63960 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

Act on March 27, 1996 (61 FR 13517–

18).

Constance K. Robinson,

Director of Operations, Antitrust Division.

[FR Doc. 97–31721 Filed 12–2–97; 8:45 am]

BILLING CODE 4410–11–M

DEPARTMENT OF LABOR

Labor Advisory Committee for Trade

Negotiations and Trade Policy;

Meeting Notice

Pursuant to the provisions of the

Federal Advisory Committee Act (P.L.

92–463 as amended), notice is hereby

given of a meeting of the Steering

Subcommittee of the Labor Advisory

Committee for Trade Negotiations and

Trade Policy.

Date, time and place: December 11, 1997,

10:00 am, U.S. Department of Labor, Seminar

Room 5, 200 Constitution Ave., N.W.,

Washington, D.C. 20210.

Purpose: The meeting will include a

review and discussion of current issues

which influence U.S. trade policy. Potential

U.S. negotiating objectives and bargaining

positions in current and anticipated trade

negotiations will be discussed. Pursuant to

section 9(B) of the Government in the

Sunshine Act, 5 U.S.C. 552b(c)(9)(B) it has

been determined that the meeting will be

concerned with matters the disclosure of

which would seriously compromise the

Government’s negotiating objectives or

bargaining positions. Accordingly, the

meeting will be closed to the public.

For further information, contact: Jorge

Perez-Lopez, Director, Office of International

Economic Affairs, Phone: (202) 219–7597.

Signed at Washington, D.C., this 25th day

of November 1997.

Andrew J. Samet,

Acting Deputy Under Secretary, International

Affairs.

[FR Doc. 97–31672 Filed 12–2–97; 8:45 am]

BILLING CODE 4510–28–M

DEPARTMENT OF LABOR

Employment and Training

Administration

Federal-State Unemployment

Compensation Program:

Unemployment Insurance Program

Letters Interpreting Federal

Unemployment Insurance Law

The Employment and Training

Administration interprets Federal law

requirements pertaining to

unemployment compensation (UC) as

part of its role in the administration of

the Federal-State UC program. These

interpretations are issued in

Unemployment Insurance Program

Letters (UIPLs) to the State Employment

Security Agencies. The UIPL described

below is published in the Federal

Register in order to inform the public.

UIPL 39–97

UIPL 39–97, dated September 12,

1997, advises States of the Department

of Labor’s interpretation of the Reed Act

provisions of Title IX of the Social

Security Act and transmits updated

instructions and requirements related to

the use of ‘‘Reed Act’’ funds as

transferred to State accounts in the

Unemployment Trust Fund.

Dated: November 26, 1997.

Raymond J. Uhalde,

Acting Assistant Secretary of Labor.

Classification: UI

Correspondence Symbol: TEUFA

Date: September 12, 1997.

Directive: Unemployment Insurance

Program Letter No. 39–97

To: All State Employment Security

Agencies

From: Grace A. Kilbane, Director,

Unemployment Insurance Service

Subject: The Reed Act Provisions of

Title IX of the Social Security Act

1. Purpose. To transmit updated

instructions and requirements related to

the use of ‘‘Reed Act’’ funds as

transferred to State accounts in the

Unemployment Trust Fund (UTF).

2. References. Sections 303(a)(2),

303(a)(4), 303(a)(5), 303(a)(8), 901(c),

903, 904 and 1201 of the Social Security

Act (SSA); the Balanced Budget Act of

1997 (BBA), P.L. 105–33; Sections

3304(a)(3), 3304(a)(4) and 3306(f) of the

Federal Unemployment Tax Act

(FUTA); 29 CFR Part 97; OMB Circular

No. A–87; Part IV, Sections 3000–3040

of the Employment Security Manual (ES

Manual); UIPL Nos. 5–90, 11–90 and

12–91; GAL Nos. 4–83, 5–94 and 2–96;

and Section III, Chapter 2 of ET

Handbook No. 401.

3. Background. The Unemployment

Insurance Service (UIS) is issuing

‘‘basic’’ program letters for certain

program areas to provide

comprehensive instructions to States in

a single document. This program letter

provides guidance to States in

accounting for their use of Reed Act

funds in accordance with standards

established by the Secretary of Labor.

This directive is a consolidation of

instructions from the ES Manual and

previous UI program and administration

letters related to Reed Act funds and

now supersedes the ES Manual sections

referenced above. These instructions

may later be included as a part of a

Handbook issuance.

4. Action Required. SESA

administrators are requested to provide

these instructions to the appropriate

staff.

5. Inquires. Inquires should be

directed to your Regional Office.

6. Rescission. Part IV, Sections 3000–

3040 of the Employment Security

Manual.

7. Attachments.

I. The Reed Act Provisions of Title IX

of the Social Security Act;

II. Draft Language for State Laws.

Attachment I—The Reed Act Provisions

of Title IX of the Social Security Act

A. Introduction

1. Definition—Background. The term

‘‘Reed Act’’ refers to a part of the

Employment Security Financing Act of

1954, and is used in honor of

Congressman Daniel A. Reed of New

York, chairman of the House Ways and

Means Committee at the time. This

legislation amended Titles IX and XII of

the Social Security Act (SSA) and

established the basic structure of the

Unemployment Trust Fund (UTF). The

amendments to Title IX, among other

things, provided, under certain

conditions, for the transfer of excess

funds in the Employment Security

Administration Account (ESAA) in the

UTF to the individual State accounts in

the UTF (Section 903(a)(1), SSA). These

transferred funds are commonly referred

to as ‘‘Reed Act’’ funds. To date, only

three Reed Act distributions—in 1956,

1957, and 1958—totalling $138 million,

have been made to State accounts.

Under the SSA, the primary purpose

of Reed Act funds is the payment of

‘‘cash benefits to individuals with

respect to their unemployment,

exclusive of expenses of

administration’’ (Section 903(c)(1),

SSA). However, subject to conditions

specified in Section 903(c)(2), SSA, a

State is permitted, at its discretion, to

use Reed Act funds for ‘‘the

administration of its unemployment

compensation law and public

employment offices’’. (See Part E. for

exception for use of Reed Act amounts

allocated for fiscal years 2000, 2001, and

2002.)

Title III, SSA, governs the use of

Federal grant funds for the

administration of the unemployment

compensation (UC) programs by States.

