Unemployment Insurance: Legislative Issues in the 112th Congress
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Unemployment Insurance: Legislative Issues
in the 112th Congress
(name redacted)
Specialist in Income Security
(name redacted)
Analyst in Income Security
January 3, 2013
Congressional Research Service
7-....
www.crs.gov
R41662
CRS Report for Congress
Prepared for Members and Committees of Congress
Unemployment Insurance: Legislative Issues in the 112th Congress
Summary
The 112th Congress considered a number of issues related to currently available unemployment
insurance programs: Unemployment Compensation (UC), temporary Emergency Unemployment
Compensation (EUC08), and Extended Benefits (EB). With the national unemployment rate
decreasing but still high, the weekly demand for regular and extended unemployment benefits
continued at high levels. Congress deliberated multiple times on whether to extend the
authorization for several key temporary unemployment insurance provisions. The EUC08
program, along with temporary provisions surrounding EB, had been set to expire at the end of
2012. The signing of H.R. 8 on January 2, 2013, now means that the EUC08 program is
scheduled to expire the week ending on or before January 1, 2014. The 100% federal financing of
the EB program will expire on December 31, 2013. In addition, the option for states to use threeyear EB trigger lookbacks expires the week ending on or before December 31, 2013.
The 112th Congress faced these expirations as well as likely unemployment insurance policy
issues, including unemployment insurance financing. In addition, a temporary 0.2% federal
unemployment tax (FUTA) surtax expired at the end of June 2011. Among other items, policy
discussions focused on the appropriate length and availability conditions of unemployment
benefits.
This report provides a brief overview of the three unemployment insurance programs—UC,
EUC08, and EB—that may currently pay benefits to eligible unemployed workers. This report
discusses relevant legislation introduced in the 112th Congress: specifically, H.R. 1745, S. 386,
H.R. 650, H.R. 589, H.R. 1663, H.R. 235, S. 310, H.R. 569, H.R. 2001, H.R. 2120, H.R. 2137,
H.R. 2731, H.R. 2806, H.R. 2868, S. 1743, H.R. 3346, S. 1804, S. 1826, H.R. 3427, S. 1885, S.
1931, S. 1944, H.R. 3598, H.R. 3601, H.R. 3630, H.R. 3615, H.R. 3638, H.R. 3743, H.R. 494, S.
2095, S. 2081, a proposal outlined in the President’s Budget Proposal for FY2013, as well as the
President’s American Jobs Act of 2011 proposal (introduced in Congress as S. 1549, H.R. 12, and
S. 1660). This report also discusses the implications for the UI programs with respect to
provisions in H.R. 2693, S.Amdt. 581 to S. 1323, P.L. 112-25, P.L. 112-40, P.L. 112-78, P.L. 11296, and H.R. 8.
This report will not be updated.
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Unemployment Insurance: Legislative Issues in the 112th Congress
Contents
Overview of Unemployment Insurance Programs ........................................................................... 1
Unemployment Compensation Program ................................................................................... 1
Emergency Unemployment Compensation Program ................................................................ 2
Current EUC08 Benefit Availability ................................................................................... 2
Impact of Federal “Non-Reduction” Rule on State UC Laws ............................................. 3
Extended Benefit Program ........................................................................................................ 5
Enacted Legislation in 112th Congress ............................................................................................. 6
Budget Control Act of 2011 (P.L. 112-25) ................................................................................. 6
The Trade Adjustment Assistance Extension Act of 2011 (P.L. 112-40) .................................. 6
The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) ................................ 7
The Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) .............................. 7
Unemployment Insurance Extensions in P.L. 112-96: Changes in EUC08
Structure and Maintenance of EB Provisions................................................................... 7
Unemployment Compensation Reforms in P.L. 112-96 .................................................... 10
Emergency Unemployment Compensation Reforms and Reemployment
Strategies for Claimants in P.L. 112-96 .......................................................................... 11
Short-Time Compensation and Self-Employment Assistance Provisions in P.L.
112-96 ............................................................................................................................ 11
The American Taxpayer Relief Act of 2012, H.R. 8................................................................ 12
Legislative Proposals ..................................................................................................................... 13
Unemployment Insurance Provisions in the President’s American Jobs Act of 2011
Proposal (Title III, Subtitle A: Supporting Unemployed Workers Act of 2011)/S.
1549/H.R. 12/S. 1660 ........................................................................................................... 13
Extension of Federal UI Provisions: EUC08, 100% EB Federal Financing, and
EB Three-Year Lookback Trigger Option ...................................................................... 13
Reemployment Services .................................................................................................... 13
Self-Employment Assistance............................................................................................. 14
Railroad Retirement Benefits ............................................................................................ 14
Reemployment NOW Program and Funding Opportunities ............................................. 14
Short-time Compensation Programs (“Worksharing”) ...................................................... 15
Long-Term Unemployed Work Opportunity Credits ........................................................ 16
The Emergency Unemployment Compensation Extension Act of 2011 (H.R. 3346/S.
1804)..................................................................................................................................... 16
Other Legislative Proposals to Extend Expiring UI Provisions .............................................. 17
H.R. 1745, the JOBS Act of 2011 ............................................................................................ 17
Alleviating State Unemployment Compensation Stress .......................................................... 18
President’s Budget Proposal for FY2013 .......................................................................... 18
Other Proposals to Alleviate State Unemployment Compensation Stress......................... 19
Additional Benefits for UI Exhaustees .................................................................................... 19
Other Legislation ..................................................................................................................... 20
Drug Testing ...................................................................................................................... 20
Electronic Benefit Transfer Fees ....................................................................................... 20
Unemployment Insurance and Millionaires ...................................................................... 21
Self-Employment Assistance............................................................................................. 21
Demonstration Projects ..................................................................................................... 22
Suspending Taxation of Unemployment Benefits ............................................................. 23
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Unemployment Insurance: Legislative Issues in the 112th Congress
Tax Credits for Hiring UI Exhaustees ............................................................................... 23
Training and Unemployment Insurance ............................................................................ 23
Work Search and Unemployment Insurance Eligibility .................................................... 24
Figures
Figure 1. P.L. 112-96 Changes to EUC08 Program ......................................................................... 9
Contacts
Author Contact Information........................................................................................................... 24
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Unemployment Insurance: Legislative Issues in the 112th Congress
T
he unemployment insurance (UI) system has two primary objectives: (1) to provide
temporary, partial wage replacement for involuntarily unemployed workers; and (2) to
stabilize the economy during recessions. In support of these goals, several UI programs
may currently provide benefits for unemployed workers.
Overview of Unemployment Insurance Programs
In general, when eligible workers lose their jobs, the joint federal-state Unemployment
Compensation (UC) program may provide up to 26 weeks of income support through the
payment of regular UC benefits. UC benefits may be extended in two ways: (1) for up to 47
weeks by the temporarily authorized Emergency Unemployment Compensation (EUC08)
program; and (2) for up to 13 or 20 weeks by the Extended Benefit (EB) program if certain
economic situations exist within the state.1
Unemployment Compensation Program
The joint federal-state UC program, authorized by the Social Security Act of 1935 (P.L. 74-271),
provides unemployment benefits for up to a maximum of 26 weeks.2 Former U.S. military
servicemembers may be eligible for unemployment benefits through the unemployment
compensation for ex-servicemembers (UCX) program.3 The Emergency Unemployment
Compensation Act of 1991 (P.L. 102-164) provides that ex-servicemembers be treated the same
as other unemployed workers with respect to benefit levels, the waiting period for benefits, and
benefit duration.
Although federal laws and regulations provide broad guidelines on UC benefit coverage,
eligibility, and benefit determination, the specifics regarding UC benefits are determined by each
state. This results in essentially 53 different programs.4 Generally, UC eligibility is based on
attaining qualified wages and employment in covered work over a 12-month period (called a base
period) prior to unemployment. All states require a worker to have earned a certain amount of
wages or to have worked for a certain period of time (or both) within the base period to be
monetarily eligible to receive any UC benefits. The methods states use to determine monetary
1
For detailed information on each of these programs, see CRS Report RL33362, Unemployment Insurance: Programs
and Benefits, by (name redacted) a nd (name redacted). Certain groups of workers may qualify for income s upport
from additional UI programs, including Trade Adjustment Assistance (TAA), Reemployment Trade Adjustment
Assistance (RTAA), and Disaster Unemployment Assistance (DUA). Workers who lose their jobs because of
international competition may qualify for income support through the TAA program or the RTAA (for certain workers
aged 50 or older). Workers may be eligible to receive DUA benefits if they are not eligible for regular UC and their
unemployment may be directly attributed to a declared natural disaster. For more information on the TAA and RTAA
programs, see CRS Report R42012, Trade Adjustment Assistance for Workers, by (name redacted).
