6772 Federal Register / Vol. 73, No. 24 / Tuesday, February 5, 2008 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Administration for Children and 

Families 

45 CFR Parts 261, 262, 263, and 265 

RIN 0970–AC27 

Reauthorization of the Temporary 

Assistance for Needy Families (TANF) 

Program 

AGENCY: Administration for Children 

and Families (ACF), Department of 

Health and Human Services (HHS). 

ACTION: Final rule. 

SUMMARY: This final rule implements 

changes to the Temporary Assistance for 

Needy Families (TANF) program 

required by the Deficit Reduction Act of 

2005 (DRA) (Pub. L. 109–171). The DRA 

reauthorized the TANF program through 

fiscal year (FY) 2010 with a renewed 

focus on work, program integrity, and 

strengthening families through healthy 

marriage promotion and responsible 

fatherhood. On June 29, 2006, ACF 

published an interim final rule 

implementing the required statutory 

changes with a 60-day comment period 

that ended on August 28, 2006. We have 

considered all comments received 

during this period and made necessary 

changes as reflected in this final rule. 

EFFECTIVE DATE: October 1, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Robert Shelbourne, Director, Division of 

State TANF Policy, Office of Family 

Assistance, ACF, at (202) 401–5150. 

SUPPLEMENTARY INFORMATION: On June 

29, 2006, the Administration for 

Children and Families published an 

interim final rule implementing key 

provisions of the Deficit Reduction Act 

of 2005. The DRA required States to 

implement certain work requirements 

effective October 1, 2006, among which 

were including families with an adult 

receiving assistance in a separate State 

program funded with qualified State 

maintenance-of-effort expenditures 

(SSP–MOE) in the work participation 

rates and revising the base year of the 

caseload reduction credit from FY 1995 

to FY 2005. The law also directed us to 

issue regulations to ensure consistent 

measurement of work participation 

rates, including defining work activities, 

determining the circumstances under 

which a parent who resides with a child 

who is a recipient of assistance should 

be required to participate in work 

activities, and requiring States to 

establish and maintain work 

participation verification procedures. 

Congress also explicitly permitted HHS 

to issue an interim final rule, implicitly 

recognizing that States may have to 

revise practices once final regulations 

were published. Under the interim final 

rule, States were able to begin planning 

and implementing necessary changes to 

their TANF programs and procedures 

under the new requirements. Under this 

final rule States are accountable for 

moving more families to self-sufficiency 

and independence. 

Comment Overview 

We provided a 60-day comment 

period, during which interested parties 

could submit comments in writing by 

mail or electronically. During this 

period, we also held five listening 

sessions across the country in which 

State and local officials, legislators and 

key associations representing them 

could provide oral comments that were 

officially recorded and considered in 

developing this final rule. 

We received 470 letters of comment 

on the interim final rule, representing 

State human service agencies, State 

legislators, national associations, 

advocacy and disability groups, 

community and faith-based 

organizations, Indian Tribes and Tribal 

organizations, educators, and the 

general public. Most commenters 

addressed several provisions of the 

interim final rule. Some comments 

favored the rule, for example: ‘‘Overall 

the regulations are very positive and set 

the correct tone that countable activities 

need to meet the new federal definitions 

and be verified.’’ But, in general, most 

commenters had mixed views, 

supporting some provisions and 

opposing others. A significant number 

of commenters expressed concerns 

about statutory provisions of the DRA or 

of existing law, over which we have no 

regulatory discretion. Others expressed 

concerns about the policies reflected in 

the rule. In response to these comments, 

ACF is committed to working with 

states, particularly with regard to TANF 

adult recipients living with disabilities, 

to explore additional approaches and 

innovative efforts to promote and 

support their employment. 