Section 302(a), SSA, addresses the uses

of UC granted funds as follows:

The Secretary of Labor shall from time

to time certify to the Secretary of the

Treasury for payment to each State

which has an unemployment

compensation law approved by the

Secretary of Labor under the Federal

Unemployment Tax Act, such amounts

as the Secretary of Labor determines to
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 63961

be necessary for the proper and efficient

administration of such law during the

fiscal year for which such payment is to

be made.

Section 303(a)(8), SSA, requires, as a

condition of receiving UC

administrative grants, that State laws

include provision for: the expenditure

of all moneys received pursuant to

section 302 of this title solely for the

purposes and in the amounts found

necessary by the Secretary of Labor for

the proper and efficient administration

of such State law.

Section 901(c)(1), SSA, authorizes to

be made available for expenditure out of

the employment security administration

account, for each fiscal year—

(A) such amounts * * * as the

Congress may deem appropriate for the

purpose of—

(i) assisting the States in the

administration of their unemployment

compensation laws as provided in title

III (including administration pursuant to

agreements under any Federal

unemployment compensation law).

(ii) the establishment and

maintenance of systems of public

employment offices in accordance with

the Act of June 6, 1933, as amended (29

U.S.C., secs. 49–49n).

State employment security agencies

(SESAs) include both UC and public

employment (ES) offices and, to the

extent that they operate State activities

provided for only under title III, SSA,

and the Wagner-Peyser Act, will

hereafter be called the ‘‘employment

security program’’. Reed Act funds may

be used to pay the administrative

expenses of the employment security

program. (See Part E. for exception for

use of Reed Act amounts allocated for

fiscal years 2000, 2001, and 2002.)

Initially, Reed Act funds were

available for administrative expenses up

to 5 years from the date they were first

credited to a State’s account. Through

amendments, the time period for

administrative use was later extended to

10, 15, 25, and 35 years, and then

eliminated effective October 1, 1991.

2. Relationship to Trust Fund

Operations. Reed Act funds become a

part of a State’s unemployment fund, as

defined in Section 3306(f) of the Federal

Unemployment Tax Act (FUTA), on the

date they are transferred to the State’s

account in the UTF. Such funds retain

legal status as a part of the State’s

unemployment fund and must be

accounted for as part of the fund until

expended for unemployment

compensation or administrative

expenses of the State’s employment

security program. As such, Reed Act

funds are subject to the ‘‘immediate

deposit’’ and ‘‘limited withdrawal’’

standards (Sections 303(a)(4) and (5),

SSA; Sections 3304(a)(3) and (4), FUTA)

applicable to all State unemployment

fund money.

B. Mechanics of a Reed Act Distribution

1. Conditions Necessary for Making

Transfers. Whenever the Secretary of

Labor has reason to believe that

conditions which are necessary for a

Reed Act transfer will occur in the next

fiscal year, the Secretary, after

consultation with the Secretary of the

Treasury, shall report to Congress with

a recommendation for appropriate

action (Section 902(c), SSA). Section

903(a)(1) provides that a transfer of Reed

Act funds will occur if the following

conditions exist in the Federal accounts

of the UTF at the end of a Federal fiscal

year (that is, September 30):

a. The balance of funds in the

extended unemployment compensation

account (EUCA) and the Federal

unemployment account (FUA) have

reached their statutory ceilings, and all

general revenue advances and related

interest to these accounts have been

repaid, and

b. There remains in the employment

security administration account (ESAA)

an amount in excess of the account’s

statutory ceiling.

The excess amount in the ESAA is

then transferred to State accounts in the

UTF at the beginning of the following

Federal fiscal year, as explained below.

2. Amounts Transferred to State

Accounts. Each State’s share of the

amount to be transferred is based on the

proportion of wages subject to FUTA

attributable to the State during the

preceding calendar year to the aggregate

amount of wages subject to FUTA

during the same year for all States. The

exact share for each State is derived by

applying its computed ratio or

percentage to the total amount to be

transferred. (See Part B.3. for exception

for calculating State shares with respect

to amounts for Federal fiscal years

ending in 1999, 2000, and 2001.) The

Secretary of Labor determines the

amount of each State’s share and

certifies it to the Secretary of the

Treasury. (Section 903(a)(2), SSA.)

3. Special Distribution with Respect to

Federal Fiscal Years 1999, 2000, and

2001. The Balanced Budget Act of 1997

(BBA) amended Section 903 of the SSA

to cap the total amount of Reed Act

transfers made with respect to Federal

Fiscal years ending in 1999, 2000, and

2001 at $100,000,000 per year. Each

State’s share of the amount to be

transferred will be based on the ratio of

the amount of ‘‘funds to be allocated to

such State for such fiscal year pursuant

to the base allocation formula under

title III’’, SSA, to ‘‘the total amount of

funds to be allocated to all States for

such fiscal year pursuant to the base

allocation formula under Title III.’’

(Section 903(a)(3), SSA.)

4. Limitations on Transfers.

All States share in a Reed Act transfer.

However, under Section 903(b), SSA,

the total amount of a State’s share may

not be credited to its UTF account in the

following two instances:

a. The Secretary of Labor finds that on

October 1 of the year in question, a State

is not eligible for certification under

Section 303, SSA, or the law of the State

is not approvable under Section 3304,

FUTA.

In this instance, the State’s share of

Reed Act funds is credited to the FUA

and held in reserve. If the Secretary of

Labor certifies that the State is eligible

for certification under Section 303, SSA,

and/or that its law is approvable under

Section 3304, FUTA, before the end of

the fiscal year, the State’s Reed Act

share is then transferred to its account.

However, such delayed credits,

although designated for the State, earn

interest for the State only from the date

credited, because they are not a part of

the State’s individual account until

credited. If certification and/or approval

is not received before the end of the

fiscal year, the amount that would have

been transferred to the State’s account

remains in the FUA and becomes

unrestricted as to its use as a part of that

account.

b. On October 1, a State has an

outstanding balance of advances under

Title XII, SSA. (See Part C.2.)

The State’s Reed Act share is reduced

(but not below zero) by the balance of

unpaid Title XII advances. The amount

of the reduction is transferred to or

retained in the FUA and serves to

reduce the State’s balance of

outstanding advances. If the State’s

Reed Act share has not been reduced to

zero, the remaining amount is credited

to its UTF account.