2
Arkansas and Illinois provide up to 25 weeks; Michigan, Missouri, and South Carolina provide up to 20 weeks; and
the maximum duration of UC in Florida and Georgia is variable, based on the state unemployment rates. For more
details on these states with less than 26 weeks of UC available, see CRS Report R41859, Unemployment Insurance:
Consequences of Changes in State Unemployment Compensation Laws, by (name redacted). In addition, the maximum
UC duration is 28 weeks in Montana and 30 weeks in Massachusetts. In conjunction with federal unemployment
benefits, however, UC duration is capped at 26 weeks.
3
For more information on the UCX program, see CRS Report RS22440, Unemployment Compensation (Insurance)
and Military Service, by (name redacted).
4
The District of Columbia, Puerto Rico, and the Virgin Islands are considered to be states in UC law.
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Unemployment Insurance: Legislative Issues in the 112th Congress
eligibility vary greatly. Most state benefit formulas replace approximately half of a claimant’s
average weekly wage up to a weekly maximum.
The UC program is financed by federal taxes under the Federal Unemployment Tax Act (FUTA)
and by state payroll taxes under the State Unemployment Tax Acts (SUTA). The 0.6% effective
net FUTA tax paid by employers on the first $7,000 of each employee’s earnings ($42 per worker
per year) funds both federal and state administrative costs, loans to insolvent state UC accounts,
the federal share (50% under permanent law, 100% temporarily under current law) of EB
payments, and state employment services.5
SUTA taxes on employers are limited by federal law to funding regular UC benefits and the state
share (50% under permanent law, 0% temporarily under current law) of EB payments. Federal
law requires that the state tax be on at least the first $7,000 of each employee’s earnings (it may
be more) and requires that the maximum state tax rate be at least 5.4%. Federal law also requires
the state tax rate to be based on the amount of UC paid to former employees (known as
“experience rating”). Within these broad requirements, states have great flexibility in determining
the SUTA structure of their state. Generally, the more UC benefits paid out to its former
employees, the higher the tax rate of the employer, up to a maximum established by state law.
Funds from FUTA and SUTA are deposited in the appropriate accounts within the Unemployment
Trust Fund (UTF).
Emergency Unemployment Compensation Program
On June 30, 2008, President George W. Bush signed the Supplemental Appropriations Act of
2008 (P.L. 110-252), which created a new temporary unemployment insurance program, the
Emergency Unemployment Compensation (EUC08) program. This was the eighth time Congress
had created a federal temporary program to extend unemployment compensation during an
economic slowdown.6 State UC agencies administer the EUC08 benefit along with regular UC
benefits. The authorization for this program has been extended multiple times and currently is
authorized through the week ending on or before January 1, 2014.
Current EUC08 Benefit Availability
The EUC08 program has been amended eleven times, most recently by H.R. 8.7 The EUC08
benefit amount is equal to the eligible individual’s weekly regular UC benefits and includes any
applicable dependents’ allowances. The most recent modifications to the underlying structure of
5
FUTA imposes a 6.0% gross tax rate on the first $7,000 paid annually by employers to each employee. Employers in
states with programs approved by the federal government and with no delinquent federal loans may credit 5.4
percentage points against the 6.0% tax rate, making the minimum net federal unemployment tax rate 0.6%. See CRS
Report RS22954, The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States, by (name red
acted), for details on how delinquent loans affect the net FUTA tax.
6
The other programs became effective in 1958, 1961, 1972, 1975, 1982, 1991, and 2002. For more details on these
programs, see CRS Report RL34340, Extending Unemployment Compensation Benefits During Recessions, by (name red
acted) and (name redacted).
7
The eleven amendments are P.L. 110-449, P.L. 111-5, P.L. 111-92, P.L. 111-118, P.L. 111-144, P.L. 111-157, P.L.
111-205, P.L. 111-312, P.L. 112-78, P.L. 112-96, and H.R. 8. Summary details on all of these laws are provided in
Table 1 of CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by
(name redacted) and (name redacted).
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the EUC08 program were made by P.L. 112-96. These modifications included changes to the
number of weeks available in each EUC08 tier as well as the state unemployment rates required
to have an active tier in that state. These requirements were implemented during 2012 in three
separate phases.8 Currently the following weeks of benefits are available in the tiers listed below:
•
Tier I is available in all states, with up to 14 weeks of EUC08 benefits provided
to eligible individuals.
•
Tier II is available if the state’s total unemployment rate (TUR)9 is at least 6%,
with up to 14 weeks provided to eligible individuals in those states.
•
Tier III is available if the state’s TUR is at least 7% (or an insured
unemployment rate, IUR,10 of at least 4%), with up to 9 weeks of provided to
eligible individuals in those states.
•
Tier IV is if the state’s TUR is at least 9% or the IUR is 5%, with up to 10 weeks
provided to eligible individuals in those states.
Current EUC08 Program Expiration
All tiers of EUC08 benefits are temporary and expire in the week ending on or before January 1,
2014. Thus, on December 28, 2013 (December 29, 2013, for New York), the EUC08 program
ends. There is no grandfathering of any EUC08 benefit after that date.
Impact of Federal “Non-Reduction” Rule on State UC Laws
In response to similar state UC financial stress following prior recessions, states typically reduced
the amount of UC benefits paid to individuals through reductions in the maximum benefit amount
or through changes in the underlying benefit calculations. Under two temporary provisions in
federal law, however, most states were prohibited from reducing UC benefit amounts through
changes to benefit calculation from February 2009 through December 2013.11 The
implementation of this “non-reduction” rule coincided with new state actions that reduced UC
8
See CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by (name red
acted) and (name redacted)
, for details on how these changes were implemented.
9
The TUR is the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. The
TUR is essentially a weekly version of the unemployment rate published by the Bureau of Labor Statistics (BLS) and
based on data from the BLS’ monthly Current Population Survey.
10
The IUR is the ratio of UC claimants divided by individuals in UC-covered jobs. The IUR is substantially different
from the TUR because it excludes several important groups: self-employed workers, unpaid family workers, workers in
certain not-for-profit organizations, and several other, primarily seasonal, categories of workers. In addition to those
unemployed workers whose last jobs were in the excluded employment, the insured unemployed rate excludes the
following: those who have exhausted their UC benefits (even if they receive EB or EUC08 benefits); new entrants or
reentrants to the labor force; disqualified workers whose unemployment is considered to have resulted from their own
actions rather than from economic conditions; and eligible unemployed persons who do not file for benefits.
11
An exception was made P.L. 112-96 which maintains the “nonreduction rule” for the calculation of the regular UC
benefit amount, except in the case of state legislation that was enacted before March 1, 2012, but would not have taken
effect before January 1, 2012. The “nonreduction” rule prohibits states from decreasing average weekly benefit
amounts without invalidating their EUC08 federal-state agreements. States that made changes to the regular UC benefit
amount prior to March 1, 2012, however, would not invalidate their EUC08 federal-state agreements.
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Unemployment Insurance: Legislative Issues in the 112th Congress
benefit duration as an alternative means to decrease total UC benefit payments.12 As a result,
these changes in state UC benefit duration may be a state response to state UC financing shortfall.
The durations for current federal unemployment benefits—each tier of the EUC08 program and
any EB periods—are calculated based on state UC benefit duration. Thus, states that have enacted
laws to reduce the duration of regular UC benefits have also reduced the duration of EUC08 and
EB benefits.
Seven states have acted to decrease their maximum UC benefit durations after the non-reduction
rule was enacted:
•
Arkansas decreased its state UC maximum duration from 26 weeks to 25 weeks,
effective March 30, 2011.
•
Florida decreased the maximum UC duration from 26 weeks to a variable
maximum duration, depending on the state unemployment rate and ranging from
12 weeks up to 23 weeks. Up to 12 weeks will be available if the state
unemployment rate is 5% or less. Each 0.5% increase in the state unemployment
rate above 5% will add an additional week of UC benefit duration. Finally, up to
23 weeks of regular UC benefits will be available if the state unemployment rate
is at least 10.5%. This benefit reduction was effective January 1, 2012.