As discussed in more detail 

throughout this preamble, the final rule 

includes a number of important changes 

to address these policy concerns. These 

include: Allowing time spent in a 

bachelor’s degree program to count as 

vocational educational training; 

allowing up to an hour of unsupervised 

homework time for each hour of class 

time in all educational activities; 

expanding State flexibility by 

converting the six-week limit on job 

search and job readiness assistance to an 

hourly equivalent; adding the flexibility 

for a State to exclude a parent who is 

a recipient of Social Security Disability 

Insurance (SSDI) benefits from the 

definition of a work-eligible individual, 

as is the case with a recipient of 

Supplemental Security Income (SSI); 

clarifying that excused holidays are 

limited to 10 days in a year; and 

enhancing State flexibility by allowing a 

State to account for ‘‘excused hours’’ 

rather than an ‘‘excused day.’’ We have 

summarized the public comments and 

our response to them throughout 

sections III through VIII of this final 

rule. 

Table of Contents 

I. The Statutory Framework: TANF and the 

Deficit Reduction Act of 2005 

II. Regulatory Principles and Provisions 

III. Cross-Cutting Issues 

A. Individuals With Disabilities 

B. Domestic Violence 

C. General Topics 

D. Tribal TANF 

IV. Part 261—Ensuring That Recipients Work 

V. Part 262—Accountability Provisions— 

General 

VI. Part 263—Expenditures of State and 

Federal TANF Funds 

VII. Part 265—Data Collection and Reporting 

Requirements 

VIII. Paperwork Reduction Act of 1995 

IX. Regulatory Flexibility Analysis 

X. Regulatory Impact Analysis 

XI. Unfunded Mandates Reform Act of 1995 

XII. Congressional Review 

XIII. Assessment of Federal Regulations and 

Policies on Families 

XIV. Executive Order 13132 

I. The Statutory Framework: TANF and 

the Deficit Reduction Act of 2005 

Enacted as part of the Personal 

Responsibility and Work Opportunity 

Reconciliation Act (PRWORA) of 1996 

(Pub. L. 104–193), the TANF program is 

a Federal block grant to States designed 

to provide temporary assistance while 

moving recipients into work and selfsufficiency. States must help recipients 

find work and meet work participation 

rates and other critical program 

requirements to avoid financial 

penalties. States have broad flexibility 

to design and operate their TANF 

programs and to determine eligibility 

criteria and the benefits and services 

that families receive to achieve the four 

program purposes: 

(1) To provide assistance to needy 

families so that children may be cared 

for in their own homes or in the homes 

of relatives; 

(2) To end the dependence of needy 

parents on government benefits by 

promoting job preparation, work, and 

marriage; 

(3) To prevent and reduce the 

incidence of out-of-wedlock pregnancies 

and establish annual numerical goals for 


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preventing and reducing the incidence 

of these pregnancies; and 

(4) To encourage the formation and 

maintenance of two-parent families. 

PRWORA initially authorized TANF 

through September 30, 2002. Congress 

then funded TANF through a series of 

short-term extensions until the Deficit 

Reduction Act of 2005 reauthorized the 

program through FY 2010 with a 

renewed focus on work, program 

integrity, and strengthening families 

through marriage promotion and 

responsible fatherhood. Signed into law 

by President Bush on February 8, 2006, 

the DRA maintained State flexibility 

and many provisions of PRWORA, but 

included important changes to improve 

the effectiveness of the TANF program. 

Some comments on the interim final 

rule reflected a misunderstanding of the 

Deficit Reduction Act confusion over 

which original provisions of TANF 

Congress retained, which ones it 

changed, what Congress directed the 

Department to do by regulation, and 

how HHS exercised this regulatory 

authority in the interim final rule. This 

section explains these distinctions. 

The Deficit Reduction Act retained 

nearly all of the TANF provisions 

enacted in the original welfare reform 

law. For example, the law retained the 

requirement that 50 percent of all 

families with an adult participate in the 

12 allowable work activities for 

specified hours each week and that 90 

percent of two-parent families similarly 

participate for certain, specified hours. 

The hourly work participation 

requirements that adults must achieve 

to count in the State’s work 

participation rates also did not change. 

