ATTACHMENT I TO UIPL 19-88

TEXT, EXPLANATION AND INTERPRETATION OF
CHANGES TO UC PROGRAM
Made by Public Law 100-203
(Section 9151 and 9153-9156)

I.    Section 9151.  Determination of Amount of Federal Share with Respect to Certain Extended Benefits Payments.

        A.    Text of Amendment.

            For the purpose of determining the amount of the Federal payment to any State under Section 204(a)(1) of the Federal-State Extended Unemployment Compensation Act of 1970 with respect to the implementation of paragraph (3) of section 202(a) of such Act (as added by section 1024(a) of the Omnibus Reconciliation Act of 1980), such paragraph shall be considered to apply only with respect to weeks of unemployment beginning after October 31, 1981, except that for any State in which the State legislature did not meet in 1981, it shall be considered to apply for such purpose only with respect to weeks of unemployment beginning after October 31, 1982.

For a State to receive Federal sharing for extended and sharable regular compensation, the State was required to apply provisions of its law conforming to Section 202(a)(3), EUCA, for weeks of unemployment beginning after March 31, 1981.  However, one State legislature did not meet in 1981 and many others did not enact the implementing legislation prior to the effective date specified in the Federal law.

Section 9151 provides that Section 202(a)(3), EUCA, shall apply to weeks of unemployment beginning after October 31, 1981.  The change is for the purpose of determining the Federal share only for weeks of unemployment beginning after March 31, 1981 to October 31, 1981.  However, if a State's legislature did not meet in 1981, Section 202(a)(3) will apply to weeks of unemployment beginning after October 31, 1982.

Federal audits of 42 States have resulted in the disallowance of Federal sharing for 15 States that did not implement the requirement by April 1, 1981.  The date for applying Section 202(a)(3) was changed by the 100th Congress to alleviate the effect of the short time period for State implementation.

        C.    Implementation.  No changes are required in State law or procedure.

        D.    Effective Date.  This section is effective as of December 22, 1987.

II.    Section 9153.  Rate of FUTA Tax.

        A.    Text of Amendments to Paragraphs (1) and (2) of Section 3301, FUTA:

                "(1) 6.2 percent in the case of calendar years 1988, 1989, and 1990: or

                 (2) 6.0 percent in the case of calendar year 1991 and each calendar year thereafter;"

        B.    Discussion.     The Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) amended Section 3301, FUTA, by increasing the gross Federal unemployment tax on wages from 3.5 percent to 6.2 percent.  The 6.2 percent gross tax included a temporary 0.2 percent tax that was to remain in effect until all outstanding general revenue advances to the Extended Unemployment Compensation Account were repaid.  Since all advances were repaid as of May 1987, the 0.2 percent surtax was due to expire at the end of 1987.

Section 9153 extends the 0.2 percent surtax for 3 years (1988, 1989 and 1990).

        C.    Implementation.  No changes are required in State law or procedure.

        D.    Effective Date.  This amendment applies to wages paid on or after January 1, 1988.

III.    Section 9154.  Transfer of Funds into the Federal Unemployment Account and the Extended Unemployment Compensation Account.

        A.    Text of Amendments.

                1.    New Subsection (g) of Section 901, SSA:

                        "Transfers For Calendar Years 1988, 1989, and 1990

                "(g)(1)  With respect to calendar years 1988, 1989 and 1990, the Secretary of the Treasury shall transfer from the employment security administration account--

            "(A) to the Federal unemployment account an amount equal to 50 percent of the amount of tax received under section 3301(1) of the Federal Unemployment Tax Act which is attributable to the difference in the tax rates between paragraphs (1) and (2) of such section; and
            "(B) to the extended unemployment compensation account an amount equal to 50 percent of such amount of tax received.

                2.    Amendments to Sections 902 and 905, SSA:

                (b)  INCREASE IN THE LIMITATION ON THE AMOUNTS IN SUCH ACCOUNTS.-- (1) Section 902(a)(2) of such Act (42 U.S.C. 1102(a)(2)) is amended by striking out "one-eighth" and inserting in lieu thereof "five-eighths".
                (2) Section 905(b)(2)(B) of such Act (42 U.S.C. 1105(b)(2)(B)) is amended by striking out "one-eighth" and inserting in lieu thereof "three-eighths".