•
Georgia decreased its UC maximum duration from 26 weeks to a variable
maximum duration that ranges between 14 weeks and 20 weeks, depending on
the unemployment rate in the state. A maximum UC duration of 14 weeks will be
available if the state unemployment rate is 6.5% or less. Each 0.5% increase in
the state unemployment rate above 6.5% will add additional weeks of UC benefit
duration up to a maximum of 20 weeks of UC benefits if the state unemployment
rate is at least 9%. This benefit reduction was effective May 2, 2012.
•
Illinois decreased its UC maximum duration from 26 weeks to 25 weeks,
effective January 1, 2012.
•
Michigan decreased its UC maximum duration from 26 weeks to 20 weeks. This
change was effective for individuals filing an initial claim for UC benefits on or
after January 15, 2012.
•
Missouri decreased its UC maximum duration from 26 weeks to 20 weeks,
effective April 13, 2011.
•
South Carolina also decreased its UC maximum duration from 26 weeks to 20
weeks, effective June 14, 2011.
12
The current “nonreduction” rule was put into place when P.L. 111-205 amended P.L. 110-252. There was a similar,
but programmatically distinct “nonreduction” rule in P.L. 111-5, as amended, which prevented states from actively
changing the method of calculation of the UC weekly benefit amount to pay UC benefit amounts less than what would
have been paid under state law prior to December 31, 2008. No states acted to decrease UC benefit amounts between
December 31, 2008, and June 2, 2010, when the federal authorization for this earlier “nonreduction” rule expired.
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Extended Benefit Program
The EB program was established by the Federal-State Extended Unemployment Compensation
Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. 3304, note). EUCA may extend receipt of
unemployment benefits (extended benefits) at the state level if certain economic situations exist
within the state.
The EB program is triggered when a state’s insured unemployment rate (IUR) or total
unemployment rate (TUR) reaches certain levels.13 All states must pay up to 13 weeks of EB if
the IUR for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the
same 13-week period in each of the two previous years. There are two other optional thresholds
that states may choose. (States may choose one, two, or none.) If the state has chosen a given
option, they would provide the following:
•
Option 1: an additional 13 weeks of benefits if the state’s IUR is at least 6%,
regardless of previous years’ averages.
•
Option 2: an additional 13 weeks of benefits if the state’s TUR is at least 6.5%
and is at least 110% of the state’s average TUR for the same 13 weeks in either of
the previous two years; an additional 20 weeks of benefits if the state’s TUR is at
least 8% and is at least 110% of the state’s average TUR for the same 13 weeks
in either of the previous two years.
Each state’s IUR and TUR are determined by the state of residence (agent state) of the
unemployed worker rather than by the state of employment (liable state). EB benefits are not
“grandfathered” when a state triggers “off” the program. When a state triggers “off” of an EB
period, all EB benefit payments in the state cease immediately regardless of individual
entitlement.14
Temporary EB Trigger Modifications in P.L. 111-312
P.L. 111-312 made some technical changes to certain triggers in the EB program. P.L. 111-312, as
amended (most recently by H.R. 8), allows states to temporarily use lookback calculations based
on three years of unemployment rate data (rather than the current lookback of two years of data)
as part of their mandatory IUR and optional TUR triggers if states would otherwise trigger off or
not be on a period of EB benefits. Using a two-year versus a three-year EB trigger lookback is an
important adjustment because some states are likely to trigger off of their EB periods in the near
future despite high, sustained—but not increasing—unemployment rates.
13
The TUR is the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. The
TUR is essentially a weekly version of the unemployment rate published by the Bureau of Labor Statistics (BLS) and
based on data from the BLS’ monthly Current Population Survey. The IUR is the ratio of UC claimants divided by
individuals in UC-covered jobs. The IUR is substantially different from the TUR because it excludes several important
groups: self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several
other, primarily seasonal, categories of workers. In addition to those unemployed workers whose last jobs were in the
excluded employment, the insured unemployed rate excludes the following: those who have exhausted their UC
benefits (even if they receive EB or EUC08 benefits); new entrants or reentrants to the labor force; disqualified workers
whose unemployment is considered to have resulted from their own actions rather than from economic conditions; and
eligible unemployed persons who do not file for benefits.
14
EB benefits on interstate claims are limited to two extra weeks unless both the agent state (e.g., Texas) and liable
state (e.g., Louisiana) are in an EB period.
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Unemployment Insurance: Legislative Issues in the 112th Congress
States implement the lookback changes individually by amending their state UC laws. These state
law changes must be written in such a way that if the two-year lookback is working and the state
would have an active EB program, no action would be taken. But if a two-year lookback is not
working as part of an EB trigger and the state is not triggered on to an EB period, then the state
would be able to use a three-year lookback. Most recently, H.R. 8 extended the authorization for
the three-year EB trigger lookbacks. The authorization for the temporary EB trigger
modifications now expires the week ending on or before December 31, 2013.
The EB benefit amount is equal to the eligible individual’s weekly regular UC benefits. Under
permanent law, FUTA finances half (50%) of the EB payments and 100% of EB administrative
costs. States fund the other half (50%) of EB benefit costs through their SUTA. ARRA (P.L. 1115, most recently amended by H.R. 8) temporarily changed the federal-state funding arrangement
for the EB program. Currently, the FUTA finances 100% of EB benefits through December 31,
2013. The one exception to the 100% federal financing is for those EB benefits based on work in
state and local government employment; those “non-sharable” benefits continue to be 100%
financed by the former employers.
Enacted Legislation in 112th Congress
Budget Control Act of 2011 (P.L. 112-25)
On August 2, 2011, President Obama signed into law the most recent measure adjusting the
public debt limit, as part of the Budget Control Act of 2011 (P.L. 112-25).15 The Budget Control
Act of 2011 establishes special procedures for congressional increases to the debt limit authorized
by the act.16 In certain situations these procedures may have an impact on unemployment
insurance benefits.17
The law authorizes increases to the debt limit by at least $2.1 trillion (and up to $2.4 trillion) in
three installments: (1) an initial increase of $400 billion; (2) an additional increase of $500
billion; and (3) an additional increase of an amount between $1.2 trillion and $1.5 trillion,
depending on certain subsequent actions.
The Trade Adjustment Assistance Extension Act of 2011
(P.L. 112-40)
On September 2, 2011, P.L. 112-40, an act to extend the Generalized System of Preferences, and
for other purposes, was introduced by Representative Camp. Title II subsection C of the act
requires (1) states to charge employers’ account when UC overpayments are the fault (through
15
For a detailed analysis of the Budget Control Act of 2011, see CRS Report R42506, The Budget Control Act of 2011:
The Effects on Spending and the Budget Deficit When the Automatic Spending Cuts Are Implemented, by (name red
acted) and (name redacted).
16
For details on how the public debt limit is increased, see CRS Report RS21519, Legislative Procedures for Adjusting
the Public Debt Limit: A Brief Overview, by (name redacted)
17
For specifics of these implications on UC, EB, and EUC08 see the Unemployment Compensation section in CRS
Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules, coordinated by (name
redacted).
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action or inaction) of the employer, (2) states to assess a minimum 15% penalty on overpayments
due to claimant fraud, and (3) employers to report any “rehired employee” to the Directory of
New Hires. P.L. 112-40 was signed into law on October 21, 2011.
The Temporary Payroll Tax Cut Continuation Act of 2011
(P.L. 112-78)
P.L. 112-78, the Temporary Payroll Tax Cut Continuation Act of 2011, was introduced in the
House (by Representative Camp), passed by the House and the Senate, and signed into law by
President Obama on December 23, 2011. Among other provisions, P.L. 112-78 extended the
expiring UI laws for two months. Under P.L. 112-78, the authorization for the EUC08 program
was extended through the week ending on or before March 6, 2012; the 100% federal financing
of the EB program was extended until March 7, 2012; and the three-year lookback trigger option
for the EB program was extended until the week ending on or before February 29, 2012.
The Middle Class Tax Relief and Job Creation Act of 2012
(P.L. 112-96)
The Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96, signed on February 22,
2012) contained provisions that (1) made changes to the structure of the EUC08 program as well
as maintained temporary EB provisions; (2) reformed the UC program; (3) provided additional
reemployment services for EUC08 claimants; and (4) expanded the Short-Time Compensation
and Self-Employment Assistance programs in states.
