Employment and Training Administration
Washington, D. C. 20210






March 14, 1996




March 31, 1997











Unemployment Insurance Service




Unemployment Compensation for Federal Employees (UCFE) Program Overpayments Made to Furloughed Employees

  1. Purpose. To provide State Employment Security Agencies (SESAs) with guidance and instructions to ensure that they and Federal agencies closely cooperate in the SESAs' establishment and recovery of UCFE overpayments made to furloughed Federal employees.

  2. References. Public Law (P.L.) 104-92; Subchapter I of Chapter 85 of Title 5 U.S.C.; 20 CFR Part 609; and ET Handbook No. 391.

  3. Background.

    1. General. During the recent partial shutdown of the Federal Government from December 15, 1995 to January 6, 1996, several SESAs issued UCFE payments to furloughed Federal employees for weeks of unemployment occurring during this period. P.L. 104-92 provided, in part, that all officers and employees of the affected Federal agencies were deemed to be performing services during the partial shutdown period and were issued retroactive salary payments for the period of their furlough. This should result in the establishment of overpayments by the SESAs which issued UCFE payments to furloughed employees for weeks of unemployment during the partial shutdown for which these Federal employees subsequently received retroactive salary payments.

      The SESA has the responsibility for determining if a UCFE program overpayment has occurred and commencing recovery actions on UCFE overpayments. Federal law at 5 U.S.C. 8502(b) provides that UCFE will be paid by the State to a Federal employee in the same amount, on the same terms, and subject to the same conditions as is provided to individuals covered under the applicable State's unemployment compensation (UC) law. For UCFE purposes, the applicable State is the State to which the individual's Federal wages were assigned under 5 U.S.C. 8504 (or 20 CFR 609.8).

      Further, the UCFE program regulations at 20 CFR 609.11 provide, in part, that the establishment and recovery of UCFE overpayments are made under provisions of the applicable State's UC law, including if the State law requires the employer, rather than the claimant, to reimburse the State for the overpayment. The UCFE program operating procedures for the establishment and recovery of overpayments are contained in Chapter XXI of ET Handbook No. 391 (see Change No. 1, dated May 1985). The regulations at 20 CFR 609.11(c) also provide that SESAs may take all actions provided under any State or Federal law to recover any outstanding UCFE overpayment amount.

    2. Effect of UCFE payments to furloughed employees on the Benefits Quality Control (BQC) sample. Once a SESA issues a UCFE payment, there is a potential that the payment may be selected for the BQC sample. Payments made to furloughed Federal employees are thus valid parts of the BQC sample and consistent with BQC policy, should be pursued by BQC regardless of any subsequent actions such as the payment being returned by the claimant or an overpayment being established. If sampled, SESA BQC units should treat these UCFE payments as normal BQC cases, and the SESA BQC units should evaluate them based on all applicable eligibility criteria.

      State BQC units should take into consideration that in these unique cases, SESAs have made payments based on all the facts that existed at the time the payment was issued. Therefore, a legislative change that occurred after the payment was issued should not in and of itself, affect the propriety of the case for BQC purposes. In other words, receipt of compensation for the period of the Federal furlough should not by itself constitute an improper payment for BQC coding.

  4. Information Provided Federal Agencies. The Department has notified Federal agencies that the SESAs will likely establish overpayments on the claims of furloughed Federal employees who received UCFE payments for weeks of unemployment during the December 15, 1995 through January 6, 1996 partial Federal Government shutdown. Federal agencies were asked to provide retroactive salary information to the SESAs that made UCFE payments to furloughed Federal employees and to cooperate with the SESAs in their overpayment establishment and recovery activities.

  5. Action Required. SESAs are requested to:

    1. Share the contents of this directive with all appropriate staff, including the BQC Supervisor;

    2. Review SESA UCFE payment records to determine if payments were made to furloughed Federal employees for weeks beginning between December 15, 1995, and January 6, 1996;

    3. Determine whether UCFE payment(s) made to furloughed Federal employees for weeks beginning during the above period constitute an overpayment under State law;

    4. If such payments do constitute an overpayment under State law, obtain from the current employing Federal agency of each furloughed employee who was paid UCFE during this period

      (1) The amount of the retroactive salary payment made to the furloughed employee, and

      (2) The weeks to which the retroactive salary payment applies;

    5. Establish UCFE overpayments in accordance with the provisions of State UC law;

    6. Initiate all overpayment recovery actions permitted under the UCFE program, including, if contained in the State's law, provisions requiring the employer, rather than the claimant to reimburse the State for the overpayment; and

    7. Fully cooperate with the Federal agencies in any UCFE overpayment determination and recovery activities.

  6. Inquiries. Please direct any inquiries regarding this directive to the appropriate Regional Office.