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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUL

ISSUE DATE

9/25/96

RESCISSIONS

None

EXPIRATION DATE

Continuing

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 37-96

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

MARY ANN WYRSCH
Director
Unemployment Insurance Service

 

SUBJECT

:

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996

  1. Purpose. To advise the States of amendments made to Federal law by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 which affect the Federal-State Unemployment Compensation (UC) program.

  2. References. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193); the Internal Revenue Code of 1986 (IRC), including the Federal Unemployment Tax Act (FUTA); the Social Security Act (SSA); Unemployment Insurance Program Letters (UIPLs) No. 37-86 and 23-96; and Office of Management and Budget (OMB) Circular No. A-87 (60 Fed. Reg. 26484, May 17, 1995).

  3. Background. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), P.L. 104-193, was enacted on August 22, 1996. This legislation, popularly known as the "welfare reform" bill, made several changes which affect the UC program. These changes--

    This UIPL provides information on these amendments and advises States of those instances where amendments to State UC law are needed to meet Federal UC law requirements. This UIPL does not, however, address those amendments relating to the eligibility of aliens. After completing its analysis of the amendments relating to aliens, the Department will issue guidance to the States as appropriate.

  4. State Directory of New Hires ("State Directory") - Section 453A, SSA, as added by Section 313(b), PRWORA. The PRWORA replaced the Aid to Families with Dependent Children program with the Transitional Assistance to Needy Families (TANF) program. A State's TANF grant is conditioned on meeting certain requirements, including a requirement that the State operate a child support enforcement program. As part of the child support enforcement program, the State must operate a Directory of New Hires by October 1, 1997. This Directory must contain the name, address, and social security number of each newly hired individual and the name, address, and Federal employer identification number of the hiring employer. (Section 453A(b)(1), SSA, as amended.) If a State chooses to use its UC agency as the collection point for the State Directory, the UC agency will need to meet any conditions for such Directory established by the PRWORA as interpreted by the Secretary of Health and Human Services (HHS).

    If the UC agency maintains the State Directory and uses the State Directory for UC purposes, UC grant funds may be used to pay UC costs associated with the Directory consistent with OMB Circular No. A-87. However, UC grants may not be used to pay for any costs of providing State Directory information to the TANF agency or to the National New Hires Directory discussed below.

    New Section 453A(g)(2)(B), SSA, specifically references Federal UC law--

    Wage and Unemployment Compensation Information.--The State Directory of New Hires shall, on a quarterly basis, furnish to the National Directory of New Hires extracts of the reports required under section 303(a)(6) to be made to the Secretary of Labor concerning the wages and unemployment compensation paid to individuals, by such dates, in such format, and containing such information as the Secretary of Health and Human Services shall specify in regulations.

    In other words, as a condition of receiving its TANF grant, the State Directory must obtain certain information from the UC agency and furnish that information to the Secretary of HHS. This requirement for the transfer of data is effective October 1, 1997. (Section 453A(a)(1)(B), SSA, as amended.) Section 303(a)(6), SSA, requires States to make "such reports as the Secretary of Labor may from time to time require."(1) Under Section 453(i), SSA, as amended by the PRWORA, the above information is required to be transmitted from the State Directory to the National Directory of New Hires.

  5. National Directory of New Hires ("National Directory") - Section 453(i), SSA, as amended by Section 316, PRWORA. Section 453, SSA, requires the Secretary of HHS to establish and conduct a Federal Parent Locator Service (FPLS). The mission of the FPLS is to obtain and transmit to any authorized person (as defined under Section 453(c)) information as to the whereabouts of any absent parent. This information is to be used to locate the parent for the purpose of enforcing child support obligations.

    As a result of the PRWORA, the FPLS is now charged with establishing and maintaining a National Directory of New Hires no later than October 1, 1997. The National Directory will consist of new hire information as well as information supplied "pursuant to section 453A(g)(2)," SSA, as quoted in part above. The Conference Report for the PRWORA explains that--

    When fully implemented the Federal Directory of New Hires will contain identifying information on virtually every person who is hired in the United States. In addition, the FPLS [Directory of New Hires] will contain quarterly data supplied by the State Directory of New Hires on wages and Unemployment Compensation paid. . . . The information is to be used for purposes of locating individuals to establish paternity, and to establish, modify, or enforce child support orders. [H. Rep. 104-725, as quoted in the Congressional Record for July 30, 1996, page H8918.]