Unemployment Insurance Extensions in P.L. 112-96: Changes in EUC08
Structure and Maintenance of EB Provisions
Under P.L. 112-96, the potential duration of EUC08 benefits available to eligible individuals was
altered. These changes are described in detail in CRS Report R42444, Emergency Unemployment
Compensation (EUC08): Current Status of Benefits, by (name redacted) and (name redacted).
Additionally, Figure 1 provides a graphical summary of the changes to EUC08 under P.L. 112-96
as well as the total potential maximum duration for UC and EUC08 benefits resulting from these
changes.
Extended EUC08 Program Expiration and Eliminated Phase-Down
P.L. 112-96 extended EUC08 through the week ending on or before January 2, 2013. The phasedown of the EUC08 program that had been available in previous extensions in the authorization
of EUC08 was eliminated by P.L. 112-96. Thus, there is no grandfathering of any EUC08 benefit
once the program’s authorization has ended.
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“Grandfathering” of EUC08 Benefits if Number of Weeks Available in Tier
Subsequently Increases (or Decreases)
P.L. 112-96 continued to allow individuals to be grandfathered into the available weeks of a
particular EUC08 tier at the date of entrance into that new tier even if the number of weeks
available in that tier increased or decreased after that calendar date.18
EB Financing and Railroad Benefits
P.L. 112-96 extended the 100% federal financing of EB through December 31, 2012, as well as
the option for states to use three-year lookbacks in their EB triggers until the week ending on or
before December 31, 2012.
P.L. 112-96 extended the temporary extended railroad unemployment benefits—authorized under
the American Recovery and Reinvestment Act (ARRA; P.L. 111-5), as amended—through
December 31, 2012, to be financed with funds still available under the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312).
18
For additional special considerations regarding the maximum potential weeks of EUC08 benefits available, see CRS
Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by (name redacted)
and (name redacted).
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Unemployment Insurance: Legislative Issues in the 112th Congress
Figure 1. P.L. 112-96 Changes to EUC08 Program
Source: Congressional Research Service
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Unemployment Insurance: Legislative Issues in the 112th Congress
Unemployment Compensation Reforms in P.L. 112-96
Able, Available, and Actively Seeking Work Requirement Formalized
While all states had some type of requirements for the unemployed to be “able, available, and
actively seeking work,” federal law did not require states to have such laws. Under P.L. 112-96,
federal law now stipulates that states must require all workers receiving UC to be “able, available,
and actively seeking” work.
Demonstration Projects Using UC Funds
P.L. 112-96 authorized the U.S. Department of Labor to allow up to 10 states to conduct
demonstration projects to improve and accelerate the reemployment of UC claimants—although
these projects would have to operate for at least one year and would be prohibited from increasing
the net costs to a state’s account in the UTF. The demonstrations would only provide subsidies for
employer-provided training, such as wage subsidies, or provide direct disbursements, not to
exceed the weekly benefit amount of an individual, to employers who hire individuals receiving
UC to pay part of the cost of wages that exceed the individual’s prior benefit level. The U.S.
Labor Secretary may waive the withdrawal standard if requested by the state (state UTF funds
would be allowed to be used for purposes other than paying unemployment benefits). The U.S.
Labor Secretary may also waive the merit employee requirement if requested by the state. No
demonstration project may be approved for more than three years and all projects are required to
end by December 31, 2015.19 As of the publication date of this report, no state demonstration
project has been approved.
Other Reforms
P.L. 112-96 required that states recover 100% of any erroneous overpayment by reducing up to
100% of the UC benefit in each week until the overpayment is fully recovered. This requirement
allows states to waive such deduction if it would be contrary to equity and good conscience. It
authorizes for states to recover Federal Additional Compensation (FAC) overpayments through
deductions to regular UC benefits.
P.L. 112-96 required that the U.S. Labor Secretary designate standard data elements for any
information required under title III or title IX of the Social Security Act (SSA).
P.L. 112-96 clarified federal law to allow (but does not require) states to engage in drug testing
certain UC claimants under certain circumstances.
19
See Unemployment Insurance Program Letter (UIPL) 15-12 for the U.S. Department of Labor’s guidance to states to
apply for permission to conduct a demonstration at http://wdr.doleta.gov/directives/attach/UIPL/uipl_15_12.pdf. For a
list of applications and determinations, see the section on “Reemployment Demonstrations” at http://ows.doleta.gov/
unemploy/jobcreact.asp.
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Emergency Unemployment Compensation Reforms and Reemployment
Strategies for Claimants in P.L. 112-96
P.L. 112-96 required that all individuals receiving EUC08 be “able, available, and actively
seeking” work. An active work search for EUC08 claimants requires individuals (1) to register
with reemployment services, as required by the state; (2) to actively search for work that is
appropriate for the individual’s skill level and labor market availability; (3) to maintain a record
of work search activities; and (4) to provide work search activities records to the state when
requested.
P.L. 112-96 required states to provide reemployment and eligibility assessments to certain EUC08
claimants. EUC08 claimants must participate in reemployment services if referred. P.L. 112-96
provides $85 in federal funding per EUC08 claimant who receives reemployment and eligibility
assessments.
Under P.L. 112-96, if an individual received an EUC08 benefit overpayment, states must offset
any unemployment benefit payable to that individual. Any offset must be made in the same
manner (and subject to the same equity and good conscience criteria if applicable) as a regular
UC overpayment offset under each state’s law.
P.L. 112-96 maintained the “nonreduction rule” for the calculation of the regular UC benefit
amount, except in the case of state legislation that was enacted before March 1, 2012. The
“nonreduction” rule prohibits states from decreasing average weekly benefit amounts without
invalidating their EUC08 federal-state agreements. Under P.L. 112-96, states that made changes
to the regular UC benefit amount prior to March 1, 2012, however, would not invalidate their
EUC08 federal-state agreements.
P.L. 112-96 required that states pay EUC08 benefits before EB benefits. Before the enactment of
P.L. 112-96, states had the option to pay EB first. Alaska was the only state to pay EB first.
Short-Time Compensation and Self-Employment Assistance Provisions
in P.L. 112-96
P.L. 112-96 clarified requirements related to short-time compensation (STC or “worksharing”)
programs and provides temporary federal financing to support state worksharing programs.20 P.L.
112-96 temporarily federally finances 100% of STC benefits for up to three years and six months
in states that meet the new definition of an STC program, with a transition period for states with
existing STC programs that do not meet the new definition (currently 23 states and the District of
Columbia have STC programs). States without existing STC programs may enter into an
agreement with the U.S. Department of Labor (DOL) in order to receive federal reimbursement
for administrative expenses, as well as temporary federal financing of 50% of STC payments to
individuals for up to two years, with employers paying the other 50% of STC benefit costs. If a
state enters into an agreement with the U.S. Secretary of Labor and then subsequently enacts a
20
Worksharing is a program within the federal-state UC system that provides pro-rated unemployment benefits to
workers whose hours have been reduced in lieu of a layoff. In a typical example of worksharing, a firm that needs to
reduce its 100-person workforce by 20% would, in lieu of laying off 20 workers, instead reduce the work hours of the
entire workforce by 20%, on a temporary basis. For additional details, see CRS Report R40689, Compensated Work
Sharing Arrangements (Short-Time Compensation) as an Alternative to Layoffs, by (name redacted).
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law providing for STC, that state would be eligible to receive 100% of federal financing. The
Labor Secretary may award grants to eligible states, with one-third of each state’s grant available
for implementation and improved administration purposes and two-thirds of each state’s grant
available for program promotion and enrollment of employers. The maximum amount of all
grants to states authorized under P.L. 112-96 was $100 million. An additional $1.5 million was
provided for the U.S. DOL to submit a report to Congress and the President, within four years of
enactment, on the implementation of this provision, including a description of states’ best
practices, analysis of significant challenges, and a survey of employers in all states to determine
the level of interest in STC.
Under P.L. 112-96, states were authorized to set up Self-Employment Assistance (SEA) programs
for individuals who (1) have at least 13 weeks of remaining benefit entitlement through the
EUC08 and EB programs and (2) are participating in entrepreneurial training activities.21 SEA
benefits under these programs are available to up to 1% of all EB and EUC08 claimants in each
participating state. The combined SEA benefits available from EB and EUC08 for any particular
individual may not exceed 26 total weeks. SEA benefits available to EUC08 and EB claimants, as
authorized by P.L. 112-96, are paid in the same amount as UC benefits and participants are
exempt from any work availability and work search requirements. An individual receiving these
SEA benefits is able to stop participation and receive any remaining EB or EUC08 benefits.