                3.    Conforming Amendments:
 

            (c)  CONFORMING AMENDMENTS.-- (1) Section 905(b)(1) of such Act (42 U.S.C. 1105(b)(1)) is amended by striking out the last sentence thereof.
            (2)  Section 901(c)(3)(C) of such Act (42 U.S.C. 1101(c)(3)(C)) is amended by striking out "(i)" and all that follows through the period and inserting in lieu thereof "a tax rate of 0.6 percent."

        o One account for each of the 53 States
        o Employment Security Administration Account
        o Extended Unemployment Compensation Account
        o Federal Unemployment Account
        o Federal Employees Compensation Account
        o Two accounts for Railroad Unemployment Insurance

Under present law, money is appropriated to the UTF for credit to the Employment Security Administration Account in amounts equal to 100 percent of the tax received under FUTA.  Monthly transfers are made from the Employment Security Administration Account to the Extended Unemployment Compensation Account within the requirements of Section 905(b)(1), SSA.

At the end of each fiscal year, the Secretary of Treasury determines (pursuant to Section 901(f)(1), SSA) if the amount in the Employment Security Administration Account exceeds the statutory limit in Section 901(f)(2), SSA.  If the excess is not retained in that account (in accordance with statutory requirements) the excess is transferred (pursuant to Section 901(f)(3), SSA) to the Extended Unemployment Compensation Account.  There is also statutory limit on this account and only that amount of the excess from the Employment Security Administration Account needed to reach the limit of the Extended Unemployment Compensation Account is transferred.  (Section 905(b)).

If the Secretary of Treasury determines there is an excess in the Employment Security Administration Account and the entire amount of such excess is not retained or transferred to the Extended Unemployment Compensation Account, then the excess is transferred to the Federal Unemployment Account up to the amount necessary for the Federal Unemployment Account to reach its statutory limit (Section 902(a), SSA).

Under the Budget Reconciliation Act of 1987 a new subsection (g) is added to Section 901.  Under this new subsection an amount equal to 50 percent of the 0.2 percent surtax imposed by Section 3301, FUTA, will be transferred to the Extended Unemployment Compensation Account and 50 percent to the Federal Unemployment Account.

In order to accumulate reserves in these accounts to help avoid future debt to the General Fund, the statutory limits in these two accounts have been raised from "one-eighth" to "five-eighths" of 1 percent of total wages covered under the State laws for the Federal Unemployment Account and from "one-eighth" to "three-eighths" of 1 percent of total wages covered under the State laws for the Extended Unemployment Compensation Account.

        C.    Implementation.  No changes are required in State law or procedure.

        D.    Effective Date.  These amendments became effective on December 22, 1987.

IV.    Section 9155.  Interest on Advances to the Federal Unemployment Account and the Extended Unemployment Compensation Account.

        A.    Text of Amendments.

                1.    Amendment to Section 905(d), SSA:

             (1) by striking out "(without interest)" and ", without interest,"; and
             (2) by adding the following new sentence at the end: "Amounts appropriated as repayable advances for purposes of this subsection shall bear interest at a rate equal to the average rate of interest, computed as of the end of the calendar month next preceding the date of such advance, borne by all interest bearing obligations of the United States then forming part of the public debt; except that in cases in which such average rate is not a multiple of one-eighth of 1 percent, the rate of interest shall be the multiple of one-eighth of 1 percent next lower than such average rate."

             (1) by striking out "(without interest)" and ", without interest,"; and
             (2) by adding the following new sentence at the end: "Amounts appropriated as repayable advances for purposes of this subsection shall bear interest at a rate equal to the average rate of interest, computed as of the end of the calendar month next preceding the date of such advance, borne by all interest bearing obligations of the United States then forming part of the public debt; except that in cases in which such average rate is not a multiple of one-eighth of 1 percent, the rate of interest shall be the multiple of one-eighth of 1 percent next lower than such average rate."

             (c) CONFORMING AMENDMENT.-- (1) Section 903(a)(1) of such Act (42 U.S.C. 1103(a)(1)) is amended by inserting "and interest" after "all advances".

Under previous law these appropriated sums were advances, repayable without interest.  The Budget Reconciliation Act of 1987 amends Sections 903(d) and 1203, SSA, to require that future advances to the Extended Unemployment Compensation Account and Federal Unemployment Account be repaid with interest.  The interest rate will be the same rate borne by all interest bearing obligations of the United States then forming part of the public debt.

        C.    Implementation. No changes are required in State law or procedure.

        D.    Effective Date.  These amendments shall apply to advances made on or after December 22, 1987.

V.    Section 9156.  Crediting Interest Earned on Advances to the States to the Federal Unemployment Account.

        A.    New Subsection to 1202, SSA:

                "(c)  Interest paid by States in accordance with this section shall be credited to the Federal Unemployment Account established by section 904(g) in the Unemployment Trust Fund."

        C.    Implementation.  No changes are required in State law or procedure.

        D.    Effective Date.  This amendment shall apply to interest paid on advances made on or after December 22, 1987.