    As this National Directory contains information which may be in the files of the State UC agency, two amendments concerning the provision of this information were made to Federal UC law. First, Section 314(g)(2), PRWORA, amended Section 3304(a)(16), FUTA, to provide, as a condition of a State law being certified for tax credit that--

    (A)  wage information contained in the records of the agency administering the State law which is necessary (as determined by the Secretary of Health and Human Services in regulations) for purposes of determining an individual's eligibility for assistance, or the amount of such assistance, under a State program funded(2) under part A of title IV of the Social Security Act, shall be made available to a State or political subdivision thereof when such information is specifically requested by such State or political subdivision for such purposes,

    (B) wage and unemployment compensation information contained in the records of such agency shall be furnished to the Secretary of Health and Human Services (in accordance with regulations promulgated by such Secretary) as necessary for the purposes of the National Directory of New Hires established under section 453(i) of the Social Security Act, and

    (C)  such safeguards are established as are necessary (as determined by the Secretary of Health and Human Services in regulations) to insure that information furnished under subparagraph (A) or (B) is used only for the purposes authorized under such subparagraph; [New language bolded.]

    Second, Section 316(g)(2), PRWORA, amended Section 303(h), SSA,(3) to provide, as a condition of States receiving administrative grants for their UC programs, that--

    Although the amendment to the FUTA is less specific, both amendments have the same effect: The State UC agency must provide certain information to the National Directory. Specifically "wage information" and "claim information" as defined in Section 303(h)(3), SSA, must be supplied on a quarterly basis. The UC agency is required to supply only wage and claim information which is already contained in its records. It is not required to obtain additional information for purposes of the National Directory.

    The SSA amendment requires that the State must provide such safeguards as the Secretary of Labor determines are necessary to determine that the information is used only for the purposes of the National Directory of New Hires. However, the FUTA amendment provides that the Secretary of HHS will establish such safeguards. The Department of Labor will be studying this matter, in conjunction with the Department of HHS, to determine what, if any, safeguards individual States must establish prior to providing the FPLS with UC information.

    Costs of Providing Information. Under amended Section 303(h), SSA, UC information will be provided to the National Directory "on a reimbursable basis." Section 453(e)(2) provides that the costs of providing information to the Secretary of HHS "shall be reimbursed" to "any State." Section 453(g), SSA, describes what amounts "may" be reimbursed to the States:

    Reimbursement for Reports by State Agencies.--The Secretary may reimburse Federal and State agencies for the costs incurred by such entities in furnishing information requested by the Secretary under this section in an amount which the Secretary determines to be reasonable payment for the information exchange (which amount shall not include payment for the costs of obtaining, compiling, or maintaining the information). [Emphasis added.]

    In brief, the States are not required to disclose UC information under Section 303(h) unless they are reimbursed by the Secretary of HHS. However, the Secretary of HHS has sole authority to determine the amount to be reimbursed. If the Secretary of HHS does not reimburse the State for what the State determines to be the entire cost of providing UC information, Federal funds provided for the administration of the State's UC program may not be used to make up the difference. Under Section 303(a)(8), SSA, UC grants may be used only for the proper and efficient administration of the State's UC law, which does not include the costs of disclosing this information.

    Effective date for UC conformity provisions. Under new Section 453A(a)(1), SSA, each State is required to establish a State Directory effective October 1, 1997. (States which already have State Directories are given until October 1, 1998, to meet the requirements of Section 453A, except that the State must transmit information to the National Directory effective October 1, 1997.) Under Section 453(i), SSA, the FPLS is required to establish and maintain a National Directory by October 1, 1997.

    However, Section 395(a)(2), PRWORA provides that "all other provisions of this title [pertaining to the Directories] shall become effective upon the date of enactment." Section 395(b) further provides that:

    Grace Periods for State Law Changes.--The provisions of this title shall become effective with respect to a State on the later of--

      (1)  the date specified in this title, or

      (2)  the effective date of laws enacted by the legislature of such State implementing such provisions,

    but in no event later than the 1st day of the 1st calendar quarter beginning after the close of the 1st regular session of the State legislature that begins after the date of the enactment of this Act. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature.

    Thus, notwithstanding the requirement that the State and National Directories be operative on October 1, 1997, States which need to amend their UC laws may qualify for a grace period which extends beyond this date to the first day of the first calendar quarter following the close of the first regular session of the State legislature. Since each year of a legislative session is deemed a separate session and since all annual sessions will adjourn by December 31, 1997, this means all States qualifying for a grace period must be in a position to provide wage and claim information to the National Directory by January 1, 1998.(4)

    States will need to review their UC laws and regulations to determine if disclosure to the National Directory is permissible. If it is not, States must take all actions necessary to ensure that the information will be disclosed.