C. Use of Reed Act Funds for UC Benefit

Payments

1. Use under Normal Circumstances.

Section 903(c)(1), SSA, imposes no

requirements on a State’s use of Reed

Act funds for benefit payments. For this

purpose, funds are withdrawn from the

State’s UTF account as are any other

funds in the account. Logically, a State

would first expend other available funds

for benefits in order to preserve its Reed

Act balance, which can be used for

either benefits or, under specified

conditions, administrative expenses.

Therefore, the Department of Labor

(DOL) assumes that as long as the

balance of funds in a State’s UTF
63962 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

account exceeds its unexpended balance

of Reed Act allocations, the total unused

Reed Act balance remains within the

account. (See Part E. for exceptions for

use of amounts allocated for fiscal years

2000, 2001, and 2002.)

2. Use upon Obtaining a Title XII

Advance. Section 1201, SSA, provides a

system of ‘‘Title XII’’ advances to States

with temporarily depleted

unemployment compensation reserves.

One of the requirements for a State to

qualify for an advance is that the

amount of the advance be determined

by considering all other amounts

available in the State’s unemployment

fund for benefit payment. (Section

1201(a)(3)(B), SSA.) This includes, as

explained below, unobligated Reed Act

funds. Therefore, upon obtaining a Title

XII advance, a State’s unexpended Reed

Act funds become subject to

expenditure for benefits without regard

to whether they have been appropriated

or, except as provided below, obligated

for an administrative expense. (See Part

E. for exceptions for use of amounts

transferred with respect to Federal fiscal

years 1999, 2000, and 2001.)

3. Procedures to Set Aside Obligated

Amounts Amounts validly obligated,

under appropriations made consistently

with the Reed Act, are considered to be

unavailable for any other purpose,

including the payment of benefits upon

obtaining a Title XII advance. To assure

availability for expenditure when

obligations mature, Reed Act funds,

which are properly obligated for an

administrative expense prior to

obtaining an advance, may be made

unavailable for benefit payment if the

State elects to set aside such amounts in

a UTF Reed Act ‘‘sub-account’’. This set

aside provision does not apply to

appropriated funds prior to actual

obligation, because an appropriation

specifies only the purpose for which

funds may be expended and does not

create transactions which require a

payment of money. Funds residing in a

Reed Act sub-account are not

considered available for benefits and are

not taken into account by DOL or

Treasury for Title XII purposes, if

properly set aside in such a subaccount. The procedures to set aside

obligated amounts are as follows:

a. To establish an initial credit to a

sub-account a State must:

1. Review each current Reed Act

obligation under which there is an

unexpended balance and validate the:

—Date of enactment of the enabling

appropriation (see part D.1.),

—Date and amount of each obligation

(see part D.2.), and

—Unexpended balance of each

obligation amount;

2. Prepare a letter certifying the

amount of unexpended Reed Act

obligations as of the end of the month

being used to establish the initial credit.

This amount must agree with

transactions reported on Form ETA

8403, Summary of Financial

Transactions—Title IX Funds (‘‘Reed

Act’’ Money) submitted for the same

month. (The total of column III(b) less

the total of column IV(a) must equal the

amount of unexpended obligations.) As

documentation, attach a summary sheet

identifying each appropriation under

which there is an unexpended

obligation amount. For each

appropriation, indicate the purpose,

dollar amount, enactment date,

legislative bill number, and the current

total dollar amount obligated.

The letter and attachment should be

addressed to: U.S. Department of Labor,

Employment and Training

Administration, Attention: TEUFA, 200

Constitution Avenue, N.W., Rm C–4512,

Washington, D.C. 20210.

DOL will then certify the same to U.S.

Treasury, subject to review of the State’s

documentation.

b. To provide for on-going

maintenance of the sub-account, a State

must:

1. Certify to DOL by letter on a

monthly basis all new obligation

amounts and all deobligated amounts.

The letter must specify the effective date

of each obligation or deobligation and

identify the corresponding

appropriation(s) and/or related

obligation(s) by amount and effective

date. The letter must be received by the

tenth business day of the month

following the month in which the

transaction occurred and be

accompanied by a Form ETA 8403 for

the appropriate month:

2. When requisitioning funds from the

State’s UTF account, specifically

identify withdrawal amounts requested

from the Reed Act sub-account;

3. Include all Reed Act sub-account

transactions on Form ETA 8403 for the

month in which the transaction(s)

occur; and

4. Include all Reed Act redeposits and

withdrawals on each month’s written

confirmation letter to Treasury of UTF

account activities.

As new obligations are made or as

obligations are cancelled, the amounts

obligated or deobligated will be certified

in a similar manner and credited or

deducted from the State’s Reed Act subaccount. Withdrawals to pay Reed Act

obligations, as specified by State

requisitions, will be charged against the

Reed Act sub-account.

4. Restoration of Funds Used for

Benefits. Each expenditure of Reed Act

funds, whether for benefits or

administrative costs, reduces the

amount available for appropriation in

accordance with Section 903(c)(2), SSA.

Under certain conditions described in

Section 903(c)(3), SSA, funds used to

pay benefits may be restored to

availability for administrative purposes:

• The Governor of a State must

submit a request for restoration of such

funds to the Secretary of Labor,

• Funds to be restored must have

been used for benefits,

• The amount to be restored does not

exceed the balance in the State’s UTF

account, and

• The State’s unemployment fund

must be free of outstanding Title XII

advances when the request is made.

a. Determining amount to be restored.

States which used Title XII advances

must determine the amount of Reed Act

funds used for benefits. A ‘‘preapproved’’ amount of a Title XII

advance is designated for a State for a

specific month. However, other than the

amount set aside in a Reed Act subaccount, U.S. Treasury procedures take

into account a State’s entire UTF

account balance (including Reed Act

funds which have not been set aside in

a Reed Act sub-account), which must be

reduced to zero prior to calculating the

actual amount of an advance and

transferring it to the State.

• The balance of Reed Act funds (not

set aside in a Reed Act sub-account) in

the State’s account on the date in the

first month any portion of a Title XII

advance was actually used is the

amount of Reed Act funds used for

benefits and eligible for restoration.