This requires a single custodial parent 

with a child younger than six to 

participate for at least an average of 20 

hours a week and for all others to 

participate for at least an average of 30 

hours a week to count in the overall 

participation rate. Similarly, two-parent 

families must participate for at least an 

average of 35 hours a week (or an 

average of 55 hours a week if federallyfunded child care is provided) to count 

in the two-parent participation rate. 

The DRA maintained the penalty 

associated with failing to meet these 

work requirements. As a result, we 

made no changes to the regulatory 

process associated with a State’s failure 

to meet the work participation rate 

requirement in the interim final or final 

rule. 

Further, the Deficit Reduction Act 

maintained provisions related to the 

TANF purposes, State plan 

requirements, use of grants, 

administrative provisions, prohibitions, 

appeals of adverse decisions, Tribal 

TANF, waivers, charitable choice, 

application of relevant Federal civil 

rights laws, and the limitation on 

Federal authority. Our charge from 

Congress was to regulate in accordance 

with the changes made by the Deficit 

Reduction Act, via an interim final rule 

if appropriate. Since none of these 

provisions changed in the statute, the 

associated regulatory provisions did not 

change in either the interim final or this 

final rule. 

Congress also made few changes in 

reauthorizing TANF funding. The law 

retained the $16.5 billion per year 

capped entitlement for State Family 

Assistance Grants and funding for the 

Contingency Fund. It extended the 

Supplemental grants for the 17 States 

with historic low grants per poor person 

and/or high population growth in the 

amount of $319 million through FY 

2008. Mandatory child care funding was 

increased by $1 billion over five years. 

The law eliminated provisions for 

Federal loans, the High Performance 

Bonus and the Illegitimacy Reduction 

Bonus and replaced them with a $150 

million-a-year research, demonstration, 

and technical assistance fund for 

competitive grants to strengthen family 

formation, promote healthy marriages, 

and support responsible fatherhood. 

The Deficit Reduction Act also 

expanded a State’s ability to meet its 

maintenance-of-effort (MOE) 

requirement. A State may now count 

expenditures that provide certain nonassistance, pro-family activities to 

anyone, without regard to financial need 

or family composition, if the 

expenditure is reasonably calculated to 

prevent and reduce the incidence of outof-wedlock births (TANF purpose three) 

or encourage the formation and 

maintenance of two-parent families 

(TANF purpose four). 

The new law did make several key 

statutory changes and also required 

HHS to promulgate rules in several 

areas. The statute added separate State 

program cases receiving assistance 

funded with qualified State 

maintenance-of-effort expenditures 

(SSP–MOE) to the calculation of the 

work participation rates. This is a new 

requirement of law, not within the 

discretion of our regulatory authority. 

Thus, regardless of how commenters 

viewed this statutory provision, we 

could not change it by regulation. The 

DRA continues to exclude any solelyState-funded (SSF) program, that is, one 

for which it does not claim the State 

expenditures as MOE under the TANF 

program. If a State established a SSF, 

such cases would not be included in the 

calculation of a State’s work 

participation rates or subject to other 

program requirements. 

The Deficit Reduction Act also 

changed the base year of the calculation 

of the caseload reduction credit from FY 

1995 to FY 2005. While the statutory 

work participation rates did not change, 

recalibrating the caseload reduction 

credit has the effect of increasing the 

work participation requirements. For 

most States, we estimate that in FY 2007 

the overall work participation 

requirement will be between 40 and 50 

percent, depending upon the amount of 

caseload reduction they had over the 

course of FY 2006 compared to the new 

baseline of FY 2005. 

Congress required HHS to do a 

number of things through regulation: 

• To define the meaning of each of 

the 12 countable work activities 

specified in PRWORA, primarily 

because a U.S. Government 

Accountability Office (GAO) study 

(GAO–05–821) reported that there was 

great variation in State definitions of 

work activities. As a result, State 

participation rates were not comparable. 