P.L. 112-96 provided $35 billion in SEA grant funding for FY2012 and FY2013 to be distributed
to states based on applications to the U.S. DOL. These funds may be used for the purposes of
establishing or improving administration of SEA programs for regular UC, EB, or EUC08
claimants as well as promoting and enrolling eligible individuals. These grants funds will be
distributed to states with approved applications based on the percentage of unemployed
individuals in that state relative to the percentage of unemployed individuals in all states. Finally,
P.L. 112-96 required the U.S. DOL to establish model language for states that participate in SEA
programs as well as requiring U.S. DOL to provide technical assistance to states and establish
reporting requirements.
The American Taxpayer Relief Act of 2012, H.R. 8
The American Taxpayer Relief Act of 2012 (H.R. 8, signed on January 2, 2013), among other
provisions, retroactively extended the authorization of the EUC08 program through the week
ending on before January 1, 2014. Thus, on December 28, 2013 (December 29, 2013, for New
York), the EUC08 program ends. H.R. 8 did not alter the elimination of the phase-down of the
EUC08 program that was enacted by P.L. 112-96. Thus, there is no grandfathering of any EUC08
benefit after that date.
H.R. 8 also extended the 100% federal financing of EB through December 31, 2013, as well as
the option for states to use three-year lookbacks in their EB triggers until the week ending on or
before December 31, 2013.
H.R. 8 also extended the temporary extended railroad unemployment benefits—authorized under
the American Recovery and Reinvestment Act (ARRA; P.L. 111-5), as amended—through
December 31, 2013, to be financed with funds still available under the Tax Relief, Unemployment
21
For more details on SEA, including SEA benefits authorized for UC claimants, see CRS Report R41253, The SelfEmployment Assistance (SEA) Program, by (name redacted).
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Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312). In addition, H.R. 8
appropriated $250,000 in general funds from the Treasury for administrative expenses.
Legislative Proposals
Unemployment Insurance Provisions in the President’s American
Jobs Act of 2011 Proposal (Title III, Subtitle A: Supporting
Unemployed Workers Act of 2011)22/S. 1549/H.R. 12/S. 1660
On September 13, 2011, Senator Reid introduced S. 1549, the American Jobs Act of 2011, by
request, which contains the legislative language of the President’s American Jobs Act of 2011
proposal. Also by request, Representative Larson introduced H.R. 12, the House companion
version of the American Jobs Act of 2011, on September 21, 2011.
S. 1660 contains the same UI provisions found in the President’s American Jobs Act of 2011, S.
1549, and H.R. 12. S. 1660 differs from the President’s American Jobs Act of 2011, S. 1549, and
H.R. 12 in some non-UI provisions proposed to offset the legislation.23
Extension of Federal UI Provisions: EUC08, 100% EB Federal Financing, and
EB Three-Year Lookback Trigger Option
The President’s American Jobs Act of 2011 proposal would provide a year-long extension of the
EUC08 authorization and the 100% federal financing of EB through calendar year 2012. In
addition, it would extend authorization for states to use three-year lookbacks for state EB triggers
during this period. It would not expand the number of weeks of unemployment benefits available
to the unemployed beyond what is currently available. (The proposal does not include a “tier V”
of EUC08 benefits.)
Reemployment Services
The President’s American Jobs Act of 2011 proposal would also impose new federal requirements
and appropriate new federal funds for states to provide reemployment and eligibility assessments
to certain EUC08 claimants. The proposal would require states to enter into agreements with the
U.S. DOL and require new EUC08 claimants to report to or check in with their local One-Stop
Career Centers. The President’s plan would provide $200 per unemployed worker in federal
funding for states to conduct Reemployment and Eligibility Assessments in order to review new
EUC08 claimants’ eligibility for benefits and provide an assessment of their work search efforts.
22
Based on legislative language released on September 12, 2011 (available online at http://www.whitehouse.gov/sites/
default/files/American_Jobs_Act.pdf).
23
For a more complete analysis of the American Jobs Act, including non-UI provisions, see CRS Report R42033,
American Jobs Act: Provisions for Hiring Targeted Groups, Preventing Layoffs, and for Unemployed and Low-Income
Workers, coordinated by (name redacted).
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Self-Employment Assistance
The President’s American Jobs Act of 2011 proposal would authorize states to enter into
agreements with the U.S. DOL to pay Self-Employment Assistance (SEA) benefits for up to 26
weeks to eligible individuals who (1) have at least 26 weeks of remaining benefit entitlement
through the EUC08 program and (2) are participating in entrepreneurial training activities. SEA
benefits would be paid in the same amount as EUC08 benefits and participants would be exempt
from the work availability and work search requirements under EUC08. SEA benefits would be
available to up to 1% of all EUC08 claimants in each participating state. An individual receiving
SEA benefits would be able to stop participation and receive any remaining EUC08 benefits.
States with agreements to pay SEA benefits would be able to use Reemployment NOW funds (see
description below) to finance SEA administrative, start-up costs, if specified in an approved state
Reemployment NOW plan.24
Railroad Retirement Benefits
The President’s American Jobs Act of 2011 proposal would extend the temporary extended
railroad unemployment benefits—authorized under the American Recovery and Reinvestment
Act (P.L. 111-5), as amended—for an additional year through June 30, 2012, to be financed with
funds still available under the Tax Relief, Unemployment Insurance Reauthorization, and Job
Creation Act of 2010 (P.L. 111-312).25
Reemployment NOW Program and Funding Opportunities
The President’s American Jobs Act of 2011 proposal would establish a “Reemployment NOW”
program with $4 billion in appropriations from the general fund of the Treasury. These federal
funds would be allotted to the states based on a two-part formula: (1) two-thirds would be
distributed to the states based upon the state share of the U.S. total number of unemployed
persons and (2) one-third would be distributed to the states based on the state share of the longterm unemployed (measured as unemployment spells of at least 27 weeks). Up to 1% of the funds
would be available for program administration and evaluation.
To receive a Reemployment NOW allotment, a state would have to submit a plan describing (1)
activities to assist the reemployment of eligible individuals; (2) performance measures; (3)
coordination of efforts with Title I of the Workforce Investment Act of 1998, the Wagner-Peyser
Act, and other appropriate federal programs; (4) timelines for implementation; (5) estimates of
quarterly enrollments; (6) assurances that the state will provide appropriate reemployment
services to any participating EUC08 claimants; and (7) assurances that the state will provide
information to the U.S. DOL relating to the fiscal, performance, and other matters, including
employment outcomes and program impacts that the U.S. DOL determines are necessary to
effectively monitor the activities. The U.S. DOL would be required to provide Congress and the
public with both guidance and program evaluation for activities conducted with Reemployment
NOW funds.
24
See CRS Report R41253, The Self-Employment Assistance (SEA) Program, by (name redacted), for additional
information on the permanent-law state option to provide SEA benefits to individuals eligible for regular, statefinanced UC.
25
For more details on unemployment benefits for railroad workers, see CRS Report RS22350, Railroad Retirement
Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits, by (name redacted).
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Allowable program uses of Reemployment NOW funds would include the following:
•
The “Bridge to Work” program would allow individuals to continue to receive
EUC08 benefits as wages for work performed in a short-term work experience
placement. The Bridge to Work placement would last up to eight weeks and
would be required to compensate claimants at a rate equivalent to the minimum
wage. The state would be permitted to augment the EUC08 benefit with
Reemployment NOW funds to meet this criteria (the EUC08 benefit would count
as wages for that calculation). For individuals participating at least 25 hours per
week in a Bridge to Work program, work search requirements would be
suspended during the participation and wages paid would not offset EUC08
benefit amounts. Any earnings acquired during program participation would not
be considered earnings for the purposes of employment taxes, but would be
treated as unemployment benefits for tax purposes.
•
Wage insurance would authorize states to provide an income supplement to
EUC08 claimants who secure reemployment at a lower wage than their separated
employment. The benefit level would be determined by the states, although it
could not be more than 50% of the difference between the worker’s wage at the
time of separation and the worker’s reemployment wage. States would also
establish a maximum benefit amount that an individual could collect. The
duration of wage insurance payments would be limited to two years. Wage
insurance under this proposal would also be limited to individuals who (1) are at
least 50 years of age; (2) earn not more than $50,000 per year from
reemployment; (3) are employed on a full-time basis as defined by the state; and
(4) are not employed by the same employer from which the individual was
separated.