• If, after an initial advance and the

resulting expenditure of Reed Act funds

for benefits, funds are recovered through

amortization (see Part F. ) and deposited

in a State unemployment fund in any

subsequent month as Reed Act

redeposits, then such redeposited

amounts are also considered to have

been used for benefits if the State uses

any portion of a Title XII advance

during that month. However, if the State

does not use any portion of a

subsequent advance in a month in

which a redeposit is made, the

redeposited amount remains in the

State’s account as Reed Act funds but

must be used only to pay benefits while

there is an outstanding balance of

advances.

Example: On February 1, 1997, a State has

a $500,000 balance of Reed Act money in its

account in the UTF, none of which has been

set aside in a Reed Act sub-account. A Title

XII advance in the amount of $5,000,000 has

been approved for use by the State during

February. On February 9, the balance in the

State’s account is $700,000 and the State
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 63963

requests a withdrawal of $2,000,000. To

transfer the State’s requisition of $2,000,000,

the U.S. Treasury first deducts the remaining

$700,000 from the State’s account (which

includes the $500,000 Reed Act balance),

thereby reducing the State’s account balance

to zero; it then adds to the account

$1,300,000 from the $5,000,000 Title XII

advance for February, which it transfers to

the State along with the original $700,000. At

this time, the $500,000 in Reed Act money

is deemed to have been used for benefits.

During March and April, the State redeposits

$100,000 to its UTF account received as

amortization payments on a Reed Act

financed building. This money is available

for obligation for administrative expenses

after the State repays all advances, because

under Section 903(c)(2), SSA, Reed Act funds

may not be obligated while there is a

outstanding balance of Title XII advances. If

the State does not borrow again and repays

all outstanding Title XII advances, the

Governor may request restoration of the

$500,000 used for benefits in February 1997.

If the State borrows again in April, the

$100,000 would also be used for benefits.

Therefore, after all advances are repaid, the

Governor may request restoration of the

$500,000 used for benefits in February 1997

and the $100,000 used for benefits in April

1997.

b. Procedures for restoration of funds.

States desiring restoration of Reed Act

funds must prepare and submit:

• Form ETA 8403, indicating when

funds were used for benefits by showing

dates (month, year) in column I and the

appropriate amounts as negative figures

in column II of the report; and

• A letter from the Governor of the

State to the Secretary of Labor (1) stating

that the State’s unemployment fund is

free of Title XII obligations and contains

funds at least equal to the amount to be

restored, and (2) specifying amounts to

be restored pursuant to Section

903(c)(3), SSA.

If the Secretary of Labor determines

that:

• Amounts requested for restoration:

(1) were used to pay benefits and (2) do

not exceed the amount in the State’s

UTF account, and

• All Title XII advances were repaid

as of the request date;

then the Secretary will notify the

Governor that the restoration is

approved. Restoration shall be effective

on the first day of the month following

the date of the Secretary’s notice.

D. Use of Reed act funds for

Administrative Purposes

1. Legal Requirements. Reed Act

funds may be used for administrative

expenses of the employment security

program only if a State adheres to the

requirements specified in Section

903(c)(2), SSA. (See Part E. for

exception for use of amounts allocated

for fiscal years 2000, 2001, and 2002.)

The State legislative body must

authorize the use of Reed Act money by

specific appropriation. The

appropriation law: (1) Must specify the

purpose and the amount of the

appropriation, (2) may not authorize

obligation of funds after the close of the

two-year period which began on the

date of enactment of the law, and (3)

must limit the amounts which may be

obligated to the balance of unobligated

Reed Act funds in the State’s

unemployment fund. Funds must be

withdrawn from the State’s

unemployment fund and expended after

the date of enactment and must be

accounted for in accordance with

standards established by the Secretary

of Labor. (See Attachment II, Draft

Language for State Laws in

appropriating Reed Act funds for

administrative purposes.)

2. Guidelines for Use.

a. Specificity and Limitation

Requirements of an Appropriation Act.

A State appropriation act authorizing

the use of Reed Act funds must (1) limit

the use of funds appropriated

exclusively to administrative expenses

of the employment security program

and (2) specify the purpose for which

the funds are appropriated and the

amount appropriated for each purpose.

For example, the purpose of an

appropriation law might be: ‘‘To

conduct a special, statewide, intensive

audit of employer payrolls in the

construction industry’’.

When a State agency is administering

other programs in addition to the

employment security program (e.g., a

disability insurance program), no part of

the expenses of administering the other

programs may be paid with Reed Act

funds. When funds are appropriated for

a purpose for which only a part is

related to employment security, the

appropriation law must specify the

employment security share and the

amount of Reed Act funds to be used.

Although an appropriation of Reed

Act funds may exceed the balance of

available Reed Act funds at the time of

the appropriation (see part D.2.c.), the

appropriation law must specify that the

amount which may be obligated at any

time may not exceed the balance of

Reed Act funds available at the time of

obligation in the State’s unemployment

fund.

b. Two-Year Limit for Obligating

Funds. The two-year time limit imposed

by Section 903(c)(2)(B), SSA, within

which Reed Act funds appropriated by

State law must be obligated begins on

the date of enactment of the

appropriation law, not the date as of

which funds were transferred to the

State’s UTF account. The appropriation

law must be worded so that it is clear

that funds appropriated are not

available for obligation after the twoyear period. The term, ‘‘date of

enactment’’, as used in Section 903(c)

(2), SSA, means the date on which an

act passed by the State legislature

becomes law. The determination of the

date when such an act becomes law is

a question for the appropriate State

authority. In some instances, State

courts have held that the effective date

of an act is the date of enactment.

However, the substitution of ‘‘effective

date’’ for the term ‘‘date of enactment’’

in Reed Act legislation should be

avoided, since an interpretation of State

law will be required to determine

whether the appropriation law meets

the requirements of Section 903(c)(2)(B),

SSA, if ‘‘effective date’’ is used. The

general rule is that the date of

enactment is the date on which the act

is approved by the Governor of the

State. Money is ‘‘obligated’’ and an

‘‘obligation’’ is created when an order is

placed, a contract is awarded, or other

transactions are entered into which

require a current or future payment of

money. The use of the term ‘‘obligate’’

instead of ‘‘expenditure’’ in Reed Act

appropriations is recommended for

consistency with Section 903(c)(2)(B).