  6. State UC Agency Access to State Directory - Section 453A(h)(3), SSA, as added by Section 313(b), PRWORA. Provision of Information in National Directory to State UC Agency - Section 453(k), SSA, as added by Section 316(f), PRWORA. New Section 453A(h)(3), SSA, requires, as a condition of a State receiving a TANF grant, that access to the State Directory be provided to State employment security (that is, UC and employment service) agencies:

    Administration of Employment Security and Workers' Compensation.--State agencies operating employment security and workers' compensation programs shall have access to information reported by employers pursuant to subsection (b) [that is, New Hire data] for the purposes of administering such programs.

    New Section 453A(h)(2), SSA, contains an identical provision requiring the granting of access to a State agency responsible for administering a program specified in Section 1137(b), SSA, pertaining to the Income Eligibility Verification System. Paragraph (3) of Section 1137(b), specifies the UC program. Therefore, additional authority exists for requiring the granting of access to UC agencies.

    The PRWORA does not address how the costs of a UC agency accessing a State Directory will be determined. The allowability of these costs for UC grant purposes is governed by OMB Circular No. A-87.

    States should be aware that, under new Section 453(n), SSA, (as added by Section 316(f), PRWORA), Federal departments, agencies and instrumentalities are required to submit certain information to the National Directory:

    Federal Government Reporting.--Each department, agency, and instrumentality of the United States shall on a quarterly basis report to the Federal Parent Locator Service the name and social security number of each employee and the wages paid to the employee during the previous quarter, except that such a report shall not be filed with respect to an employee of a department, agency, or instrumenta-lity performing intelligence or counterintelligence functions, if the head of such department, agency, or instrumentality has determined that filing such a report could endanger the safety of the employee or compromise an ongoing investigation or intelligence mission.

    In addition, new Section 453A(b)(1)(C), SSA, requires Federal entities to report new hire information:

    Federal Government Employers.--Any department, agency, or instrumentality of the United States shall comply with subparagraph (A) [requiring employers to furnish new hire information] by transmitting the report described in subparagraph (A) to the National Directory of New Hires . . .

    As this information may be useful for UC purposes, the Department will be discussing its potential uses with the Department of HHS. States should be aware that the Secretary of HHS has the sole authority for determining the extent, if any, to which any information in the National Directory may be shared with State UC agencies.(5) In the event that States may obtain such information, Section 453(k)(3), SSA, addresses costs for providing information from the National Directory--

    For Information Furnished to State and Federal Agencies.--

    A State or Federal agency that receives information from the Secretary [of HHS] pursuant to this section shall reimburse the Secretary for costs incurred by the Secretary in furnishing the information, at rates which the Secretary determines to be reasonable (which rates shall include payment for the costs of obtaining, verifying, maintaining, and comparing the information). [Emphasis added.]

    Thus, the Secretary of HHS has the sole authority for determining what fees will be paid by State UC agencies for any information obtained from the National Directory.

  7. Income Eligibility Verification System - Amendment to Section 1137(a)(3), SSA, made by Section 313(c)(1), PRWORA. Section 303(f), SSA, requires a State to operate an income eligibility verification system (IEVS) which meets the requirements of Section 1137(a), SSA. Section 1137(a)(3) requires employers "to make quarterly wage reports to a State agency" which may be the State UC agency. The PRWORA amended the SSA to expand the types of employers required to submit quarterly wage reports while at the same time allowing an exception. As a result Section 1137(a)(3) now reads, in part, as follows--

    employers (including State and local governmental entities and labor organizations (as defined in section 453A(a)(2)(B)(iii)) [sic - should probably be (ii)] in such State are required . . . to make quarterly wage reports to a State agency (which may be the agency administering the State's unemployment compensation law) except that the Secretary of Labor (in consultation with the Secretary of Health and Human Services and the Secretary of Agriculture) may waive the provision of this paragraph if he determines that the State has in effect an alternative system which is as effective and timely for purposes of providing employment related income and eligibility data for the purposes described in paragraph (2), and except that no report shall be filed with respect to an employee of a State or local agency performing intelligence or counterintelligence functions, if the head of such agency has determined that filing such a report could endanger the safety of the employee or compromise an ongoing investigation or intelligence mission; [Amendments bolded.]

