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References. Unemployment Insurance Program Letter (UIPL) No. 32-96; UIPL 17-95 and Change 1. Background. The General Agreement on Tariffs and Trade, enacted on December 8, 1994, required States to deduct and withhold Federal income taxes from unemployment benefits upon claimants' requests. The moneys withheld are currently transferred to the IRS by the State issuing the benefit payment, generally through the Electronic Funds Transfer Payment System (EFTPS). The Bureau of Public Debt (BPD) in the U.S. Treasury has offered to make tax withholding transfers directly from each State's account in the Unemployment Trust Fund to the IRS through the Unemployment Trust Fund Accounting System (UTFAS), which is used to make deposits to and withdrawals from the Unemployment Trust Fund (UTF). The specific system operations are explained in the next section. The new process should prove more efficient because States can then use the UTFAS for all UTF transactions. There will be only one transfer for all withholding payments, and that transfer can be done daily, much like making daily deposits to the State UTF account. System Operations. Accountants in the BPD, Trust Fund Management Branch (TFMB), will use the FEDTAX II system to make transfers to the IRS using the State's Employer Identification Number (EIN). Each State will notify the TFMB of the daily withholding amount by entering a book transfer in the UTFAS. This book transfer will move the withholding amount from the State UTF account to a UTF income tax liability account daily. From the liability account, TFMB will upload to the FEDTAX II the withholding information, and then the withholding amount will be transferred to the IRS. Specific instructions will be sent in an update to the UTFAS user's manual. Each State will continue to prepare and mail 1099s and file the Form 945 using its own EIN. Action required. SESA Administrators are encouraged to use the UTFAS for withholding payments by registering with the BPD. To register, each State should send a letter providing the following information: a. The EIN the State uses for 945 filing. b. The name record used for 945 filing. c. The name and phone number of the State point of contact for withholding issues. d. Authorization for the BPD, Office of Public Debt Accounting, Division of Federal Investments, Trust Fund Management Branch, to make payments from the State UTF account to the IRS. The letter should be signed by the same person authorized to enter or amend banking arrangements and drawdowns from the UTF or to delegate such authority. The letter should be sent to: Bureau of Public Debt Attention: Deborah Ali PO Box 1328, Room 114HB Trust Fund Management Branch Parkersburg, WV 26106-1328

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References: Chapter V, Section 5, and Chapter XI, Section 1, ET Handbook No. 391. Background: The locality-based comparability payments (known as locality pay) is authorized for GS employees in certain areas of the country. The Office of Personnel Management recently increased the number of areas to 32. The new pay localities are Hartford, CT and Orlando, FL. The locality rates of pay were computed based on the annual rates shown on the 1998 General Schedule and reflect the locality pay percentages authorized by the President on August 29, 1997. The locality rates of pay are considered basic pay for retirement, life insurance, premium pay, and severance pay purposes and for advances in pay. They are also used to compute worker's compensation payments and lump-sum payments for accrued and accumulated annual leave. They are NOT considered basic pay for other pay administration purposes. The locality pay increases became effective January 1998. Instruction: SESAs should provide copies of the attached 32 Federal Locality Salary Tables to appropriate staff members engaged in UCFE claims activities. Action Required: SESAs should follow the above instructions and provide the attached revised 32 Federal Locality Pay Tables to appropriate staff.

References: Section 3303(a)(1), Federal Unemployment Tax Act (FUTA) and Unemployment Insurance Program Letter (UIPL) 29-83. Background: In order to promote the employment of public assistance recipients, some States have considered or enacted legislation intended to ensure that employer experience rates are not adversely affected if these individuals subsequently become unemployed. A method chosen by some States to prevent an adverse effect on experience rates has been to exclude from the employer¿s experience rating computations unemployment benefits paid to former employees who have previously received public assistance. The Department of Labor considers efforts to encourage the employment of public assistance recipients laudable; however, it is the Department of Labor¿s position that consideration of the receipt of public assistance or other pre-employment circumstances of employees (current or former) in employer experience rating determinations does not conform with Federal law. Federal Law Requirements: Section 3303(a)(1), FUTA, contains the Federal experience rating requirement for employers in a State to receive the additional credit against the FUTA tax. Additional credit is allowed to employers paying reduced rates of contributions, where the State law conforms with 3303(a)(1), FUTA. For FUTA tax credit purposes, these employers are treated as though they had paid contributions at the highest rate assigned based on experience, or 5.4 percent, whichever is lower. Section 3303(a)(1), FUTA, requires that State law provide that: - no reduced rate of contributions to a pooled fund or to a partially pooled account is permitted to a person (or group of persons) having individuals in his (or their) employ except on the basis of his (or their) experience with respect to unemployment or other factors bearing a direct relation to unemployment risk during not less than the 3 consecutive years immediately preceding the computation date; Although the term ¿experience¿ is often used as convenient shorthand, no State system directly measures experience with respect to unemployment. Instead, all States use a factor or combination of factors bearing a direct relation to unemployment risk. Since the unemployment risk of the worker is the basic phenomenon which is to be measured, the factors referred to in Section 3303(a)(1) are limited to those basic elements that measure an employer¿s experience with the impact of unemployment upon his or her workers. (See page 2 of the Attachment to UIPL 29-83.) In addition, the experience must be measured throughout a period of not less than 3 years preceding the computation date. The use of public assistance status or other pre- employment circumstances of individual workers is not consistent with this interpretation of the requirements of Section 3303(a)(1), FUTA, for two reasons. First, using these circumstances to a priori exclude wages earned by a worker in determining experience is inconsistent with Federal law, since a portion of the employer¿s experience during the 3- year period will never be used. Second, the receipt of public assistance and other pre-employment circumstances are not directly related to the employer¿s experience with the impact of unemployment on his or her workers. These circumstances are not directly related to the employer¿s need for services, the term of employment, or the reason for separation from employment. For example, during a lay-off, all workers are separated due to a lack of work. Whether the individual previously received public assistance has no bearing on the fact that a lack of work exists. As another example, if a worker is discharged for misconduct, the reason for the separation is the worker¿s misconduct, not pre-employment status. In conclusion, all situations where the consideration of pre-employment income or circumstances could be introduced into a State¿s experience rating system, including the noncharging of benefits, is inconsistent with Section 3303(a)(1), FUTA. However, because the Department of Labor strongly supports endeavors to employ public assistance recipients, the Department is exploring legally permissible avenues that might benefit employers who hire welfare recipients. We will notify States of the findings upon completing the effort. Action: State administrators are requested to take necessary action to assure that State law conforms with and is applied consistently with Section 3303(a)(1), FUTA, as interpreted in this UIPL.

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