Federal Additional Compensation nonreduction rule

UIPL24-10acc.pdf (https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2010/UIPL24-10acc.pdf)

                                                            CLASSIFICATION
      Employment and Training Administration                Federal Additional Compensation
                 Advisory System                            (FAC)
            U.S. Department of Labor                        CORRESPONDENCE SYMBOL
             Washington, D.C. 20210                         DL
                                                            DATE
                                                            May 26, 2010


ADVISORY:            UNEMPLOYMENT INSURANCE PROGRAM LETTER No. 24-10

TO:                  STATE WORKFORCE AGENCIES

FROM:                JANE OATES /s/
                     Assistant Secretary

SUBJECT:             Federal Additional Compensation – Application of the Nonreduction Rule

1. Purpose. To provide additional guidance on the “Nonreduction Rule” under the Federal
   Additional Compensation (FAC) program.

2. References. Section 2002 (the FAC law) of Division B, Title II (Assistance for Unemployed
   Workers and Struggling Families Act), of the American Recovery and Reinvestment Act of
   2009, Public Law No. 111-5 (hereafter the FAC law); and Unemployment Insurance Program
   Letter (UIPL) Nos. 11-09 and 14-09.

3. Background. The FAC program provides a $25 supplement to the weekly payment of all
   forms of unemployment compensation (UC), except state additional compensation. FAC is
   paid from Federal general revenues and is administered by the states under agreement between
   the states and the U.S. Department of Labor.

  The FAC law contains a “Nonreduction Rule” under which a state’s agreement will be
  terminated if the Department determines that the “method governing the computation of
  regular compensation” under the state’s UC law has been modified so that—

              (1) the average weekly benefit amount of regular compensation
                  which will be payable during the period of the agreement
                  (determined disregarding any additional amounts attributable to
                  the modification described in subsection (b)(1) [that is, the $25
                  FAC supplement]) will be less than



 RESCISSIONS                                             EXPIRATION DATE
 None                                                    Continuing

               (2) the average weekly benefit amount of regular compensation
                   which would otherwise have been payable during such period
                   under the State law, as in effect on December 31, 2008.

  See Section 2002(c) of the FAC law for the full text of the Nonreduction Rule. Although UIPL No.
  11-09 provided a general statement regarding this Nonreduction Rule, it did not provide any guidance
  regarding its specific applications. Since that UIPL was issued, the Department has received inquiries
  regarding specific applications. This UIPL, using a Question and Answer (Q&A) format, responds to
  these inquiries.

4. Action. State administrators should distribute this advisory to appropriate staff.

5. Inquiries. Questions should be addressed to your Regional Office.

6. Attachment. FAC Nonreduction Rule – Questions and Answers

UIPL24-10a1.pdf (https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2010/UIPL24-10a1.pdf)

                                                                                     Attachment

                                   FAC Nonreduction Rule
                                   Questions and Answers


Method of Computing the Weekly Benefit Amount

1. Question: The Nonreduction Rule applies to the “method governing the computation of
regular compensation” under the state’s UC law. What does this mean?

Answer: This language refers only to the state’s mathematical formula for computing an
individual’s weekly benefit amount (WBA), including any dependent’s allowance. The language
precludes states from substituting the federally-funded FAC for state-financed benefits by, for
example, applying an across-the-board reduction in WBAs for regular compensation by an
amount equal to the FAC.

The Nonreduction Rule does not apply to provisions of state UC law addressing—

   •   The base period, including wages needed to qualify for UC and alternative base periods
       (ABPs). Base period provisions determine whether an individual has sufficient labor
       force attachment to qualify for UC in the first place, an event that precedes the
       computation of the WBA. As a result, a state may, under UIPL No. 14-09, add an ABP
       to qualify for a UC modernization incentive payment, without triggering application of
       the Nonreduction Rule.

   •   The number of weeks of UC payable with respect to a benefit year. These provisions
       affect the duration of UC, not the computation of the WBA.

   •   Nonmonetary eligibility provisions such as able and available requirements, voluntary
       quits, discharges for misconduct, or refusals of suitable work. As the term “nonmonetary
       eligibility” suggests, these eligibility matters are unrelated to the “method of computing”
       the WBA.

   •   Waiting periods. These provisions address how long an individual must wait before
       becoming eligible to receive UC, not the method of computing the WBA.

   •   Reductions in UC due to earnings, retirement pay, severance pay, wages in lieu of notice,
       or other payments. These reductions are made after the state has applied its “method” for
       computing the individual’s WBA.

   •   Permissible intercepts from UC, such as recoveries of overpayments or intercepts of child
       support. These intercepts are made after the state has applied its “method” for computing
       the individual’s WBA.

   •   Penalties for fraud claims, including reduction in benefit rights and additional
       assessments such as interest, fines and penalty amounts. These provisions impose
       penalties and are not part of the “method of computing” the WBA.

2. Question: Since the FAC program was created, the balance in my state’s unemployment fund
has dropped. If my state wants to amend its UC law to reduce the weekly benefits payable to
improve its solvency, does the Nonreduction Rule still apply?

Answer: Yes. The Nonreduction Rule does not contain an exception for actions related to state
solvency concerns.

3. Question. My state’s law, as in effect on December 31, 2008, provides that the WBA will be
adjusted each year based on the state-wide average weekly wage. Since this adjustment will
result in increasing the WBA, my state is considering temporarily suspending this adjustment.
Would such a suspension violate the Nonreduction Rule?

Answer: Yes. The Nonreduction Rule applies to the average WBA “which would otherwise
have been payable during such period under the State law, as in effect on December 31, 2008.”
(Emphasis added.) Thus, the suspension of a requirement for adjusting the WBA that was in
effect on December 31, 2008, violates the Nonreduction Rule.

Modification of WBA

4. Question: Does any reduction resulting from a change in the method of computing the WBA
of regular compensation mean the FAC agreement will be terminated?

Answer: No. The FAC law precludes only a modification resulting in an average WBA payable
during the period of the agreement that is less than the average WBA which would otherwise
have been payable under the State law as in effect on December 31, 2008. This means the FAC
law permits a change in the method that reduces the WBA but simultaneously is offset by a
different change in the method that increases the WBA.

Thus, for example, a state could change its method of computing the WBA to reduce the
maximum WBA while also changing its method of computing dependents’ allowances to result
in an increase. If this situation occurs, the Department will be required to determine if a decrease
in the average WBA has occurred. A state may not obtain this offset by using a law change
unrelated to the method of computing the WBA. For example, a change liberalizing
nonmonetary eligibility could not be used for this offset as it does not relate to the “method of
computing” the WBA.





Period of Applicability of Nonreduction Rule

5. Question. After what date may my state change the method of computing the WBA to reduce
the average WBA without violating the Nonreduction Rule?

Answer. The FAC law provides that a state may not reduce the average WBA “payable during
the period of the [FAC] agreement. . . .” While the FAC Agreements will continue in effect to
govern such matters as overpayments, Section 2002(e)(3) of the FAC law provides that FAC
ceases to be payable for weeks of unemployment beginning after December 7, 2010. Thus, the
Department interprets the Nonreduction Rule as applying to weeks of unemployment beginning
on or before December 7, 2010. As a result, to avoid issues under the Nonreduction Rule, any
change to state law resulting in a reduction of the average WBA must be made effective after this
date.

Note that, if the FAC law is amended to extend FAC to a new date beyond December 7, 2010,
the Nonreduction Rule also will be extended to the same new date.