Employment and Training Administration
Washington, D. C. 20210


TAA Reform Act/Health Ins.




October 10, 2002















Assistant Secretary




Use of National Emergency Grant Funds Under the Workforce Investment Act, as Amended, to Develop Systems for Health Insurance Coverage Assistance for Trade-Impacted Workers

  1. Purpose. To: (1) transmit information regarding new health insurance coverage benefits and state-level responsibilities created by the Trade Adjustment Assistance Reform Act of 2002; and (2) announce the availability of funds to help states establish the systems and procedures needed to carry out their new responsibilities.

  2. References. Workforce Investment Act, section 173;
    Trade Adjustment Assistance Reform Act of 2002 (Public Law 107-210), sections 201, 202 and 203;
    Internal Revenue Code of 1986, Chapter 1, subchapter A, part IV, Subpart C;
    Unemployment Insurance Program Letter 02-03, "Health Insurance Tax Credit for Eligible Trade Adjustment Assistance/Trade Readjustment Allowances (TAA/TRA) Recipients;" dated October 10, 2002 and
    TEGL 11-02, "Operating Instructions for Implementing the Amendments to the Trade Act of 1974 Enacted by the Trade Act of 2002."

  3. Background. The Trade Adjustment Assistance Reform Act of 2002 (P.L. 107-210), (The Act) which amended The Trade Act of 1974, was signed by the President on August 6, 2002. It consolidates the prior TAA and NAFTA-TAA programs into one comprehensive program of assistance. The Act broadens the eligible target group and increases the scope of assistance available to eligible individuals. Significantly, several provisions of The Act establish mechanisms by which eligible individuals can receive assistance in covering the costs of healthcare insurance.

    The primary mechanism is a federal tax credit to be established by the Internal Revenue Service: a tax credit to be available for eligible health insurance costs incurred as early as December 2002, and available on an advance payment basis by August 1, 2003. The provisions related to this tax credit are covered in Sections 201 and 202 of The Act.

    The Act establishes an alternative mechanism, which is intended to be used as a bridge to the point at which eligible individuals can qualify for the tax credit on an advance basis, by authorizing the use of National Emergency Grant (NEG) funds under the Workforce Investment Act (WIA) to pay the cost of certain healthcare insurance coverage. Additional funds are appropriated to the NEG account specifically for this purpose. These provisions are covered in newly created sections 173(f) and (g) of WIA. The language from Section 203 of the Trade Reform Act that amends WIA to incorporate these new sections is included as Attachment A to this notice.

    This advisory provides information and procedures under which states can apply for system-building funds under WIA section 173(f) to develop and implement the infrastructure needed to make available these new healthcare coverage benefits for eligible individuals, and certify individuals potentially eligible for the health insurance tax credit. Instructions for accessing funds to pay the costs of qualified health insurance coverage, as described in WIA section 173(g), will be issued separately.

  4. Eligible Individuals. Individuals eligible for health insurance coverage assistance under the Trade Adjustment Assistance Reform Act are:

    - an individual who is receiving a trade readjustment allowance (TRA) under the Trade Act, or would be eligible for TRA except that he/she has not yet exhausted Unemployment Insurance benefits;
    - an individual who is receiving benefits under a demonstration program of alternative trade adjustment assistance for older workers under section 246 of The Act;
    - an individual who is 55 years of age or older and is receiving a pension benefit paid in whole or part by the Pension Benefit Guaranty Corporation (PBGC).

    In addition, coverage may also be provided for the spouse and dependents of an eligible individual where such persons are not otherwise covered by healthcare insurance. Dependents are limited to those persons who are allowable dependent deductions on the eligible individual's tax return.

