Background: The criteria for establishing the rate of interest to be charged on Title XII advances during any calendar year are in Section 1202(b)(4) of the Social Security Act. Calendar Year 1993 Interest Rate: The U.S. Treasury Department has announced that the rate of interest to be charged for calendar year 1993 is 7.45 percent. Action Required: SESAs anticipating the need for interest-bearing Title XII advances during 1993 should take necessary action to establish a mechanism to provide funds for the payment of such interest in accordance with the provisions of Section 1202(b) of the Social Security Act, and subject to the limitations in Sections 303(c)(3) and 1202(b)(5) of the Social Security Act and Section 3304(a)(17) of the Federal Unemployment Tax Act.

Reference: Section 2, Public Law (P.L.) 103-387, Social Security Domestic Employment Reform Act of 1994. Background: On October 22, 1994, Congress enacted P.L. 103-387 which changed the Social Security, Medicare and Federal Unemployment Tax Act (FUTA) reporting and payment requirements for employers of domestic employees. The P.L. 103-387 (also known as the "Nanny Tax Law"): (A) replaces the quarterly reporting and payment requirements of Social Security and Medicare taxes with annual reporting and payment on the employers' personal Federal income tax return; (B) raises the domestic workers' earnings threshold for reporting and paying Social Security and Medicare taxes from $50 in a quarter to $1,000 per year, retroactive to January 1, 1994; (C) exempts household employment by individuals under the age of 18 from Social Security and Medicare taxes unless household employment is the worker's principal occupation (being a student is considered an occupation for this purpose); (D) permits employers of domestic workers to report and pay FUTA taxes on the employer's personal Federal income tax return (Treasury will develop a new schedule for reporting these taxes on the 1995 Form 1040), and; (E) allows the U.S. Treasury Secretary to enter into agreements with States to collect, as the agent of the State, State unemployment contributions from employers of domestic workers by allowing individuals to pay contributions, based on wages paid to these workers, on their Federal income tax returns. Current Status: No decisions have been made by the U.S. Department of Treasury concerning the details for entering into agreements with States to collect State unemployment contributions from employers of domestic workers. Discussions within Treasury currently center around whether or not such an activity is practical and/or desirable. If Treasury elects to offer States the opportunity to enter into such agreements, the States may accept or decline the offer. State law changes relative to annual vs. quarterly contribution reporting and payment requirements, as well as experience rating issues, may be necessary for States choosing to enter into such an agreement with Treasury. Federal certification, methods of transferring funds, receipt of partial tax payments, requests for extensions for filing Federal income taxes, and quarterly wage reporting requirements, are all issues that must be resolved through additional discussion and coordination with the Treasury Department, the U.S. Department of Labor, and the SESAs. The Unemployment Insurance Service is working with Treasury to resolve these issues. More information will be provided as it becomes available. The SESAs should note that, although the earnings threshold for reporting and paying Social Security and Medicare taxes was changed from $50 per quarter to $1,000 per year, the wage requirements for determining liability for FUTA are unchanged. Effective Date: Agreements between SESAs and Treasury that permit Treasury to collect State unemployment contributions from employers of domestic workers could apply to wages paid in calendar years beginning after December 31, 1994. Action Required: SESA administrators are requested to provide this information to appropriate staff.

References: The Internal Revenue Code of 1986, including the Federal Unemployment Tax Act (FUTA). Background: On January 1, 1995, Section 3306(c)(1)(B), FUTA, ceased to be effective. That section exempted from the definition of employment, and therefore from the tax established by the FUTA, agricultural workers who are aliens admitted to the United States to perform agricultural labor pursuant to Sections 214(c) and 101(a)(15)(H) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(15)(H)(ii)(a)). These workers are commonly referred to as "H-2A" workers. Impact on the UC Program: For FUTA-taxable services, States may continue the exclusion for services performed by H-2A workers while the employer(s) pay the full Federal tax on the exempted services without benefit of the offset credit. However, if an H-2A worker performs services for a State or local governmental entity or a nonprofit organization to which Section 3304(a)(6)(A), FUTA, pertains, States are now required to extend coverage. Action Required: SESA administrators are requested to share this information with appropriate staff.

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AWBA Utilization: The attached listing identifies the AWBA which is to be used when computing the weekly amount of disaster unemployment assistance (DUA) for major disasters where the date of the disaster for the individual occurs during the third quarter of FY 1993 (refer to 20 CFR 625.6). The AWBA for each State is based on the total amount of unemployment insurance paid in that State in the first four of the last five completed calendar quarters immediately preceding the quarter in which the major disaster began. States shall use the AWBA, rounded to the next higher dollar amount, in the computation of the DUA weekly benefit amount. An updated listing will be provided for each subsequent calendar quarter. Action Required: State Employment Security Agency Administrators are requested to provide this information to appropriate staff.