•
Enhanced reemployment services would allow states to use funds to provide
EUC08 claimants and individuals who have exhausted all entitlements to EUC08
benefits with reemployment services that are more intensive than any
reemployment services provided by the states previously (for instance, one-onone assessments, counseling, or case management).
•
Start-up of SEA state programs would authorize states to use funds for any
administrative costs associated with the start-up of SEA agreements (as described
above).
•
Additional innovative programs would allow states to use funds for programs
other than the programs described above. These programs would be required to
facilitate the reemployment of EUC08 claimants, among other requirements.
Short-time Compensation Programs (“Worksharing”)
The President’s American Jobs Act of 2011 proposal would clarify requirements related to shorttime compensation (STC or “worksharing”) programs and provide temporary federal financing to
support state worksharing programs.26 This proposal would temporarily federally finance 100%
26
Worksharing is a program within the federal-state UC system that provides pro-rated unemployment benefits to
workers whose hours have been reduced in lieu of a layoff. In a typical example of worksharing, a firm that needs to
reduce its 100-person workforce by 20% would, in lieu of laying off 20 workers, instead reduce the work hours of the
entire workforce by 20%, on a temporary basis. For additional details, see CRS Report R40689, Compensated Work
(continued...)
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of STC benefits for up to three years in states that meet the new definition of an STC program,
with a transition period for states with existing STC programs that do not meet the new definition
(currently 23 states and the District of Columbia have STC programs). States without existing
STC programs would be allowed to enter into an agreement with the U.S. DOL for up to two
years in order to receive federal reimbursement for administrative expenses, as well as temporary
federal financing of 50% of STC payments to individuals, with employers paying the other 50%
of STC costs. Under this proposal, if a state enters into an agreement with the U.S. Secretary of
Labor and then subsequently enacts a law providing for STC, that state would be eligible to
receive 100% of federal financing. The President’s proposal would award U.S. DOL grants to
eligible states, with one-third of each state’s grant available for implementation and improved
administration purposes and two-thirds of each state’s grant available for program promotion and
enrollment of employers. The maximum amount of all grants to states would be $700 million.
Finally, this proposal would provide $1.5 million for the U.S. DOL to submit a report to Congress
and the President, within four years of enactment, on the implementation of this provision,
including a description of states’ best practices, analysis of significant challenges, and a survey of
employers in states without STC programs.
Long-Term Unemployed Work Opportunity Credits
The President’s American Jobs Act of 2011 proposal would add a targeted group for purposes of
the Work Opportunity Tax Credit (WOTC) for individuals who have been unemployed for six
months or more during the one-year period prior to being hired. For those long-term unemployed
who are hired and remain on a firm’s payroll at least 400 hours, an employer would be able to
claim a non-refundable income tax credit of 40% of the first $10,000 in wages paid during the
worker’s first year of employment. For eligible hires who remain employed for 120 hours to 399
hours, the credit rate would be 25%. Under certain circumstances, tax-exempt employers may
take the credit for hiring long-term unemployed individuals. The Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) extended the
authorization of WOTC through December 31, 2011.27
The Emergency Unemployment Compensation Extension Act of
2011 (H.R. 3346/S. 1804)
H.R. 3346 and S. 1804—both named the Emergency Unemployment Compensation Extension
Act of 2011—propose to extend expiring UI provisions and make various changes, including to
the financing of UI benefits. H.R. 3346 and S. 1804 would provide a year-long extension of the
EUC08 program, the 100% federal financing of the EB program, and the authorization for states
to use three-year lookbacks for state EB triggers through calendar year 2012. These bills also
propose to allow states to temporarily suspend the lookback for the EB triggers, “by statute,
regulation, or other issuance having the force and effect of law,” through the end of calendar year
2012. H.R. 3346 and S. 1804 would also extend the temporary extended railroad unemployment
(...continued)
Sharing Arrangements (Short-Time Compensation) as an Alternative to Layoffs, by (name redacted).
27
For more information on the Work Opportunity Tax Credit, see CRS Report RL30089, The Work Opportunity Tax
Credit (WOTC), by (name redacted).
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benefits (authorized under P.L. 111-5, as amended) for an additional year (i.e., through June 30,
2012) using existing funds from P.L. 111-312.
H.R. 3346 and S. 1804 would also allow states to enter into an agreement with the U.S. DOL to
temporarily suspend the accrual of interest for loans to the states for FY2012. In addition, states
that otherwise have employers facing a decreased state tax credit on federal unemployment taxes
would be able to opt to suspend the reduction in credit for tax year 2012. To have these options
available to the state, the state would be required to continue to calculate regular unemployment
benefit entitlements (both in weekly amount and total weeks available) as required by state law
on the date of enactment of this proposal. States with no outstanding unemployment loans within
the Unemployment Trust Fund (UTF) would earn an additional two percentage points in interest
on the (positive) average daily balance in the state’s UTF account.
Other Legislative Proposals to Extend Expiring UI Provisions
In addition to the President’s American Jobs Act of 2011 proposal, S. 1549/H.R. 12/S. 1660, and
H.R. 3346/S. 1804, there have been several other legislative proposals to address UI expirations.
For instance, Subtitle F of H.R. 3638 proposes a one-year extension (i.e., through calendar year
2012) of the three expiring UI provisions: the authorization for the EUC08 program, the 100%
federal financing of the EB program, and the three-year lookback option for EB triggers.
Additionally, H.R. 3638 would add 14 weeks to the current duration of Tier I of the EUC08
program, amending Tier I of EUC08 to provide up to 34 weeks of unemployment benefits rather
than the current up to 20 weeks of benefits.
S. 1885 would extend the EUC08 authorization and the 100% federal financing of the EB
program for another year (i.e., through calendar year 2012). S. 1885 would not, however, extend
the authorization for states to use three-year lookbacks in their EB triggers. S. 1885 proposes to
offset the UI extensions using $44 billion in unobligated, federal discretionary funds.
H.R. 3743 would have extended the EB and EUC08 provisions until the week ending on or before
March 6, 2012.
H.R. 1745, the JOBS Act of 2011
Representative Camp introduced H.R. 1745, the Jobs, Opportunity, Benefits, and Services Act of
2011 (the JOBS Act of 2011), on May 5, 2011. H.R. 1745 proposes a number of changes to (1)
state UC eligibility requirements and (2) the funding of federal unemployment benefits (i.e.,
EUC08 and EB). For instance, it would create new federal requirements related to work
availability and work search activities that would require changes in state UC laws. In order to
satisfy the new “actively seeking work” federal requirement, H.R. 1745 would require individuals
receiving regular state UC benefits to (1) register for employment services within 14 days of
initial UC claim; (2) post a resume, record, or other employment application on a database as
required by each state; and (3) apply for work that is similar to an individual’s previous job and
that pays comparable wages for similar work in the local labor market where an individual resides
or is actively seeking work. H.R. 1745 would also impose new federal educational requirements
(i.e., high school degree, GED or equivalent, or progress toward GED) for UC claimants in state
programs. This bill would allow states to create and conduct demonstration projects to improve
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and accelerate the reemployment of UC claimants, although these projects would not be able to
increase the net costs to a state’s account in the UTF.
H.R. 1745 would also transform the financing of federal unemployment benefits (including
EUC08 benefits) from a mandatory, individual entitlement to a block grant to states for FY2011
and FY2012 ($31 billion over both years) in an amount proportional to federal benefit payments
in each state during the previous 12 months. H.R. 1745 would allow states to use block grant
funds to pay federal unemployment benefits (i.e., EUC08 and EB benefits) or, if states pass their
own legislation to do so, to use the funds to pay any type of unemployment benefit (including
regular UC), to repay outstanding federal loans (including interest payments on federal loans), or
to provide additional reemployment services. H.R. 1745 would end the 100% federal financing of
the EUC08 and EB programs, effective July 6, 2011. States would continue to pay EUC08
benefits with block grant funds. Under current law, a state has the option to terminate the federalstate EUC08 agreement with 30 days notice to the U.S. DOL, and this termination would not
impact the state’s share of the block grant. States would continue to pay EB if the program were
still active (i.e., triggered “on”).
