance and reporting. UIPL No. 22 -12 Change 1 provides model legi slative language for states to use for their STC programs which includ es some optional provisions that offer states flexibility and an opportunity to improve program integrity. UIPL No. 22 -12 Change 2 provides states additional options for their STC pro grams. States interested in amending their laws to provide for an STC program should review the model legislative language and optional provisions in these UIPLs. Links to these UIPLs are provided in the References section below. In addition states may contact the appropriate ETA Regional Office to initiate discussions about the requirements of section 3306 v FUTA and any additional permissible flexibilities they may be considering for their STC programs. 8. Inquiries . States should direct inquiries to COVID -19 dol.gov and copy the appropriate ETA Regional Office. 9. References . Coronavirus Aid Relief and Economic Security CARES Act Pub. L. 116 -136 including Title II Subtitle A Relief for Workers Affected by Coronavirus Act 10 Families First Coronavirus Response Act Pub. L. 116 -127 including Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 EUISAA Middle Class Tax Relief and Job Creati on Act of 2012 Pub. L. 112 -96 Section s 3303 a 3306 v and 3309 a Federal Unemployment Tax Act FUTA 26 U.S.C. 3303 3306 and 3309 Section s 303 and 903 a Social Security Act SSA 42 U.S.C. 503 and 1103 Sections 414 i and j Internal Revenue Code IRC 26 U.S.C. 414 UIPL No. 15 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Federal Pandemic Unemployment Compensation FPUC Program Operating Financial and Reporting Instructions issued on April 4 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 9297 UIPL No. 14 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Summary of Key Unemployment In surance UI Provisions Regarding Temporary Emergency State Staffing Flexibility issued on April 2 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 3390 UIPL No. 13 -20 Families First Coronavirus Response Act Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 issued on March 22 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 8634 UIPL No. 10 -20 Unemployment Compensation UC for Individuals Affected by the Coronavirus Disease 2019 COVID -19 issued on March 12 2020 https wdr.dole ta.gov directives corr doc.cfm DOCN 8893 UIPL No. 22 -12 Change 2 Short -Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012 issued on February 7 2014 https wdr.doleta.gov directives corr doc.cfm DOCN 7832 UIPL No. 22 -12 Change 1 Short -Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012 issue d on December 21 201 2 https wdr.doleta.gov directives corr doc.cfm DOCN 5754 and UIPL No. 22 -12 Short -Time Compensation Provisions in the Middle Class Tax Relief and Job Creation Act of 2012 issued on June 18 2012 https wdr.doleta.gov directives corr doc.cfm DOCN 9382 . 10. Attachments . Attachment I Statutory Language of Title II Subtitle A Sections 2108 -2111 of the Coronavirus Aid Relief and Economic Security CARES Act Attachment II Text of Agreement Attachment I II Grants f or STC Programs Amount