Of the activities, the underlying statute 

also specified which nine activities 

count toward meeting the first 20 hours 

of a 30-hour average weekly 

requirement; we refer to them as ‘‘core 

activities.’’ Any additional hours 

needed to meet the requirement can 

come from any of three ‘‘non-core 

activities’’ or from core activities. Under 

the statute, non-core activities may not 

count as core activities. 

• To clarify who is a work-eligible 

individual. In addition to families with 

an adult receiving TANF assistance, 

who were already a part of the work 

participation rates, the DRA required us 

to include such families receiving 

assistance under a separate State 

program and to specify the 

circumstances under which a parent 

who resides with a child who is a 

recipient of assistance should be 

included in the work participation rates. 

• To ensure that State internal control 

procedures result in accurate and 

consistent work participation 

information. Each State must establish 

and maintain work participation 

verification procedures that are based 

on regulations promulgated by the 

Secretary. 

• To establish a process for a new 

penalty in the event that a State fails to 

establish and maintain adequate 

procedures to verify reported work 

participation data. 

II. Regulatory Principles and Provisions 

To address these new statutory 

provisions and requirements of the 

Deficit Reduction Act, the final rule: 


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1. Defines each of the 12 countable 

work activities. Defining work activities 

is necessary for consistent measurement 

and will ensure an equitable and level 

playing field for the States. Because the 

statute provides 12 distinct activities, 

we have tried to define them as 

mutually exclusive, while still leaving 

flexibility for States to address the 

critical needs of families. 

2. Defines the term ‘‘work-eligible 

individual.’’ Generally a ‘‘work-eligible 

individual’’ is: (1) An adult (or minor 

child head-of-household) receiving 

assistance under TANF or a separate 

State program; or (2) a non-recipient 

parent living with a child receiving 

assistance. The definition excludes the 

following non-recipient parents: a minor 

parent who is not the head-ofhousehold, a non-citizen who is 

ineligible to receive assistance due to 

his or her immigration status, or, at 

State option on a case-by-case basis, a 

recipient of Supplemental Security 

Income (SSI) benefits. In addition, the 

term excludes some parents, whether 

they are recipients or not: a parent 

providing care for a disabled family 

member living in the home, if there is 

medical documentation to support the 

need for the parent to remain in the 

home to provide that care; and, at State 

option on a case-by-case basis, a parent 

who is a recipient of Social Security 

Disability Insurance (SSDI) benefits. We 

exclude these parents because they 

either cannot work legally or we believe 

it would be inappropriate to require 

them to work. 

3. Clarifies that a State may count 

only actual hours of participation. 

Under the original TANF rule, some 

States reported scheduled hours of 

participation, which created an 

inconsistency among States and reduced 

incentives to ensure that individuals 

actually participated for assigned hours. 

Under the final rule, we clarify that each 

State must report only actual hours of 

participation; nevertheless, for 

individuals in unpaid work activities, 

we permit States to count up to 10 days 

of holidays and an additional 80 hours 

excused absences. To reduce the 

documentation burden on both 

employers and workers, we also permit 

States to report projected hours of 

employment on the basis of prior, 

documented actual hours of work. 

Similarly, to reduce the documentation 

burden on both educational providers 

and participants in an educational 

activity, we also allow States to count 

up to one hour of unsupervised 

homework time for each hour of class 

time. 

4. Recalibrates the caseload reduction 

credit by updating the base year from 

FY 1995 to FY 2005. As under 

PRWORA, the credit excludes caseload 

changes due to changes in Federal law 

or State eligibility criteria since the base 

year. 

5. Requires each State to establish 

and maintain work participation 

verification procedures through a Work 

Verification Plan. Each State must: (1) 

Determine which work activities may 

count for participation rate purposes; (2) 

determine how to count and verify 

reported hours of work; and (3) identify 

who is a work-eligible individual. The 

State must also develop and use internal 

controls to ensure compliance with its 

procedures and submit them in a 

complete Work Verification Plan to the 

Secretary for approval. 