Alleviating State Unemployment Compensation Stress
The broader financial crisis facing the states is mirrored in the states’ accounts within the UTF.
On December 30, 2010, 31 states owed a cumulative $40.8 billion to the federal accounts within
the UTF. ARRA temporarily stopped the accrual of interest charges on loans through December
31, 2010, but those charges are once again accruing. States currently are prohibited from actively
legislating a decrease in regular benefits (restricted for the duration of the EUC08 program); as a
result, state unemployment taxes on employers are likely to increase. At the same time, employers
in 21 states face an increased net federal unemployment tax (FUTA) in 2011 because they have
borrowed funds from the federal UTF loan account for two consecutive years.28
President’s Budget Proposal for FY2013
The President’s Budget Proposal for FY2013 attempts to address some of these concerns. The
proposal includes extending the suspension of interest accrual through 2014 and temporarily
suspending net FUTA tax increases through 2015. Currently, the U.S. DOL projects that states
accrued $1.22 billion in interest charges in FY2011 and $1.79 billion in FY2012 without these
suspensions.
The proposal would increase the FUTA taxable wage base from $7,000 to $15,000 in 2015 while
increasing the FUTA tax rate to 0.8% for FY2013 and FY2014 and then decreasing the FUTA tax
rate from 0.6% to 0.38%. Beginning in 2015, the FUTA tax base would be indexed to wage
growth. Under federal law, the taxable wage base for SUTA taxes in states must be at least the
taxable wage base for FUTA. Therefore, the proposed increase in the FUTA taxable wage in the
President’s Budget Proposal would have the effect of requiring states to have a SUTA taxable
wage base of at least $15,000 in 2014 and indexed to wage growth beginning in 2015.
28
See CRS Report RS22954, The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States, by
(name redacted) for more information on the interest calculation and the net FUTA increases in some states.
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Additionally, the proposal included up to $4 billion in funds for certain reemployment activities
similar to what was described earlier in the “Reemployment NOW Program and Funding
Opportunities” subsection under the description of the President’s American Jobs Act of 2011
proposal.
Other Proposals to Alleviate State Unemployment Compensation Stress
S. 386 would extend the suspension of interest accrual on federal loans to states through 2012;
temporarily suspend net FUTA tax increases through 2012; increase the FUTA taxable wage base
from $7,000 to $15,000 in 2014 while lowering the net FUTA tax rate to 0.38%; and index the
FUTA taxable wage base to wage growth after 2014. Unlike the President’s Budget Proposal for
FY2013, S. 386 would forgive a certain percentage (20%, 40%, or 60%) of the outstanding
federal loan to the state based upon a state-level need-based measure as of December 31, 2010.
(This measure was originally constructed for temporarily increasing the Medicaid Federal
Medical Assistance Percentages (FMAP) in P.L. 111-5.) States without an outstanding federal
loan would receive an additional 0.5% in interest compared with what they would otherwise
receive on their state UTF account balances. Employers in states that maintain a programmatic
measure of sufficient reserves would face a net FUTA tax rate that was 0.1 percentage point less
than it would otherwise have been. In addition, S. 386 would require that any state taking
advantage of the provisions in S. 386 submit a “reasonable” plan to the U.S. DOL explaining how
the state would repay any outstanding federal loans and how the state would attain a
programmatic measure of sufficient reserves within a “reasonable” time.
H.R. 650 would extend the suspension of interest accrual on federal loans to states through 2012.
Additional Benefits for UI Exhaustees
Recent congressional hearings have raised the issue of how to aid long-term unemployed
workers, especially those individuals who have exhausted all available unemployment benefits.29
As of July 2012, about 41% of unemployed individuals had been without a job for more than 26
weeks.30 These long-term unemployed workers are at risk of exhausting current benefits while
remaining unemployed.31
One policy strategy to address the needs of unemployment insurance benefit exhaustees is to
create additional federal benefits. H.R. 589 and H.R. 3638 would add up to 14 additional weeks
29
House Subcommittee on Human Resources Hearing on “Improving Efforts to Help Unemployed Americans Find
Jobs,” held on February 10, 2011 (Hearing advisory and witness testimony available at
http://waysandmeans.house.gov/Calendar/EventSingle.aspx?EventID=223512); Senate Committee on Finance Hearing
on “Using Unemployment Insurance to Help Americans Get Back to Work: Creating Opportunities and Overcoming
Challenges,” held on April 14, 2010 (Member statements and witness testimony available at http://finance.senate.gov/
hearings/hearing/?id=868a8e37-5056-a032-5297-a991437cea80); House Subcommittee on Income Security and Family
Support Hearing on “Responding to Long-Term Unemployment,” held on June 10, 2010 (Member statements and
witness testimony available at http://democrats.waysandmeans.house.gov/Hearings/hearingDetails.aspx?NewsID=
11201).
30
U.S. Department of Labor, “Employment Situation Summary,” Table A-12, April 6, 2012.
31
For more information on long-term unemployment, see CRS Report R41179, Long-Term Unemployment and
Recessions, by (name redacted) and (name redacted).
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Unemployment Insurance: Legislative Issues in the 112th Congress
of unemployment benefits to the existing tier I of the EUC08 program, amending tier I of EUC08
to provide up to 34 weeks of unemployment benefits to eligible individuals.
H.R. 494 would create a Civilian Conservation Corps to employ unemployed or underemployed
U.S. citizens in the construction, maintenance, and carrying on of works of a public nature, such
as forestation of U.S. and state lands, prevention of forest fires, floods, and soil erosion, and
construction and repair of National Park System paths and trails. The proposal would require
placement preference to the employment of additional persons in the Corps in the following
order: (1) unemployed Armed Forces veterans (including Reserve members); (2) unemployed
U.S. citizens who have exhausted their unemployment compensation; (3) unemployed U.S.
citizens who are eligible for unemployment compensation immediately before employment in the
Corps, including any additional compensation or extended compensation; and (4) other
unemployed or underemployed U.S. citizens.
Other Legislation
Drug Testing
H.R. 3615 would create a new federal requirement for states to drug test all UC claimants as a
condition of benefit eligibility. If an individual tests positive for certain controlled substances (in
the absence of a valid prescription or as otherwise authorized under a state’s laws), he or she
would be required to retake a drug test after a 30-day period and test negative in order to be
eligible for UC benefits.
H.R. 3601 would add a new federal requirement that individuals undergo a substance abuse risk
assessment for each benefit year as a condition of eligibility for UC in all states. This new federal
requirement would also require individuals deemed to be at high risk for substance abuse—based
on the assessment results—to test negatively for controlled substances within one week after the
assessment to qualify for UC benefits.
H.R. 2001 would create a new federal requirement that individuals be deemed ineligible for UC
benefits based on previous employment from which they were separated due to an employmentrelated drug or alcohol offense. This proposal would require states to amend their state UC laws.
Electronic Benefit Transfer Fees
H.R. 3598 would define any fee associated with Electronic Benefit Transfer (EBT) cards used by
states to distribute unemployment benefits as administrative expenses under federal law. Such a
federal definition would prohibit states from deducting EBT fees from unemployment benefit
payments made with state unemployment tax (SUTA) funds. Under this proposal, any EBT fees
would need to be financed through state administrative funds rather than an individual’s
unemployment benefit payment.
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Unemployment Insurance: Legislative Issues in the 112th Congress
Unemployment Insurance and Millionaires
Several bills have been introduced that have the intent to restrict or recover unemployment
insurance benefits paid to high income individuals or households.32
S. 1944 would create a new income tax on unemployment benefit income for any taxpayer filing
jointly with an adjusted gross income (AGI) of at least $1 million (and $500,000 in the case of an
individual filing a single tax return). The tax rate for this unemployment benefit income would be
55% in tax years 2011 and 2012 and then 50% for tax years after 2012. (The UI income would
continue to be used in the calculation of AGI and thus subject to “regular” federal income tax.)
Among other provisions, S. 1931 would create a new tax on unemployment benefit income for
certain high-income taxpayers. For individual taxpayers with more than $1 million in AGI ($2
million for joint filers), any income from unemployment benefits would be taxed at an additional
100% rate. (The UI income would continue to be used in the calculation of AGI and thus subject
to “regular” federal income tax.) Under this proposal, individual filers with an AGI of at least
$750,000 (and $1.5 million for joint filers) would also face the new tax on unemployment benefit
income with the rate proportional to AGI over these limits and the maximum rate set at 100%.