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References: UIPL 44-90 (September 21, 1990) Background: Charging a UI benefit to the appropriate employers' accounts involves two determinations: determining whether an employer should be charged for benefits paid under the claim in question; and allocating the benefit amount between the accounts of chargeable employers and the general pool account. Core RQC reviews the accuracy of both determinations as part of its program review of a SESA's tax accounting function. A Department of Labor Office of Inspector General study of experience rating raised the concern that employers might be systematically evading benefit charges by alleging that the claimant had quit or otherwise left for nonchargeable reasons. As a result, UI tax rates might be insufficiently experience-rated. In response RQC pilot tested a more thorough examination of Benefit Charging accuracy, including a verification of the accuracy of employer responses to notices of potential benefit charge. The results of that pilot test, conducted in six States for 9 months during 1991, are summarized in the attached paper. The paper also identifies options for assessing the accuracy of benefit charges in the future. The Department seeks comments on these options before deciding whether to go beyond, at some future date, the present Core RQC review. The final evaluation report on the Benefit Charging pilot was received from Abt Associates, Inc., in January 1993. Copies of this report, "Unemployment Insurance Revenue Quality Control: Benefit Charging Pilot Project" are available on request. Action Requested: State Administrators are requested to (a) provide comments to the appropriate Regional Office on the attached options paper 45 days from date of release of this UIPL, and (b) forward to the National Office (Attn: TEUQR) any benefit charge studies done within the past 5 years that might be helpful in considering these options. Inquiries: Questions should be directed to the appropriate Regional Office. Copies of the Abt Evaluation Report: Copies are available upon request from Burman Skrable, ETA/UIS/OQCI, 200 Constitution Avenue, N.W., Room S-4015, Washington, DC 20210, (202) 219-5220.

References: UIPL 33-89 (May 18, 1989), and UIPL 28-92 (June 4, 1992). Background: During each of the past three fiscal years the National Office (NO) has provided an increasing number of SESAs with the resources necessary to implement QC Program Improvement (PI) recommendations. The States have used these resources to successfully implement a wide range of PI recommendations. Policy: The NO will continue in FY 93 to provide limited funding for SESAs to implement QC/PI recommendations within their UI program. States are invited to submit proposals for additional funds for FY 93. The proposal eligibility is open to all States that have documented problems identified through QC findings that need to be corrected to improve operations, but do not have sufficient funding to implement these improvements. SESAs submitting requests for additional funding should describe: problems identified from QC findings; the changes, actions, etc., to be accomplished in the proposed project; the type of personnel that will be involved; and the additional resources in staff and material (e.g., programming and equipment) that will be required, including one-time start-up costs. The proposal must also contain the timeframes for the process including development, training and implementation. In addition, where outside contractor assistance is necessary, the proposal must include an estimate of the level of contractor effort. States should have developed and started the initial implementation phase of the project by October 1, 1993. After one year of operation, SESAs must submit a report describing the implementation effort and the resulting outcomes. This report should be received in the NO by December 18, 1994. The SESA must also agree to periodic Regional Office/NO monitoring of progress. Funds granted for PI implementation are for the express purpose presented in the agency's proposal as approved, including any clarifications or stipulations made by the Department. By accepting funding for this initiative, States are agreeing to the conditions and timeframes set forth in the proposal. Failure to implement funded proposals, or redirection of any portion of the funds allocated for this purpose, may subject the funding to recapture or audit exception. SESAs which are unable to initiate PI projects and/or obligate the funds should return those funds to the NO as soon as they become aware of their inability to implement the project, so that other approved projects may be funded. In the event unforeseen circumstances prevent the State from obligating these funds by December 31, 1993, a formal extension request must be submitted to the NO, Office of Quality Control. The extension request should provide a detailed explanation of the circumstances, and should be for a limited time period only. PI Implementation Funding: The total dollar amount to be set aside for this project is not yet decided. However, the NO will provide funding to those SESAs selected until the amount dedicated to the initiative is exhausted. The NO must obligate the funding by September 30, 1993. Procedures for Submitting and Reviewing Proposals: a. State Agency Procedures. SESAs wishing to undertake QC/PI implementation projects should submit a comprehensive proposal based on the criteria above. Attachment A provides an outline for proposals. The proposal must be received in the appropriate Regional Office (RO) no later than ninety (90) days from the date of this UIPL. The RO should submit these proposals to the NO, Attn: TEUQI as soon as possible. b. NO Proposal Review Procedures. Proposals received timely by the NO will be evaluated according to the procedure contained in Attachment B. The panel will review each proposal to determine whether the proposal is consistent with the format contained in Attachment A. All applicants will be notified concerning the outcome of this review. Action Required: Proposals are to be sent to the appropriate RO. Upon completion of the PI Implementation Grant, the State should send the final report to the NO. A copy of this report should be sent to the RO. SESA administrators are requested to provide this information to appropriate staff.

