Employment and Training Administration
Washington, D. C. 20210






August 26, 1991




August 31, 1992











for Regional Management




Unemployment Fund Cash Management

  1. Purpose. To provide information to State employment security agencies (SESAs) on the Cash Management Improvement Act of 1990 (CMIA) and its implications for State unemployment fund cash management.

  2. Reference. Cash Management Improvement Act (PL 101-453); Unemployment Insurance Program Letter No. 54-86 (August 15, 1986); 55 Federal Register 20404 (May 16, 1990).

  3. Background. The Unemployment Insurance Service (UIS) has been committed to the improvement of the FederalState unemployment insurance (UI) cash management system. To accomplish that goal, a long-term project to devise a comprehensive unemployment fund cash management program was instituted. The proposed program, developed after careful analysis, review, and consultation within the UI system, was published for comment in the Federal Register on May 16, 1990. Comments were received from 27 States (including SESAs, State Treasurers and Comptrollers) and other interested parties (OMB, the National Association of State Auditors, Comptrollers, and Treasurers).

    While the UIS was evaluating comments to the proposed program, the CMIA was enacted. The CMIA contains specific provisions for the Unemployment Trust Fund (UTF) which do not comport with the proposed program published in the Federal Register or with present UIS cash management policy. Therefore, publication of a final Federal Register notice, promulgating the official cash management program was suspended.

  4. CMIA. The purpose of the CMIA is to achieve sound cash management by the States and the Federal Government. Although the interest exchange provisions are critical elements of the legislation, they are a method of discipline, not a vehicle for the generation of income for either the States or the Federal Government. The CMIA requires the Secretary of Treasury to execute agreements with individual States by October 24, 1992, to stipulate drawdown and disbursement practices for Federal program purposes, including the UTF. The CMIA also requires the Treasury Department to publish regulations implementing the CMIA by October 24, 1992. The UIS is participating in the drafting of the sections of Treasury regulations dealing with the UTF. UIS will also assist the Treasury in the negotiation and execution of State Agreements. The CMIA does not address State collection activities such as the deposit and transfer of funds for the UTF.

  5. Impact of CMIA on UTF Cash Management. 

    1. Performance Measures.

      UIS will propose changes to UTF cash management performance measures after final Treasury regulations have been issued. Those proposed performance measures will contain deposit and transfer measures in accordance with the immediate deposit requirements of the Social Security Act and the Federal Unemployment Tax Act, and withdrawal measures in concert with provisions of the Treasury regulations and State agreements. States will be afforded opportunity for comment, through a UIPL or Federal Register notice, on all proposed performance measures. UIS received numerous comments on deposit issues and performance measures in response to the May 16, 1990, Federal Register notice, which will be carefully considered in the development of new performance measures.

      State Agreements and Treasury regulations will provide a framework for UIS performance measures for benefit payment account cash management (drawdown from the UTF and disbursement of benefit payments).

    2. Bank Compensation.

    The CMIA permits the deduction of "related banking costs" from "actual interest earnings" on benefit payment account balances before deposit to the UTF. The extent of this departure from current policy, which is that States may use Title III funds for payment of bank charges for clearing and benefit payment accounts, will be addressed in the Treasury regulations andor UIS directives. State Agreements and regulations will define, and likely limit, interest earnings and related banking costs.

  6. Next Steps. 

    1. Until new performance measures are adopted, the current desired levels of achievement (DLAs) will be used to measure State unemployment fund cash management performance (see UIPL 54-86, dated August 15, 1986). Those DLAs are:

      • Deposit 90% of employer contributions into the clearing account within three days of receipt;

      • Transfer funds to the UTF within 2 business days of deposit into the clearing account; and

      • Withdraw from the State account in the UTF an amount sufficient to maintain in the benefit payment account a balance equal to not more than one day's benefit payment requirement from the account.

    2. The Treasury Department will publish proposed regulations and model State agreements for comment in the Federal Register. UIS will inform SESAs of the publication date.

    3. UIS will participate in the negotiation of individual State agreements. SESAs should become involved with the State agency representing the State in the negotiations to relay SESA goals and objectives, and to address specific UTF procedures in the agreement. The list of State contacts for CMIA is attached.

    4. UIS will revisit all cash management performance measures and reports so that they comport with CMIA and Treasury regulations. Any proposed changes will be shared with SESAs for comment.

    5. UIS will keep SESAs informed of the progress in implementing the CMIA.

  7. Action Required. SESAs should share the content of this directive with all appropriate staff, including State Treasurer and Comptroller staff.

  8. Inquiries. Questions should be addressed to the appropriate Regional Office.

  9. Attachment. State CMIA contacts.