The use of such terminology also allows

greater flexibility in handling Reed Act

funds; money obligated before the

expiration of the two-year limit may be

expended any time afterward.

c. Appropriation in Anticipation of

Future Reed Act Availability. A State

legislature is not prohibited from

appropriating Reed Act funds in

anticipation of a future availability of

Reed Act funds. However, such funds

may not be obligated prior to becoming

available even though they have been

properly appropriated by act, the

enactment date of which precedes the

date of funds becoming available.

d. ETA Administrative Requirements

Not Applicable. Although Reed Act

funds may be used for an administrative

expense of the employment security

program, Section 903(c)(2), SSA, does

not, as do Sections 303(a) and 303(a)(8),

SSA, require that the expenditure be for

a purpose or in an amount found

necessary for proper and efficient

administration by the Secretary of

Labor. Further, since Reed Act funds are

not granted funds, the administrative

requirements related to the use of grant

funds at 29 Code of Federal Regulations

(CFR) Part 97 and OMB Circular No. A–

87 (60 Federal Register 26484 (May 17,

1995)) with respect to the expenditure

of Wagner-Peyser Act and Title III funds

(granted funds) are not applicable to the

expenditure of Reed Act funds.
63964 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

Nevertheless, Reed Act funds must be

expended consistent with Sections

903(c) (1) and (2), SSA. Further, where

Wagner-Peyser and granted funds are to

be used to reimburse Reed Act

expenditures for certain permissible

purposes, DOL prior approval may be

required for such use of granted funds.

(See part F.)

e. Restrictions on Withdrawal of

Funds. Reed Act funds may not be

withdrawn from a State’s

unemployment fund for administrative

expenses, and expenses may not be

incurred until after the enactment date

of the appropriation law. In addition,

funds may not be withdrawn prior to

obligation. The withdrawal of Reed Act

funds must adhere to the U.S. TreasuryState Agreement under the Cash

Management Improvement Act of 1990

(CMIA).

Funds may be withdrawn only in

amounts necessary to pay mature

obligations. (Section 303(a)(5), SSA;

Section 3304(a)(4), FUTA.) An

obligation is mature when payment is

due either by reimbursement of

expenses or contractual agreement for

advance payments. Reed Act funds

withdrawn may be mingled with other

administrative funds (granted funds) if

separate book accounts are maintained

by the State agency to identify the

balance of Reed Act funds at all times.

3. Use of Reed Act Interest Credits.

Since Section 903(c)(2)(D), SSA, limits

the amount which may be obligated for

administration to amounts transferred to

the State’s account, interest credits

attributable to the amount of Reed Act

funds in the State’s UTF account may

not be appropriated, obligated,

expended, or disbursed for

administrative purposes.

4. Investment of Reed Act Funds Not

Permissible. Except as provided under

the CMIA, investment is not one of the

purposes for which money withdrawn

from a State unemployment fund may

be used. Since Reed Act funds are a part

of the State’s unemployment fund, a

State law which permits investment of

such funds is inconsistent with Section

303(a)(5), SSA, and Section 3304(a)(4) of

FUTA. It was the intent of Congress, as

indicated by Section 904, SSA, that

money in the UTF may be invested only

by the Secretary of Treasury. This intent

is effectuated only by assuring that Reed

Act moneys remain in the UTF.

E. Use of Reed Act Funds Allocated for

Fiscal Years 2000, 2001, and 2002

The BBA of 1997 amended paragraph

(2) of Section 903(c) of the SSA, by

adding the following sentence: ‘‘Any

amount allocated to a State under this

section for fiscal year 2000, 2001, or

2002 may be used by such State only to

pay expenses incurred by it for the

administration of its unemployment

compensation law, and may be so used

by it without regard to any of the

conditions prescribed in any of the

preceding provisions of this paragraph.’’

Unlike previous Reed Act transfers,

States are prohibited from using Reed

Act funds allocated for these three years

for the payment of UC benefits or the

administration of State public

employment offices. However, States

may, among other uses, use these Reed

Act funds for purchasing real property

for UC purposes and may amortize these

purchases against UC grant funds. (See

Parts G. and H.) Additionally, the

restrictions applicable to Reed Act

funds in section 903(c)(2), SSA, are not

applicable to amounts allocated for

fiscal years 2000, 2001, and 2002. This

means that the amounts transferred to

States for these three years may be used

without obtaining an appropriation from

the State’s legislative body, as discussed

in Parts D.1. and D.2., above. States

must amend their UC laws to prohibit

the use of Reed Act funds allocated for

fiscal years 2000, 2001, and 2002 for the

payment of UC benefits and may further

amend their UC laws to authorize the

use of such funds for UC administrative

purposes without a specific

appropriation from their State

legislatures. (See Attachment II, Draft

Language for State Laws.)

F. Use of Reed Act Funds for Voter

Registration Activities

Under the National Voter Registration

Act (NVRA) of 1993, States are

permitted to designate State UC and ES

offices as voter registration agencies.

Reed Act funds may be used to pay for

the administration of a State’s UC law

and public employment office. Since,

under the SSA, voter registration

activities are not necessary for the

administration of the State’s UC law,

Reed Act funds may not be used for

those activities. However, since Section

7(a)(3)(B) of the Wagner-Peyser Act

authorizes SESAs to use ES grant

monies for ‘‘developing linkages

between services funded under this Act

and related Federal or State legislation’’,

if an ES office is designated as a voter

registration agency under the NVRA,

then voter registration activities of that

ES office are legitimate ES

administrative expenses chargeable to

ES grants. Therefore, Reed Act funds

may be used to pay for these voter

registration activities.

Note: As illustrated in F., the use of Reed

Act funds for SESA administrative expenses

is permissible for purposes other than those

specifically mentioned in this discussion.

G. Use of Reed Act Funds to Acquire

Real Property

1. Acquisition of Real Property

Deemed an Expense of Administration.

Reed Act funds may be used to acquire

land and to purchase or construct a

building for use and occupancy by the

State employment security agency

consistent with Section 903(c)(2), SSA.

This is an expense of employment

security administration. The following

are special conditions applicable to this

use of Reed Act funds:

a. Space. Since Reed Act funds may

be used only for employment security

purposes, such funds may be used to

pay only for that part of the land and

building space costs which are directly

related to employment security

purposes, e.g., that part of the cost of a

building as is represented by the

proportion of the total space occupied

and used by the employment security

agency for employment security

purposes, including the cost of agency

functions and other agency programs

and activities which jointly benefit

Wagner-Peyser Act and unemployment

compensation programs.