  5. Qualified Healthcare Coverage. Healthcare insurance that can qualify for the tax credit and paid coverage with NEG funds are:

    - coverage under a COBRA continuation provision
    - coverage under a state-based continuation provision
    - coverage through a qualified state high risk pool
    - coverage under a program offered to state employees
    - coverage under a state-based health insurance program comparable to a program for state employees
    - coverage through an arrangement between a state and
    -- a group health plan
    -- an issuer of healthcare coverage
    -- an administrator, or
    -- an employer
    - coverage offered through a state arrangement with a private sector healthcare coverage purchasing pool
    - coverage under a state-operated health plan that does not receive any Federal financial participation
    - coverage under a group health plan that is available through the employment of the eligible individual's spouse
    - coverage under individual health insurance in which the eligible individual was enrolled during the entire 30 day period preceding the date of separation by which the individual became eligible for TAA assistance
  6. State Responsibilities. To administer the health insurance tax credit, The Act anticipates that Governors will establish procedures and systems adequate to ensure eligibility of individuals for assistance, proper referral to and enrollment of eligible individuals in qualified coverage, and effective verification of benefit payments. Such procedures and systems may include:

    - eligibility verification;
    - certification of state-based healthcare plans;
    - notification to eligible individuals of available qualified healthcare insurance options;
    - assistance to eligible individuals in enrolling in qualified programs;
    - issuing processing certificates that confirm individuals are eligible for healthcare coverage assistance; and
    - developing and installing necessary data management systems.

    Regarding the end of year tax credit for 2002 (see UIPL 02-03), states are asked to provide a list of potentially eligible individuals to the IRS by November 22, 2002, so that the IRS can mail information and forms for claiming the credit to these individuals. States are also asked to mail IRS forms 8887 to those potentially eligible for the credit by February 18, 2003.

    Regarding the advance tax credit, states will be asked to certify individuals' potential eligibility for the tax credit, issue certificates that these individuals may submit to insurers to seek the credit on an advance basis, and provide information electronically to the IRS about eligible individuals. Specific requirements for administration of the advance health insurance tax credit are being developed with the IRS. States will also be asked to issue IRS form 8887, showing the months for which eligibility requirements were met, to eligible individuals at the end of each tax year for which the credit is available.

    States may use penalty mail to pay postage costs associated with these responsibilities.

  7. Availability of Funds to Assist States. The Department is immediately making available NEG funds to assist states in establishing the infrastructure needed to meet the responsibilities specified above and in UIPL 02-03. A base level of $50,000 is being made available to each state to offset the additional costs of establishing the systems to comply with the responsibilities noted in Section 6 above and in the previously cited UIPL. Additions to this base level will be made as determined by documentation submitted to support a higher level. Please note that the maximum level of NEG funding that will be made available to support the development of systems and infrastructure is $200,000.

    Pre-Award Costs. For those states that began developing infrastructure systems for this program prior to the availability of NEG funds, the Department will consider requests for pre-award costs for these activities, consistent with the provisions of this guidance and the cited UIPL. If a state requests pre-award costs, those costs must be separately identified in the grant application and cannot pre-date August 6, 2002. Pre-award costs will be included in the level of NEG funding awarded to support system building activities consistent with the levels noted earlier.

    Once the systems and procedures are in place and the state is receiving and processing requests for healthcare coverage, the state may submit a modification to the grant award to cover ongoing operational costs for these activities that exceed the amount of the initial system building grant award. Guidance on the requirements for this modification will be issued separately.

  8. Procedures for Applying for Funds. Funds may be requested by submitting a grant application to:

    Office of Grants and Contract Management
    ATTN: E. Fred Tello, Grant Officer
    U.S. Department of Labor-Employment and Training Administration
    200 Constitution Avenue, NW -- Room S-4203
    Washington, DC 20210

    It is recommended that applications be sent via overnight mail or faxed to the attention of Mr. Tello at (202) 693-2879. If sent by mail, please be advised that mail delivery in the Washington area may be somewhat delayed due to mail decontamination procedures.

    Grant applications must include the following:

    - Completed and signed SF-424, Application for Federal Assistance;
    - Completed SF-424A Budget Information Form (Section B and D only) for the amount of requested funds;
    - Narrative (not to exceed two pages) describing the overall approach and specific activities, and estimated costs of each, to be undertaken by the state to meet the requirements cited above.
    Included in Attachment B is a suggested format for identifying the specific activities to be undertaken by the state.

  9. Inquiries. Questions regarding this transmittal should be directed to Shirley Smith, Administrator, Office of National Response, at (202) 693-3501, or to your Regional Administrator. A directory of the Regional Office contacts is included as Attachment C.

  10. Attachments.
    Attachment A: Section 203 of the Trade Adjustment Assistance Reform Act of 2002
    Attachment B: A sample format for identifying specific activities to be undertaken by states.
    Attachment C: USDOL/ETA Regional Office contacts.