Any tax receipts collected from this new federal income tax on unemployment benefits from a
particular state would be transferred into that state’s account in the federal UTF.
Among other provisions, H.R. 235 would prohibit the use of federal funds—from the EUC08 and
EB programs—to pay unemployment benefits to anyone with resources of at least $1 million in
the preceding year. An individual’s resources would be determined in the same way as the
resource test for the Medicare Part D drug benefit subsidy. This provision would be effective for
any weeks of unemployment benefits beginning on or after January 1, 2011.
S. 310 would prohibit any EUC08 or EB benefit payments to individuals with resources in the
preceding year of at least $1 million, as determined through the resource test for the Medicare
Part D drug benefit subsidy. For the purposes of the drug benefit subsidy, resources are defined by
the individual states and include savings and investments but do not include the value of a
primary residence or the value of a car. Unlike H.R. 235, the prohibition provision in S. 310
would be effective on or after the date of enactment of this legislation.
H.R. 569 is a House companion bill to S. 310 and contains the same legislative language.
Self-Employment Assistance
H.R. 3427 and S. 1826 are companion bills that, among other provisions, would authorize states
to create Self-Employment Assistance (SEA) programs available to recipients of EUC08 and EB
benefits. SEA allowances would be paid in lieu of (and in the same amount as) unemployment
benefits under the EUC08 and EB programs for up to 26 total weeks to eligible individuals who
(1) have at least 13 weeks of remaining benefit entitlement through the EUC08 and EB programs
and (2) are participating in entrepreneurial training activities. SEA participants would be exempt
from the work availability and work search requirements under EUC08 and EB. Under H.R. 3427
and S. 1826, SEA benefits would be available to up to 1% of all EUC08 and EB claimants in each
32
See CRS Report R42643, Receipt of Unemployment Insurance by Higher-Income Unemployed Workers
(“Millionaires”), by (name redacted) for background and analysis of the proposals.
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Unemployment Insurance: Legislative Issues in the 112th Congress
participating state. Participants would be able to discontinue SEA participation at any time and
receive any remaining entitlement to EUC08 or EB benefits. Under current law, states are
authorized to set up SEA programs for recipients of regular UC benefits, but not recipients of
EUC08 or EB benefits, as proposed by H.R. 3427 and S. 1826.33
H.R. 3427 and S. 1826 would also provide federal funds to states that submit approved
applications to be used for (1) the creation, development, and administration of the proposed SEA
programs and (2) the promotion and enrollment of EUC08 and EB recipients in SEA programs.
Appropriated funds for these grants to states would total $35 billion for each FY2012 through
FY2014.
The SEA provisions in H.R. 3427 and S. 1826 are substantively similar to the SEA provisions that
were included in P.L. 112-96.
Demonstration Projects
S. 1743 would give states the option to create a “Learn to Earn” program, if approved by the U.S.
DOL. All Learn to Earn state programs would be authorized for FY2013 and FY2014 only. A
Learn to Earn program (which is similar to the “Bridge to Work” program proposed in the
American Jobs Act [S. 1549, S. 1660, H.R. 12]) would allow individuals to continue to receive
EUC08 benefits as wages for work performed in a short-term work experience placement of up to
10 weeks for not more than 38 hours per week. Learn to Earn state programs would be required to
compensate claimants at a rate equivalent to the minimum wage, with the EUC08 benefit
payment counted as wages for that calculation. The state would be permitted to augment the
EUC08 benefit. For individuals participating in a Learn to Earn program, work search
requirements would be suspended during the participation and additional wages paid by the
program would not offset EUC08 benefit amounts. Any earnings acquired during program
participation would not be considered earnings for the purposes of employment taxes, but would
be treated as unemployment benefits for tax purposes.
Under S. 1743, federal funding for states to establish Learn to Earn programs would come from
savings determined by the Office of Management and Budget (OMB) through the termination and
consolidation of existing job training programs deemed by OMB to be “duplicative or
ineffective.” These federal funds would be allotted to the states based on a two-part formula: (1)
two-thirds would be distributed to the states based on the state share of the U.S. total number
unemployed persons and (2) one-third would be distributed to the states based on the state share
of the long-term unemployed (measured as unemployment spells of at least 27 weeks). Up to 1%
of the funds would be available for program administration and evaluation.
H.R. 2731 would allow states to enter into agreements with the U.S. DOL to set up reemployment
demonstration projects. Reemployment demonstration projects in states would be approved for no
more than three years and could be conducted no later than five years after enactment of the
legislation. H.R. 2731 would prohibit these state reemployment demonstration projects from
using any funds from the state’s account in the federal UTF. This legislation would be effective
for weeks beginning after September 30, 2011.
33
For more details on the current-law option for states to set up SEA programs for individuals eligible for statefinanced UC benefits, see CRS Report R41253, The Self-Employment Assistance (SEA) Program, by (name redacted).
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Unemployment Insurance: Legislative Issues in the 112th Congress
H.R. 2137 would provide the authority, over the five years following enactment, for states to set
up a particular type of demonstration project within their UC programs—an Employment
Assistance Voucher Program. This Employment Assistance Voucher Program would allow states
to use their state UC funds to provide subsidies to employers who hire individuals eligible for
state UC benefits and likely to exhaust those unemployment benefits in lieu of paying
unemployment benefits to such individuals. H.R. 2137 would provide no additional federal
funding to states that participate in this UC demonstration project.
Suspending Taxation of Unemployment Benefits
H.R. 2868 would eliminate employer Social Security payroll taxes on the earnings of newly hired
individuals employed for at least 30 hours a week if those individuals had been receiving any
unemployment benefits (e.g., UC, EUC08, EB, UCX, and DUA) or had exhausted any of these
unemployment benefits as of the day prior to the new employment start date.
H.R. 2806 would repeal the federal income taxation of unemployment benefits and any trade
adjustment assistance payments. It would also eliminate the penalty for early distributions from a
qualified retirement plan to an individual after separation from employment if the individual had
received at least 24 weeks of UC. The bill would apply to benefits received after December 31,
2010.
Tax Credits for Hiring UI Exhaustees
H.R. 2120 proposes to expand the definition of a targeted group for purposes of the Work
Opportunity Tax Credit to include individuals who have exhausted entitlement to EUC08. For
those EUC08 exhaustees who are hired and remain on a firm’s payroll at least 400 hours, an
employer would be able to claim an income tax credit of 40% of the first $10,000 in wages paid
during the worker’s first year of employment. For eligible hires who remain employed from 120
hours to 399 hours, the subsidy rate would be 25%. In the second year of employment, an
employer would be able to claim an additional income tax credit of up to 25% of the first $10,000
in wages paid to that eligible worker during the second year. The income tax credit would be
refundable.
H.R. 1663 proposes a temporary tax credit for certain small businesses that hire eligible,
unemployed workers. This hiring credit would be calculated following Section 51 of the Internal
Revenue Code of 1986. It would be available to businesses with gross receipts in the previous
taxable year of no more than $20 million (among other requirements) that hire unemployed
individuals who (1) have received unemployment benefits—either regular UC or other federal
benefits, including EUC08 and EB—for at least four weeks during the year prior to the hiring
date and (2) reside in a “high unemployment zone” (defined as any county with an unemployment
rate that exceeds both the national unemployment rate and 4%). The hiring credit proposed in
H.R. 1663 would be temporarily authorized for individuals starting work for an employer after
December 31, 2011, and until December 31, 2013.
Training and Unemployment Insurance
S. 2095 would expand the types of training that may be considered approved training while an
individual is receiving unemployment compensation to specifically include any coursework
necessary to attain a recognized postsecondary credential if that individual is likely to exhaust his
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Unemployment Insurance: Legislative Issues in the 112th Congress
or her regular unemployment compensation, and the credential can be attained within a certain
time period. The proposal defines “recognized postsecondary credential” as a credential
consisting of an industry-recognized certificate, a certificate of completion of an apprenticeship,
or an associate or baccalaureate degree.
Work Search and Unemployment Insurance Eligibility
S. 2081 would require an individual receiving extended unemployment compensation to perform
at least 20 hours of public service each week and engage in at least 20 hours of active job
searching each week.
Author Contact Information
(name redacted)
Specialist in Income Security
[redacted]@crs.loc.gov, 7-....
Congressional Research Service
(name redacted)
Analyst in Income Security
[redacted]@crs.loc.gov, 7-....
24
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