6. Establishes a new penalty for 

failure to comply with work verification 

procedures. The final rule specifies that 

if a State fails to establish or comply 

with its work participation verification 

procedures and fails to correct the 

compliance deficiency, we will impose 

a penalty of between one and five 

percent of the State Family Assistance 

Grant (SFAG). The rule outlines the 

criteria under which we will impose 

this penalty and explains how a State 

may claim reasonable cause or submit a 

corrective compliance plan to correct 

the violation and avoid the penalty. 

7. Allows additional pro-family 

expenditures to count toward a State’s 

maintenance-of-effort (MOE) 

requirement. The final rule allows a 

State to count expenditures on certain 

pro-family activities without regard to 

financial need or family composition, if 

the expenditure is reasonably calculated 

to prevent and reduce the incidence of 

out-of-wedlock births (TANF purpose 

three), or encourage the formation and 

maintenance of two-parent families 

(TANF purpose four), as long as they 

meet all applicable MOE requirements 

and limitations. States receiving Healthy 

Marriage or Responsible Fatherhood 

grants may count State expenditures for 

any required match toward the State’s 

TANF MOE requirement, provided the 

expenditure also meets all applicable 

MOE requirements and limitations. 

Based on the consideration of all 

timely comments, this final rule reflects 

adopted changes to 45 CFR Parts 261, 

262, 263, and 265 of the interim final 

rule of June 29, 2006. The comments 

and changes are discussed in the 

preamble. Changes to these parts appear 

in sections IV to VII of this document. 

As in the interim final rule, the term 

‘‘we’’ is used throughout the regulatory 

text and preamble to mean the Secretary 

of the Department of Health and Human 

Services (HHS) or the following 

individuals or agencies acting on his 

behalf: the Assistant Secretary for 

Children and Families, the Regional 

Administrators for Children and 

Families, the Department of Health and 

Human Services, and the 

Administration for Children and 

Families. The term ‘‘Act’’ refers to the 

Social Security Act. We use the terms 

‘‘Deficit Reduction Act of 2005,’’

‘‘Deficit Reduction Act,’’ ‘‘DRA,’’ or 

‘‘Pub. L. 109–171’’ when we refer to the 

new law. States, the Territories, and the 

District of Columbia are all subject to 

the TANF requirements, but a reference 

to States means this entire group. Except 

as otherwise noted, we use the term 

‘‘TANF’’ to refer to TANF and any SSP–

MOE programs in a State. 

III. Cross-Cutting Issues 

Many commenters raised general or 

cross-cutting issues about the overall 

impact of the interim final rule or the 

impact on specific populations. We 

address these issues in this section, 

followed by comments on each section 

of the interim final rule. 

A. Individuals With Disabilities 

Comment: Many commenters 

maintained that the interim final rule 

would hamper State efforts to design 

programs appropriate for people with 

disabilities and discourage them from 

addressing their needs. Commenters 

expressed concern that States would be 

much less likely to invest the resources 

needed to provide the services that 

families with disabilities need if they 

are not able to count those families 

toward the work participation rates. 

Some commenters recommended that 

we broaden work activity definitions to 

accommodate the participation of 

people with disabilities. Others urged us 

to permit lower hourly standards as an 

accommodation. Otherwise, they 

recommended that we exclude clients 

with disabilities from the definition of 

a work-eligible individual. 

Response: We recognize that many 

individuals with disabilities are capable 

of participating in productive work 

activities and encourage States to 

explore these capabilities, rather than 

focusing on their limitations. In fact, in 

the preamble to the interim final rule, 

we encouraged States to provide selfsufficiency opportunities to individuals 

with disabilities and to engage them in 

appropriate work activities. We offered 

concrete examples, such as specialized 

work experience sites, that would 

provide and demonstrate the skills and 

experience needed to obtain 

employment. However, given the 

concern expressed by commenters on 

this critical issue, we intend to expand 

our technical assistance efforts in 


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identifying and sharing effective models 

that have been developed by vocational 

rehabilitation agencies and the entire 

disability community. 