    New Section 453A(a)(2)(B)(ii), SSA, as added by Section 313(b), PRWORA, provides that "labor organization"--

    shall have the meaning given such term in section 2(5) of the National Labor Relations Act, and includes any entity (also known as a "hiring hall") which is used by the organization and an employer to carry out requirements described in section 8(f)(3) of such Act of an agreement between the organization and the employer."

    Section 2(5) of the National Labor Relations Act (NLRA) defines "labor organization" as--

    any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.

    Section 8(f)(3) of the NLRA pertains to agreements covering employees in the building and construction industry under which the employer notifies the labor organization "of opportunities for employment with such employer, or gives such labor organization an opportunity to refer qualified applicants for such employment."

    As a result of the amendments to Section 1137(a)(3), SSA, all States must require State and local governments and the labor organizations described above to submit quarterly wage reports to a State agency which may be the UC agency. States will need to examine their laws and regulations to determine if any amendments are necessary. Also as a result of the amendments to Section 1137(a)(3), SSA, States are prohibited from requiring the filing of a report concerning an employee who is performing "intelligence or counter intelligence functions" if the head of a State or local agency employing the individual determines that the filing of such a report "could endanger the safety of the employee or compromise an ongoing investigation or intelligence mission."

    UC agencies should be aware that Section 409(a)(4), SSA, as amended by Section 103(a), PRWORA, provides that, if the Secretary of HHS determines that a State TANF program is not participating during a fiscal year in the IEVS as required, the Secretary of HHS will reduce the State's TANF grant for the following fiscal year by up to 2 percent.

    The effective date of the amendment to Section 1137(a)(3), SSA, is the date of enactment of the PRWORA. (Section 395(a)(2), PRWORA.) However, if the State must amend its law to require such reporting, the effective date is the effective date of the law enacted by the State legislature, but in no case later than January 1, 1998. (Section 395(b)(2), PRWORA. See item 5 of this UIPL for an explanation of this January 1, 1998 effective date.)

  8. Use of UC Information for Child Support Enforcement Purposes - Section 303(e), SSA, as amended by Section 313(d), PRWORA. Section 303(e), SSA, among other things, requires States to provide certain UC information to child support enforcement agencies. The PRWORA added the following new paragraph to the end of Section 303(e)--

    (5)  A State or local child support enforcement agency may disclose to any agent of the agency that is under contract with the agency to carry out the purposes described in paragraph (1)(B) [i.e., for purposes of establishing and collecting child support obligations from, and locating, individuals owing such obligation] wage information that is disclosed to an officer or employee of the agency under paragraph (1)(A) [i.e., a state or local child support enforcement agency]. Any agent of a State or local child support agency that receives wage information under this paragraph shall comply with the safeguards established pursuant to paragraph (1)(B). [Emphasis added.]

    Section 303(a)(1), SSA, requires that State law contain "[s]uch methods of administration . . . as are found by the Secretary of Labor to be reasonably calculated to insure full payment of unemployment compensation when due." This provision has long been interpreted to prohibit, with certain exceptions, disclosure of claimant and employer UC information. Although disclosure to public officials in the performance of their duty has been permitted, disclosure to private entities without the consent of the individual is generally not allowed. (See UIPL 23-96.)

    The amendment partially removes this restriction on disclosure to private entities for purposes of Section 303(e), SSA. Federal law now authorizes a State UC agency to provide UC information to a State or local child support agency which turns that information over to a private contractor for purposes of establishing and collecting child support obligations from, and locating, individuals owing such obligations. This authorization is contingent on the existence of safeguards consistent with Section 303(e)(1)(B), SSA, as determined in regulations issued by the Secretary of Labor. The Secretary of Labor has not yet prescribed regulations on these safeguards. Therefore, until these regulations are issued, States will assure compliance with Section 303(e)(1)(B) by following the confidentiality protection provisions of 20 C.F.R. 603.7 pertaining to requesting agencies.

    A State wishing to use this new authority will need to determine whether its UC law must be amended. The amendment to Section 303(e), SSA, is effective on the date of enactment of the PRWORA.

  9. Use of Employment Security Information to Establish Paternity and for Other Purposes - Section 466(c)(1), SSA, as added by Section 325(a)(2), PRWORA. Section 466(c)(1), SSA, requires that State and local child support enforcement agencies use certain expedited procedures relating "to the establishment of paternity or to establishment, modification, or enforcement of support orders . . . ." One of these procedures is obtaining access to employment security records--

    Federal UC law was not amended to require State UC agencies to provide such access. Specifically, Section 303(e), SSA, relating to the provision of UC information to child support agencies was not amended. However, Section 303(e)(1)(A), SSA, already requires that wage information be disclosed, upon request and on a reimbursable basis, to child support agencies. Also, Section 303(a)(1), SSA, permits disclosure of UC information, including claim information, to public officials in the performance of their duties.