Reed Act funds may not be used to

pay for more land or building space

than is needed for employment security

purposes. However, funds may be used

to purchase or construct a building large

enough to provide space for future

expansion that reasonably can be

anticipated at the time of purchase or

construction.

b. Rental of Space. Extra space which

is available through the purchase or

construction of a building large enough

for reasonable expansion purposes may

be leased until the time it is required for

agency use. Income from the lease may

be deposited in the State’s UTF account

but may not be credited as Reed Act

funds. Income from a lease may not be

credited as Reed Act funds because only

amounts transferred to the State’s

account under Section 903(a)(1), SSA,

have ‘‘Reed Act’’ status. If the cost of the

space is being amortized with grant

funds, the income from the lease must

be prorated between the State’s UTF

account and use to reduce the State’s

grant costs, in accordance with 29 CFR

97.25, and the annual grant agreement.

2. Disposition of Real Property and

Subsequent Use of Proceeds. Real

property acquired with Reed Act funds,

which has not been amortized with

grant funds (see part F.), may be sold or

otherwise disposed of without obtaining

DOL approval or disposition

instructions. When unamortized real

property is no longer needed for its

originally authorized employment

security purpose, States are expected to
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 63965

use good business judgment in

disposing of such property. Proceeds

from such disposal must be returned to

the State’s UTF account. The proceeds

will be credited as Reed Act funds up

to the amount of the original

expenditure, because only amounts

transferred to the State’s account under

Section 903(a)(1), SSA, have Reed Act

status.

When real property acquired with

Reed Act funds and wholly or partially

amortized with grant funds is no longer

needed for its originally authorized

employment security purposes, it must

be sold, exchanged for replacement

property, or otherwise disposed of as

directed by DOL disposition

instructions (29 CFR Part 97.31(c)).

Example A illustrates the sale of real

property which was purchased with

both non-Federal funds and Reed Act

funds, with a portion of the Reed Act

funds have been amortized with DOL

grant funds.

Example A: Thirty-five years ago, $1

million of Reed Act funds and $1 million of

other non-Federal funds were used to acquire

real property at the cost of $2 million for

employment security purposes. Over the

years, seventy percent (70%) of the Reed Act

funds were amortized with DOL grant funds.

Today, the real property is being sold for $6

million. The distribution of the respective

equities is based on the following

computations.

Share of Each Fund Source Based on Adjusted Contributions to Cost:

Other Funds ($2,000,000 less $1,000,000) ................................................................................................................ $1,000,000 = 50%

DOL Grant Funds (70% x $1,000,000) ...................................................................................................................... 700,000 = 35%

Reed Act Funds ($1,000,000 less $700,000) ............................................................................................................. 300,000 = 15%

Total Cost ............................................................................................................................................................. 2,000,000 100%

Equity in Property by Fund Source:

Other Funds equity (50% x $6,000,000) .................................................................................................................................... $3,000,000

DOL equity (35% x $6,000,000) ................................................................................................................................................. 2,100,000

Reed Act equity (15% x $6,000,000) .......................................................................................................................................... 900,000

Total Sale Proceeds .............................................................................................................................................................. 6,000,000

(29 CFR 97.31(c)(2).)

See Part F.1. for an explanation of how DOL (Federal) equity was created in the property.

a. Replacement. A State may use proceeds from the sale of real property as an offset to the purchase price of

a replacement property. In a replacement transaction, it is not necessary to make another appropriation of Reed Act

funds to obtain the replacement property if the use of such funds conforms in all respects to the original appropriation

authorizing the acquisition of the disposed property and is permissible under State law. In the interpretation of State

Reed Act appropriations, the State is the final arbiter of its State law. Such transactions may not result in a new

obligation of Reed Act funds. If the property being replaced is worth more than the replacement, the excess cash

proceeds received or equivalent cash shall be handled as in Part 2.b.

b. Use of Cash Proceeds. The Reed Act share of cash proceeds received from the sale or other disposition of

real property must immediately be deposited in the State’s account in the UTF (Section 303(a)(4), SSA, and Section

3304(a)(3), FUTA). Similarly, any portion of the Reed Act proceeds from a disposition that is not used for replacement

property must be immediately deposited in the State’s UTF account. However, only proceeds equivalent to the original

cost of the property may be credited to the State’s account as Reed Act funds. Earnings or profit resulting from real

estate transactions may not be credited as Reed Act funds because only amounts transferred to a State as provided

in Section 903(a)(1), SSA, have ‘‘Reed Act’’ status. The remainder of cash proceeds, if any, must be used for the

payment of unemployment benefits or other expenditures consistent with the withdrawal standard. Failure to immediately

deposit the applicable proceeds into the UTF may be cause for the Secretary of Labor to commence conformity/compliance

proceedings and to assess interest on the amount outstanding. Example B illustrates the proper distribution of the

Reed Act share of sales proceeds in Example A.

Example B:

Distribution of Reed Act Share of Sales Proceeds:

Reed Act contribution to acquisition cost ................................................................................................................................. $1,000,000

Less: Adjusted grant funds contribution to (amortization of) acquisition cost ....................................................................... 700,000

Adjusted Reed Act Contribution ................................................................................................................................................ 300,000

Reed Act equity in sales proceeds ............................................................................................................................................. 900,000

Less: Adjusted Reed Act contribution (credited to UTF as Reed Act funds) .......................................................................... 300,000

Balance of Reed Act equity (credited to UTF for payment of unemployment compensation and other expenditures consistent with the withdrawal standard) .................................................................................................................................... 600,000

H. Reimbursement of Reed Act

Expenditures From Granted Funds

1. Extent of Reimbursement. UI and

ES grant funds may be used to

reimburse the State’s Reed Act

expenditures to the extent that the costs

meet the requirements for use of funds

authorized by the Wagner-Peyser Act

and Title III. (29 CFR Part 97; OMB

Circular No. A–87.) To date,

reimbursement through amortization

arrangements has been authorized for:

• the cost of obtaining land and

constructing or purchasing a building

for employment security purposes (real

property),

• capital improvements to Stateowned office buildings, to the extent

such buildings are used for employment

security purposes, and

• the acquisition of automatic data

processing (ADP) installations.