Under the TANF statute, the work 

participation rate calculations generally 

include all families with an adult 

receiving assistance. When Congress 

replaced the Aid to Families with 

Dependent Children (AFDC) program 

with TANF, it eliminated a number of 

statutory exemptions related to 

incapacity, temporary illness, and age. 

There was no suggestion in PRWORA 

that the activities or hours that count 

toward the work participation rate 

should vary for clients with disabilities. 

By limiting the maximum participation 

rate to 50 percent, Congress recognized 

that some individuals would not be able 

to satisfy the full requirements. 

However, we believe States should work 

with and provide services to 

individuals, whether they can 

participate for enough hours to count 

toward the work participation rates or 

not. Because families with adults 

receiving Federal assistance are subject 

to time limits, it is important for States 

to serve the entire caseload so that all 

recipients progress toward selfsufficiency. States should also provide 

needed accommodations that can help 

all individuals reach their full potential. 

We believe the regulation provides 

States with increased flexibility and 

incentives to work with people with 

disabilities. In the definition of ‘‘workeligible individual’’ in § 261.2, we give 

States the option of either including or 

excluding parents who receive SSI or 

SSDI benefits and whose children are 

TANF recipients. If the parent works 

enough to count in the rate, the State 

can include the family, but it is not 

disadvantaged if the parent receiving 

SSI or SSDI cannot work. In the final 

rule, we allow States to adjust prior 

reported data and to back out of the 

participation denominator any 

appropriate family with a work-eligible 

individual whose application for SSI or 

SSDI was approved retroactively, as 

long as the adjustment is within the 

allowable reporting time frame for the 

fiscal year. Also, we have reaffirmed in 

the final rule that a parent needed in the 

home to care for a disabled family 

member is also excluded from the 

participation rate. 

Comment: Many commenters 

suggested that the interim final rule 

makes it difficult for States to meet the 

work requirements and to comply with 

the Americans with Disabilities Act 

(ADA) of 1990 and Section 504 of the 

Rehabilitation Act of 1973. 

Response: We recognize and 

underscore that States must continue to 

comply with relevant civil rights laws, 

including the ADA and Section 504 of 

the Rehabilitation Act of 1973 (Section 

504). We believe that this final rule 

gives States several ways to count 

activities that they would be legally 

required to provide under the ADA and 

Section 504. It is also important to note 

that a State may be legally obligated to 

provide a reasonable accommodation/ 

modification under the ADA and 

Section 504 even if it will not receive 

credit toward its Federal work activity 

requirements for the accommodation/ 

modification. As identified in the 

preamble of the interim final rule, HHS 

developed and will develop additional 

technical assistance related to the 

application of civil rights laws in the 

TANF context. Existing tools may be 

found at the HHS Office for Civil Rights 

(OCR) Web site at http://www.hhs.gov/ 

ocr/tanf. Among other help, the 

webpage includes guidance entitled 

‘‘Prohibition Against Discrimination on 

the Basis of Disability in the 

Administration of TANF,’’ which 

addresses the application of the ADA 

and Section 504 in the TANF context, 

the legal requirements of ensuring equal 

access, reasonable accommodations/ 

modifications, nondiscriminatory 

operational methods, and includes a 

discussion of promising practices. 

Complaints alleging violations of these 

requirements are not infrequent. OCR 

currently has open TANF complaints, 

many of which allege that States are 

denying TANF applicants and 

beneficiaries with disabilities equal 

access and/or not providing reasonable 

accommodations/modifications. Such 

complaints are often resolved by a State 

agreeing to implement effective and 

comprehensive screening and 

assessment of TANF applicants and 

beneficiaries. 

