UIPL 01-25.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 October 3 2024 RESCISSIONS None EXPIRATION DATE September 30 2025 ADVISORY TO UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 01-25 STATE WORKFORCE AGENCIES FROM JOS JAVIER RODR GUEZ Assistant Secretary SUBJECT Implementation of Sequestration under the Budget Control Act of 2011 BCA for mandatory Unemployment Insurance UI Programs for Fiscal Year FY 2025 1.Purpose. To advise states of sequestration rules for FY 2025 to ensure State Workforce Agencies SWAs apply these rules to mandatory UI programs. 2.Action Requested. The Employment and Training Administration ETA advises State Administrators to provide this guidance to appropriate staff. 3.Summary and Background. a.Summary - As required by the sequestration order and set out in the Office of Management and Budget OMB Report to the Congress on the Balanced Budget and Emergency Deficit Control Act BBEDCA 251A Sequestration for FY 2025 published on March 11 2024 a 5.7 percent reduction in non-exempt mandatory programs is effective as of October 1 2024 for FY 2025. This rate reflects no change from the rate of sequestration in effect in FY 2024. b.Background - The BCA amended the BBEDCA of 1985 to require reductions in budgetary authority known as sequestration beginning on January 2 2013 unless Congress passed and the President signed a bill that reduced the deficit by at least 1.2 trillion over 10 years. Such action did not occur and sequestration rules have been in effect since FY 2013. 4.Sequestration in FY 2025. a.Impact on the Mandatory UI Programs. Below is a list of programs projects and activities PPAs related to the mandatory UI programs and the applicability of sequestration to each PPA. 2 The following PPAs are exempted from sequestration 1 Unemployment Compensation paid by a state from its account in the Unemployment Trust Fund 2 Title XII Social Security Act advances to states 3 Unemployment Compensation for Federal Employees and Unemployment Compensation for Ex-Servicemembers and 4 Benefit expenses attributable to PPAs enacted through Pub. L. 116-136 the Coronavirus Aid Relief and Economic Security CARES Act as amended see explanation in paragraph b. below . Note The Federal Emergency Management Agency advises that there is no impact on Disaster Unemployment Assistance administrative funding or payment. Sequestration applies to the following PPAs 1 The Federal share of Extended Benefits EB 2 Trade Adjustment Assistance TAA funds appropriated under the Federal Unemployment Benefits and Allowances Account and 3 Administrative expenses attributable to PPAs enacted through Pub. L. 116-136 the CARES Act as amended. b. Impact of Sequestration on Benefit Costs for CARES Act PPAs. As stated above the sequestration order set out in OMB s Report to Congress requires a 5.7 percent reduction to budget authority approved for FY 2025. The PPAs established through enactment of the CARES Act as amended expired September 6 2021. Although residual benefit payments will continue to be issued to claimants beyond the expiration of these programs the Department of Labor Department in consultation with OMB has determined these residual benefit payments to be obligations incurred when the week of unemployment was experienced. Therefore residual benefit payments for these programs will continue to be charged to the FY 2021 budget authority and will not be subject to the 5.7 percent sequestration reduction. c. Impact of Sequestration on Administrative Costs for CARES Act PPAs. The administrative expenses to be paid in FY 2025 regarding the temporary Unemployment Compensation programs created in the CARES Act as amended are treated differently than benefit costs paid in FY 2025. Administrative costs are deemed to be incurred when staff processes the claims workloads. Accordingly administrative costs for CARES Act programs will require new budget authority for FY 2025 and will be subject to a 5.7 percent reduction. The National Office will apply the sequestration reduction to amounts prior to issuing the administrative funding to state grants. d. Impact of Sequestration on EB. The permanent 50 percent Federal share of EB payments authorized in the Federal-State Extended Unemployment Compensation Act EUCA of 1970 remains subject to sequestration. The applicable percentage of 3 sequestration reduction to the permanent 50 percent Federal share of EB costs for FY 2025 is 5.7 percent starting with weeks of unemployment ending on October 5 2024 and ending