Reed Act funds expended for the

above purposes may be amortized with

grant funds because these expenditures

meet the administrative requirements

related to the use of grant funds at 29

CFR Part 97 and OMB Circular No. A–

87 with respect to the expenditure of

Wagner-Peyser Act and Title III funds.
63966 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

The amortization of Reed Act

expenditures for the acquisition of real

property and capital improvements with

grant funds creates Federal equity.

‘‘Federal equity’’ means the Federal

government owns a share of the fair

market value of real property. Therefore,

when the property ceases to be used for

employment security purposes, DOL

recaptures the Federal equity. The value

of the Federal equity is based on the

adjusted contribution of UI and ES grant

funds to the acquisition cost of the

property and any capital improvements

that materially increase the value or

useful life of real property.

2. Deposit and ‘‘Reappropriation’’ of

Reimbursed Reed Act Funds. Grant

funds used to reimburse a State for Reed

Act expenditures must be deposited

immediately to the State’s UTF account

(Section 303(a)(4), SSA; Section

3304(a)(3), FUTA), and credited to Reed

Act funds used in the project. Where a

reimbursement relates to a particular

project within an appropriation

involving two or more years of Reed Act

allocations, the reimbursement is

applied first to the earliest Reed Act

allocation used in the project and

thereafter to the next earliest in

consecutive order. Reimbursed funds

may be ‘‘reappropriated’’ by the State

legislature for other Reed Act

administrative purposes.

I. Unemployment Trust Fund (UTF)

Transactions

1. Withdrawal of Reed Act Funds.

U.S. Treasury requirements and

procedures for withdrawal of Reed Act

funds from a State’s UTF account for

payment of benefits and administrative

expenses are the same as for regular

benefit funds through Treasury’s on-line

requisition system. To withdraw Reed

Act funds which have not been ‘‘set

aside’’ in a Reed Act sub-account, the

State must include the amount being

withdrawn in the total requisition for

regular benefits. There is a specific line

on the electronic requisition screen for

withdrawal of Reed Act funds which

have been ‘‘set aside’’ in a Reed Act subaccount. The total amount of

administrative Reed Act funds being

withdrawn and the account and location

of its deposit must be noted in the

‘‘special instructions’’ section of the

screen.

2. Deposit of Reed Act Fund

Reimbursements. As noted in part F.2.,

grant funds used to reimburse Reed Act

expenditures must be returned

immediately to the State’s UTF account.

The following are procedures for

deposit of such reimbursements:

• The State agency must prepare a

voucher against the administrative fund

account in the amount of the

reimbursement to be made.

• The ‘‘payee designation’’ must be

the State employment security agency,

or whatever designation is appropriate

to permit deposit to the clearing

account.

• After deposit to the clearing

account, the reimbursement must be

included in the next transfer of funds

from the clearing account to the State’s

UTF account.

The same procedures for depositing

reimbursement amounts will be used for

returning any Reed Act funds which

have been withdrawn for an

administrative purpose but not used.

(See part D.2.e.)

J. Accounting for Reed Act Funds

1. Accounting Records. Each State

agency will maintain an accounting

system with respect to Reed Act funds

which will provide information for

required DOL reports. The accounting

records will contain:

a. Date and amount of each allocation

or transfer of Reed Act funds to the

State’s UTF account, identified by fiscal

year and totalled.

b. Date and amount of each

expenditure of Reed Act funds for

benefits and the fiscal year in which the

funds charged with such expenditure

were transferred to the State’s account.

c. For each appropriation of Reed Act

funds for costs of administration:

• Date of enactment of the

appropriation law;

• Amount appropriated by the

appropriation law;

• Date and amount of each obligation

and expenditure of Reed Act funds with

respect to each project authorized by the

appropriation law and the Reed Act

funds against which each obligation is

charged;

• Date and amount of each

withdrawal from the UTF account with

respect to each project authorized by the

appropriation law;

• Date and amount of each return

(and credit) to the UTF account of

withdrawals not expended;

• Date and amount of all receipts

from the sale or other disposition of an

employment security building financed

with Reed Act funds or the lease of

space therein;

• Date and amount of each

reimbursement of Reed Act funds by

way of amortization with grant funds

with respect to each project authorized

by the appropriation law; the crediting

of each reimbursement to the UTF

account, and the balance which remains

to be reimbursed (or amortized); and

• Total of funds obligated pursuant to

each appropriation, the total

unobligated balance of each

appropriation, and total charges against

Reed Act funds.

d. Control totals for each transaction

recorded for each appropriation in c.

above.

e. Each entry in the records must be

supported by appropriate

documentation, and reference to such

documentation must be made in the

records.

2. Approval of Vouchers.

Each obligation and voucher for

expenditure of Reed Act funds

appropriated for expenses of

employment security administration

must be approved by the administrative

head of the State agency or a duly

authorized agent. All such documents or

certified duplicates or copies thereof

will be filed in the administrative office

of the State agency.

K. Reed Act Funds Reporting

Requirements

All transactions involving Read Act

funds must be reported on Form ETA

8403, Summary of Financial

Transactions—Title IX Funds (‘‘Reed

Act’’ Money) in accordance with

instructions in ET Handbook No. 401,

Section III, Chapter 2. Redeposits to and

withdrawals from the UTF account are

also reported on lines 14 and 41,

respectively, of Form ETA 2112, UI

Financial Transaction Summary.

Instructions for Form ETA 2112 are

contained in ET Handbook No. 401,

Section II, Chapter 1.

L. OMB Approvals

Reporting requirements for Form ETA

8403, Summary of Financial

Transactions—Title IX Funds (‘‘Reed

Act’’ Money) and Form ETA 2112, UI

Financial Transaction Summary are

approved by the Office of Management

and Budget (OMB) under OMB

Approval No. 1205–0154 (expiration

date: February 28, 2000). OMB Approval

is being sought for procedures to request

restoration of Reed Act funds used for

benefits (part C.5.b.) and procedures to

establish and provide on-going

maintenance to a Reed Act ‘‘subaccount’’ (part C.4.). When approval is

received for these collections,

notification will be issued.