We were also trying to make one other 

key point. It is discriminatory to deny 

a person with a disability the right to 

participate in or benefit from the aid, 

benefit, or service provided by a public 

entity. The benefits and services 

provided must be equal to those 

provided to others, and as effective in 

affording equal opportunity to obtain 

the same result, to gain the same benefit, 

or to reach the same level of 

achievement as those provided to 

others. Services, programs, and 

activities must be administered in the 

most integrated setting appropriate to 

the needs of qualified individuals with 

disabilities. Separate or different aids, 

benefits, or services are permitted, but 

only when necessary to ensure that they 

are as effective as those provided to 

others. Persons with disabilities must 

also have the option of declining to 

accept a particular accommodation. 

Thus, State agencies must offer people 

with disabilities an equal right to 

participate in programs instead of 

automatically exempting them from 

participation requirements. 

The Supreme Court, in School Board 

of Nassau County v. Arline noted, 

‘‘* * * society’s accumulated myths 

and fears about disability and disease 

are as handicapping as are the physical 

limitations that flow from actual 

impairment.’’ 480 U.S. 273, 284 (1987). 

Provisions of the ADA and the 

Rehabilitation Act prohibit exclusion 

and segregation of individuals with 

disabilities and the denial of equal 

opportunities enjoyed by others, based 

on, among other things, assumptions, 

patronizing attitudes, fears, and 

stereotypes about individuals with 

disabilities. Public agencies are required 

to ensure that their actions are based on 

facts applicable to individuals and not 

on assumptions as to what a class of 

individuals with disabilities can or 

cannot do. 

The ADA covers individuals who vary 

widely in the severity of their disability, 

degree of disadvantage, capabilities, and 

skills, and their appropriate path to selfsufficiency and independence must be 

assessed on an individual basis, just like 

everyone else. It is exactly for these 

reasons that Congress chose not to 

exclude individuals with disabilities 

from the participation requirements and 

the benefits and results that accrue to 

working individuals and families. We 

believe that potential danger lies in 

altered expectations and opportunities, 

in automatic exemptions, and in 

exclusions from integrated requirements 

and services designed to lead to selfsufficiency and independence. TANF 

agencies must provide programs in the 

most integrated setting appropriate to 

the needs of people with disabilities. 

Agencies should take steps to ensure 

that individuals with disabilities can 

participate in all programs and services 

for TANF clients, not just those 

programs and services that are designed 

solely for people with disabilities. In 

addition, TANF agencies must ensure 

equal access to programs and services 

for TANF clients. In ensuring equal 

access, it is critical that TANF agencies 

have comprehensive and effective 

screening and assessment tools in place. 

Clearly, a State must provide 

appropriate accommodations and 

services when necessary to afford an 

individual with a disability an equal 

opportunity to participate in, and enjoy 

the benefits of, the service, program, or 

activity, and the opportunity to request 

such accommodations and services. 


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States can and must make necessary 

accommodations in the number of hours 

and types of activities they require, if 

needed. But, accommodations that 

enable clients to work are clearly just as 

critical. States must ensure that 

individuals with disabilities are not 

excluded from services, programs and 

activities because buildings are 

inaccessible, and these include the 

buildings of contractors and providers. 

Agencies must also provide 

accommodations to individuals with 

disabilities, at no additional cost, where 

necessary to ensure effective 

communication with individuals with 

hearing, vision, or speech impairments. 

(Accommodations include but are not 

limited to such services or devices as 

qualified interpreters, assistive listening 

headsets, television captioning and 

decoders, telecommunications devices 

for the deaf [TDDs], videotext displays, 

readers, taped texts, materials in Braille, 

and large print materials.) 

Comment: One commenter suggested, 

‘‘Employment of individuals with 

mental illness should be a top priority 

for policy makers at all levels of 

government. Unfortunately, due to 

stigma, organizational, financial and 

other barriers, employment is often a 

low priority, if it is a priority at all. It’s 

doubtful that the Interim Final Rules, as 

currently drafted, will result in greater 

work opportunities for people with 

psychiatric disabilities.’’

