Employment and Training Administration
Washington, D. C. 20210






October 10, 1984




October 31, 1985











for Regional Management




Amendments Made by P.L. 98-369, (The Deficit Reduction Act of 1984), Which Affect the Federal-State Unemployment Compensation Program

  1. Purpose.  To advise State agencies of the amendments made by the subject Act to Section 3306 of the Federal Unemployment Tax Act (FUTA), Section 112 of the Revenue Act of 1978, and Titles III and XI of the Social Security Act.

  2. References.  Sections 1073, 1074, 1075, and 2651 of P.L. 98-369.

  3. Background.  The amendments made by P.L. 98-369 have made several significant changes affecting the unemployment compensation program which may require changes in State laws.

    Section 1073 adds a new subsection (s) to Section 3306 of FUTA to include all tip income (including charged tips) which is reported by the employee to the employer as "wages" for purposes of FUTA.

    Section 1074 amends Section 822(b) of the Economic Recovery Tax Act of 1981 to extend the exclusion from "employment" of certain fishing boat services under Section 3306(c)(18) of FUTA for calendar years 1983 and 1984.

    Section 1075 amends Section 112(d) of the Revenue Act of 1978 (relating to taxation of unemployment benefits at certain income levels) by excluding from taxation unemployment compensation attributable to weeks of unemployment ending before December 1, 1978, which were paid after December 31, 1978.

    Section 2651 amends Title XI of the Social Security Act to establish an income and eligibility verification system for exchange of information among State agencies administering programs for AFDC, Medicaid, Food Stamps, SSI and UI, and any State program under a plan approved under Title I, X, XIV or XVI of the Social Security Act.  Subsection (a) of Section 2651 adds Section 1137 to the Social Security Act.  Subsection (a) of Section 1137 specifies the requirements of the Income and Eligibility Verification System as follows:

    1.  The State shall require, as a condition of eligibility for benefits under any of the specified programs, that the claimant furnish the State the individual's social security account number (or numbers, if more than one), and the State shall utilize such numbers in the administration of the program specified.

    2.  Wage information available under Section 3304(a)(16), FUTA, Section 1137(a)(3) and Section 6103(1)(7) of the Internal Revenue Code of 1954 shall be requested and utilized in verifying eligibility for and the amount of benefits available under any of the programs specified.

    3.  Employers in the State are required, effective September 30, 1988, to make quarterly wage reports to a State agency (which may be the SESA) except that the Secretary of Labor (in consultation with the Secretary of Agriculture and the Secretary of Health and Human Services) may waive this requirement 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 of income and eligibility verification.

    Section 2651(d) also amends Title III of the Social Security Act (by adding subsection (f) to Section 303) requiring that the State agency charged with the administration of the State UI law shall provide that information be requested and exchanged for purposes of income and eligibility verification in accordance with a State system that meets the requirements of the income and eligibility verification system established pursuant to the requirements of the amendment to Title XI of the Social Security Act outlined above.

    Accounting systems will be used to assure that programs providing data receive reimbursement for costs involved from programs utilizing the data.

    Subsections (b) and (c) of Section 2651 contain amendments to Titles IV and XIX of the Social Security Act adding the same information request and exchange requirements for the AFDC and Medicaid programs.  Subsections (e) through (j) of Section 2651 add the same requirements to the programs under Titles I, X, XIV, and XVI of the Social Security Act and the Food Stamp Act of 1977.

    Explanations and interpretations of each of these amendments are provided in the attachment to this UIPL on a section-by-section basis corresponding to the section number in P.L. 98-369.

    P.L. 98-369 also includes amendments pertaining to the Targeted Jobs Tax Credit and the Trade Adjustment Assistance program.  Information on these provisions will be provided in separate issuances.

    None of the amendments discussed in this letter are required for conformity with FUTA.  However, Section 2651(d) establishes a new condition in Section 303(f) of the Social Security Act for the receipt of grants for administrative costs.  The effective dates for the provisions as well as the action appropriate for each of these amendments are set forth in the attachment to this UIPL.

  4. Action Required.  SESAs are requested to notify appropriate staff of these amendments.

  5. Inquiries.  Inquiries should be directed to your regional office.

  6. Attachment. Explanation and interpretation of amendments.