    States will need to review their UC laws and regulations to determine if granting access to child support agencies - subject to safeguards, nonliability and payment of any costs associated with granting such access - requires amendment to State UC law to accommodate the child support agency.

  10. Food Stamp Overissuances - Section 13(b)(1) of the Food Stamp Act of 1977 (FSA) as amended by Section 844(a), PRWORA. Under Section 303(d)(2), SSA, "uncollected overissuances" of food stamp allotments may be intercepted from an individual's UC under certain limited conditions. See UIPL 37-86 for a complete explanation of these conditions.

    Although the PRWORA did not amend Section 303(d)(2), SSA, it did amend Section 13(b)(1) of the FSA to require that a State Food Stamp agency must now collect any overissuance of food stamp coupons issued "to a household" by withholding amounts from UC payable to "a member of the household"(6) as provided under Section 13(c), FSA, which establishes certain procedures for the food stamp agency. Under subsection (2) of Section 13(b), FSA, the Secretary of Agriculture may waive this requirement under certain conditions.

    Section 13(b)(1), FSA, does not affect the requirements of Section 303(d)(2), SSA. It merely mandates that State food stamp agencies take an action that previously was optional under the FSA and that is permitted under the SSA.

    As all State laws contain provisions which prohibit attachment of UC, States which have not already enacted provisions implementing Section 303(d)(2), SSA, will need to amend their UC laws to accommodate the State food stamp agency. The following draft language will, as adjusted for State usage, assure UC conformity requirements are met:

    As State food stamp agencies must reimburse the State UC agency for the administrative costs incurred in intercepting food stamps (Section 303(d)(2)(D), SSA), State UC agencies may not perform any food stamp intercept activities without entering into an agreement for reimbursement of all costs which will be incurred by such activities. (UIPL 37-86, page 4.)

    If the State food stamp agency does not wish the State UC agency to perform all the activities listed in Section 303(d)(2), SSA, the State UC agency need only perform those activities for which it is paid. For example, if the State food stamp agency does not wish the UC agency to require applicants for UC is to disclose whether an overissuance is owed, then the State UC agency need not do so.

  11. Action. Each State must take appropriate action to assure that its law authorizes the disclosure of UC wage and claim information to the National Directory of New Hires. State UC agencies which maintain State wage record files will need to assure that State and local governmental entities and labor organizations submit quarterly wage reports as required. UC agencies are encouraged to cooperate with other State agencies in implementing the requirements of the PRWORA.

  12. Inquiries. Please direct inquiries to the appropriate Regional Office.


1.   The Secretary does not currently require the submittal of data on individuals under Section 303(a)(6), SSA. However, as discussed below, both the FUTA and the SSA have been amended to require UC agencies to provide wage and claim information to the State Directory.

2.  The bolded language commencing with "eligibility" was inserted by Section 110(k)(2), PRWORA, as a conforming amendment. It recognizes the repeal of the AFDC program and the creation of the TANF program.

3.  Prior to amendment, Section 303(h), SSA, required State UC agencies to "take such actions . . . as may be necessary to enable the Secretary of Health and Human Services to obtain prompt access to any wage and unemployment compensation claims information" for purposes of carrying out the child support enforcement program. See UIPL 11-89.

4.  Section 395(c), PRWORA, provides for a longer grace period if the State needs to amend its Constitution. This longer grace period will end at the earlier of (1) one year after the effective date of the necessary State constitutional amendment or (2) 5 years after the date of enactment of the PRWORA.

5.  Section 453(l), SSA, as added by Section 316(f), PRWORA, limits the use of information "in the Federal Parent Locator Service," which includes information in the National Directory. The information in the Federal Parent Locator Service "shall not be used or disclosed, except as expressly provided" in Section 453, SSA. Section 453(j)(3)(B), SSA, also added by Section 316(f), PRWORA, authorizes the Secretary of HHS to disclose information in the directories to "State agencies." Under Section 453(j)(3), these agencies are limited to TANF and child support agencies.

6.  Under Section 13(a)(2), FSA, "[e]ach adult member of a household shall be jointly and severally liable for the value of any overissuance of coupons." Since food stamps are allotted to households, this means every adult member of the household may be liable for the overissuance.