Note: States are not required to respond to

these collections of information unless a

currently valid OMB approval number is in

effect.

Attachment II—Draft Language for

State Laws

I. Draft Statutory Language

The following language will allow

States to use either of the Reed Act
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 63967

1 ‘‘Fixed equipment’’ refers to such things as a

central heating and/or air conditioning plant which

becomes an integral part of the building and may

be included in the cost of the building reimbursable

out of granted funds.

2See footnote 1 above.

3The Department of Labor recommends that the

phrase ‘‘date of enactment’’ be used here, since

Section 903(c)(2)(B) of the Social Security Act

requires that use of the appropriated money be

limited to a 2-year period beginning with such date.

4Section 903(c)(2)(D) requires that this limitation

be applied to money obligated, even though a State

may choose to apply the 2-year limitation to

expenditures.

appropriation alternatives provided

after this draft statutory language.

(f) Money credited under Section 903

of the Social Security Act.

(1) Money credited to the account of

this State in the Unemployment Trust

Fund by the Secretary of the Treasury of

the United States of America pursuant

to Section 903 of the Social Security Act

may not be requisitioned from this

State’s account or used except for the

payment of benefits and for the payment

of expenses incurred for the

administration of this State’s

unemployment compensation law and

public employment offices. Such money

may be requisitioned pursuant to

Section [insert section referring to

withdrawals from the Unemployment

Trust Fund] for the payment of benefits.

Such money may also be requisitioned

and used for the payment of expenses

incurred for the administration of this

State’s unemployment compensation

law and public employment offices but

only pursuant to a specific

appropriation by the legislature and

only if the expenses are incurred and

the money is requisitioned after the date

of enactment of an appropriation law

which specifies the purpose(s) for

which such money is appropriated and

the amount(s) appropriated therefor.

Such appropriation is subject to the

following conditions:

(A) The period within which such

money may be obligated is limited to a

period ending not more than two years

after the date of the enactment of the

appropriation law; and

(B) the amount which may be

obligated is limited to an amount which

does not exceed the amount by which

(i) the aggregate of the amounts

transferred to the account of this State

pursuant to Section 903 of the Social

Security Act exceeds, (ii) the aggregate

of the amounts used by this State

pursuant to this Act and charged against

the amounts transferred to the account

of this State.

(2) For purposes of subsection (1)(B),

the amounts obligated under an

appropriation for the above-described

administrative purposes shall be

charged against transferred amounts at

the exact time the obligation is entered

into.

(3) The appropriation, obligation, and

expenditure or other disposition of

money appropriated under this

subsection shall be accounted for in

accordance with standards established

by the United States Secretary of Labor.

(4) Money appropriated as provided

herein for the payment of expenses of

administration shall be requisitioned as

needed for the payment of obligations

incurred under such appropriation and,

upon requisition, shall be deposited in

the employment security administration

fund from which such payments shall

be made. Money so deposited shall,

until expended, remain a part of the

unemployment fund and, if it will not

be immediately expended, shall be

returned promptly to the account of this

State in the Unemployment Trust Fund.

(5) Notwithstanding paragraph (1),

moneys credited with respect to Federal

fiscal years 1999, 2000, and 2001, shall

be used soley for the administration of

the UC program and are not subject to

appropriation by the legislature.

II. Draft Appropriation Language

Two suggested Reed Act

appropriation bills are presented. Either

bill may be used with the draft statutory

language presented earlier. The first

permits States with statutory Reed Act

provisions to incorporate the

requirements of Section 903(c)(2), SSA,

by simply referencing these statutory

provisions. This approach may be better

for States where the Reed Act

appropriation may be contained in a

larger appropriation act or where State

appropriation law limits the content of

any single appropriation bill. The

second details the requirements of

Section 903(c)(2) and is similar to Reed

Act appropriation bills recommended

by this Department in the past. Since

Reed Act moneys transferred with

respect to Federal fiscal years 1999,

2000, and 2001, need not be

appropriated by the State legislature,

States need not follow this draft

language for such moneys.

Alternative 1

AN ACT APPROPRIATING MONEY

FOR ERECTING A BUILDING FOR USE

BY [Name of State employment security

agency]

BE IT ENACTED BY THE

LEGISLATURE OF THE STATE OF

[Name of State]

SEC. 1. There is hereby appropriated

out of funds made available to this State

under Section 903 of the Social Security

Act, as amended, the sum of $llll,

or so much thereof as may be necessary,

to be used, under the direction of the

[name of State employment security

agency or the agency responsible for

building construction] and subject to the

requirements of Section [reference

section of State code containing Reed

Act provisions] of the State Code, for the

purpose of acquiring land and erecting

a building thereon for the use of [name

of State employment security agency]

and for such improvements, facilities,

paving, landscaping, and fixed

equipment1 as may be required for its

proper use and for operation by the

[name of State employment security

agency].

SEC. 2. Section 1 shall take effect and

be in force from and after passage.

Alternative 2

AN ACT APPROPRIATING MONEY

FOR ERECTING A BUILDING FOR USE

BY [Name of State employment security

agency]

BE IT ENACTED BY THE

LEGISLATURE OF THE STATE OF

[Name of State]

SEC. 1. There is hereby appropriated

out of funds made available to this State

under Section 903 of the Social Security

Act, as amended, the sum of $llll,

or so much thereof as may be necessary,

to be used, under the direction of the

[name of State employment security

agency or the agency responsible for

building construction], for the purpose

of acquiring land and erecting a

building thereon for the administration

of this State’s unemployment

compensation law and public

employment offices and for such

improvement, facilities, paving,

landscaping, and fixed equipment 2 as

may be required for its proper use and

operation.

SEC. 2. No part of the money hereby

appropriated may be obligated after the

expiration of the 2-year period

beginning on the date of the enactment 3

of this act.

SEC. 3. The amount obligated 4

pursuant to this act shall not exceed at

any time the amount by which (a) the

aggregate of the amounts transferred to

the account of this State pursuant to

Section 903 of the Social Security Act

exceeds (b) the aggregate of the amounts

obligated for administration and paid

out for benefits and required by law to

be charged against the amounts

transferred to the account of this State.

SEC. 4. This Act shall take effect and

be in force from and after passage.

[FR Doc. 97–31669 Filed 12–2–97; 8:45 am]

BILLING CODE 4510–30–M