References: The Federal Unemployment Tax Act (FUTA), 26 U.S.C. 3301 et seq., and the National and Community Service Act of 1990 (NCSA), as amended, codified at 42 U.S.C. 12501 et seq. Background: The Department has received several inquiries concerning whether Federal unemployment compensation (UC) law requires State UC coverage of services performed by AmeriCorps participants for State or local governments and certain nonprofit organizations in National and Community Service Programs under the NCSA. This UIPL provides guidance on this issue. Discussion: a. AmeriCorps. Under the NCSA, the Corporation for National Service makes grants to States, which in turn grant the funds to local non-profit organizations and educational institutions which operate the National and Community Service Programs. The Corporation also grants funds directly to national non-profit organizations, State and local governmental entities and Native American Indian tribes for these public service programs. The Corporation is charged with the operation of three programs: AmeriCorps, Learn and Serve America and the National Senior Service Corps. Participants in AmeriCorps grantee programs perform full-time or part-time public services in exchange for post-service educational benefits. Full-time participants receive a stipend for living expenses while enrolled. Participants generally perform public service in one of four areas: education, environment, public safety or human service. For example, participants may provide services at a soup kitchen or may transform a vacant lot into an urban garden. b. Federal UC Law Requirements. Section 3304(a)(6)(A), FUTA, requires that UC must be payable based on services performed in the employ of State and local governments and certain nonprofit organizations. Specifically, UC must be payable based on the services described in Section 3309(a)(1), FUTA. Section 3309(a)(1), FUTA, applies to those services excluded from the definition of employment solely by reason of being performed for the State and local governments described in Section 3306(c)(7), FUTA, or the religious, charitable, educational and other nonprofit organizations described in Section 3306(c)(8), FUTA. Exclusions to this required coverage are found in the other paragraphs of Section 3306(c), FUTA, and Section 3309(b), FUTA. Whether an individual performs services in the employ of a governmental or nonprofit entity is determined under the common-law test required by Section 3306(i), FUTA. In sum, Federal UC law requires that UC must be paid based on services performed by an employee for governmental and nonprofit entities unless an exclusion exists in Federal law. The question concerning AmeriCorps is whether an employment relationship exists between the AmeriCorps participants and the grantee/ subgrantee programs. c. Application of Federal UC Law to AmeriCorps Services. The General Counsel for the Corporation for National Service has provided an opinion (attached) which interprets the NCSA as precluding, as a matter of law, the finding of an employer- employee relationship between the grantee/subgrantee program and the participant. Since the Corporation for National Sevice is the organization with the responsibility for administering and interpreting the NCSA, the Department has chosen to defer to its interpretation. Therefore, since there is no employer-employee relationship under this interpretation, the required coverage provision of Section 3304(a)(6)(A), FUTA, does not apply. At the same time, nothing in the NCSA or the FUTA requires States to exclude services performed by Americorps participants. Whether such services are covered is a matter to be determined under each State's law. Action Required: State agency administrators are requested to provide the above information to appropriate staff.

References: UIPL No. 16-94 (3/15/94), UIPL No. 31-94 (6/24/94), UIPL No.42-94 (8/16/94), UIPL No. 7/95 (12/20/94) and ET Handbook No. 401., 2nd Edition, Change 5 (10/11/94). Background: The RQC staff compiles questions and issues that arise during Regional and National Office (NO) monitoring trips, and from other sources to those questions believed to be of universal interest to the State staff implementing RQC. This set of questions is the fourth segment in the Q&A series. The revised 581 form has become effective January 1995 with the first report for the quarter ending March 31, 1995, due in the NO on May 20, 1995. In this set of Q&As, great emphasis has been placed on the revised 581 and RQC Computed Measures. Tax staff and RQC staff have worked closely in crafting the responses to questions and answering the additional concerns State Employment Security Agency (SESA) staff have raised on these topics. Questions and Answers: The Q&As are arranged by categories: (1) the 581 report and (2) each major RQC tax function. Numbering of the questions in each section is continuous. This format provides the necessary flexibility to allow periodic Q&A updates to be inserted in the appropriate section. There is overlap between 581 and RQC questions. Those that pertain to both the 581 and the RQC review are answered in the first section of the Q&A attachment. Those that pertain only to RQC appear in the second section of the attachment. Action Required: The SESA Administrators are requested to distribute the attached Q&As to the RQC Reviewers, SESA Tax staff, and appropriate Data Processing (DP) staff as well as the organizational unit staff responsible for the preparation and accuracy of the 581 report. Five copies are attached for your convenience.