with weeks of unemployment ending on September 27 2025. Unless a state amends its law to reduce EB as explained below a reduction in the permanent Federal share of EB due to sequestration means the state becomes responsible for paying the remaining EB share from its own funds i.e. the amount represented by the 5.7 percent reduction to the permanent 50 percent Federal share provided under EUCA. Authority for States to Reduce EB Weekly Benefit Amounts due to Sequestration Under EUCA the EB weekly benefit amount WBA is the amount of regular compensation including dependents allowances under the State law payable to such individual for such week for total unemployment. Section 202 b 2 EUCA. However section 256 h 2 of BBEDCA 2 U.S.C. 906 i 2 permits states to reduce EB WBAs if the Federal share of EB costs is reduced under a sequestration order. That section provides that 1 A State may reduce each weekly benefit payment made under the Federal- State Extended Unemployment Compensation Act of 1970 for any week of unemployment occurring during any period with respect to which payments are reduced under an order issued under section 904 of this title by a percentage not to exceed the percentage by which the Federal payment to the State under section 204 of such Act is to be reduced for such week as a result of such order. 2 A reduction by a State in accordance with subparagraph A shall not be considered as a failure to fulfill the requirements of section 3304 a 11 of Title 26. As a condition of reducing EB WBAs state law must authorize the reduction in EB WBAs as specified in the BBEDCA. Note that actual reductions in Federal spending could not be achieved if WBAs are reduced without also reducing individuals remaining entitlement or maximum benefit amount MBA for EB. For this reason state law must also provide for reductions in EB remaining entitlement and MBA if it provides for reducing EB WBAs. Any state amending its law to provide for EB reductions due to sequestration must provide notice to claimants and an opportunity to appeal the calculation of the amounts. The notice should also inform claimants that appeal of the sequestration reduction itself will likely not succeed as sequestration is mandated by Federal law. Any state considering changing its state law to reduce the WBA is encouraged to work closely with ETA to ensure conformity with Federal UC law. e. Impact of Sequestration on TAA. The applicable percentage of reduction to TAA is 5.7 percent in FY 2025. As in previous fiscal years using the flexibility under BBEDCA the 4 Department intends to apply the full TAA Program sequestration to the funding for training and other activities which are the funds available for training employment and case management services out-of-area job search relocation allowances and related administrative expenses. The reductions will not be applied to Trade Readjustment Allowances Reemployment Trade Adjustment Assistance or Alternative Trade Adjustment Assistance available under the TAA Program. 5. Inquiries. Please direct inquiries to the appropriate ETA Regional Office. 6. References. Federal-State Extended Unemployment Compensation Act of 1970 Federal-State EUCA Pub. L. 91-373 Balanced Budget and Emergency Deficit Control Act of 1985 BBEDCA Pub. L. 99- 177 as amended by the Budget Control Act of 2011 Budget Control Act of 2011 BCA Pub. L. 112-25 Middle Class Tax Relief and Job Creation Act of 2012 Pub. L. 112-96 American Taxpayer Relief Act of 2012 ATRA Pub. L. 112-240 Families First Coronavirus Response Act of 2020 Pub. L. 116-127 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Pub. L. 116- 136 Consolidated Appropriations Act 2021 Pub. L. 116-260 American Rescue Plan Act of 2021 Pub. L. 117-2 Unemployment Insurance Program Letter UIPL No. 07-24 Implementation of Sequestration under the Budget Control Act of 2011 BCA for Mandatory Unemployment Insurance Programs for Fiscal Year FY 2024 issued January 25 2024 https www.dol.gov agencies eta advisories uipl-07-24 UIPL No. 04-23 Implementation of Sequestration under the Budget Control Act of 2011 BCA for Mandatory Unemployment Insurance Programs for Fiscal Year FY 2023 issued March 22 2023 https www.dol.gov agencies eta advisories unemployment-insurance-program-letter-no- 04-23 Office of Management and Budget OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2025 dated March 11 2024 and Office of Management and Budget OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2024 dated March 13 2023. 7. Attachments. None.