Response: We agree that employment 

of individuals with disabilities should 

be a priority, and this Administration 

has made it a priority for all executive 

agencies. President Bush, in announcing 

his ‘‘New Freedom Initiative’’ in 2001, 

stated, ‘‘Every American should have 

the opportunity to participate fully in 

society and engage in productive work. 

Unfortunately, millions of Americans 

with disabilities are locked out of the 

workplace because they are denied the 

tools and access necessary for success.’’

The number of recipients with 

disabilities who are currently working 

significantly understates both the 

capability and desire of people with 

disabilities to work. Under significant 

work participation requirements, States 

will need to expand preparatory and 

employment options for individuals 

with disabilities. We will continue to 

work closely with our colleagues in the 

Substance Abuse and Mental Health 

Services Administration, the Social 

Security Administration, and the 

disability community to enhance 

services to all people with disabilities. 

Comment: One commenter noted that 

the preamble to the interim final rule 

often encouraged States to engage 

individuals with disabilities but that the 

rule did not offer practical ways to assist 

States in doing so. The commenter 

urged us to ensure that the final rule 

includes better mechanisms to allow all 

TANF recipients with disabilities to 

meet work participation requirements. 

Response: We agree that TANF 

agencies need to find more effective 

ways to engage people with disabilities 

in their caseloads than many have used 

in the past. Increased efforts should be 

pursued in a number of areas. For some 

States, TANF agencies need to re-engage 

with State rehabilitation agencies to use 

their proven knowledge and expertise to 

address the barriers individuals with 

disabilities face and to help them enter 

the workplace. Much needs to be done 

to overcome negative stereotypes and 

misperceptions among the public. Job 

developers need to educate employers, 

since research shows that working 

individuals with disabilities are very 

effective employees. Agencies need to 

improve their marketing of the 

advantages and benefits of work to 

individuals with disabilities, while 

ensuring that benefits, such as medical 

coverage, are sustained. 

In the first 10 years of the TANF 

program, there has been inadequate 

attention to engaging individuals with 

disabilities in work; however, few States 

raised concerns to us about their ability 

to serve people with disabilities during 

this period. Oftentimes, individuals 

with disabilities face challenges in 

entering the workforce and pose 

challenges to State agencies trying to 

help them enter the workforce. 

Sometimes, a disability is debilitating 

enough that a person cannot work. 

Federal programs such as SSI and SSDI 

serve such people. But for many others, 

a disabling condition does not preclude 

the possibility and the rewards of work, 

even if it creates challenges. 

It is precisely for this reason that we 

have not categorically removed 

individuals with disabilities from the 

definition of work-eligible individual. 

Individuals who happen to have 

disabilities should be afforded the same 

opportunities to engage in work—to find 

work-related training, work experience, 

and employment—as those who do not 

have a disability. By keeping such 

individuals in the work participation 

rate, as they have been since the 

inception of TANF, States have an 

added incentive to address the needs of 

people with disabilities. 

We look forward to working with 

States in this area through our technical 

assistance efforts and anticipate 

disseminating information about 

promising approaches to helping 

individuals with disabilities and 

establishing linkages between 

organizations serving the needs of 

individuals with disabilities. ACF will 

use its Welfare Peer Technical 

Assistance Network to disseminate 

information on promising practices for 

serving individuals with disabilities. In 

addition, ACF will work with States to 

explore additional approaches and 

innovative efforts to promote and 

support the employment of TANF adult 

recipients living with mental, 

intellectual and physical disabilities. 

Comment: Many commenters urged 

us to permit ‘‘deeming’’ for individuals 

with disabilities. They recommended 

that we allow States to count recipients 

who participate in accordance with an 

employment plan that includes 

accommodations for disabilities as 

having met required hours to count in 

the participation rate. They stressed that 

this would give States an incentive to 

engage such individuals to their greatest 

ability. Similarly, they urged us to let 

States count recipients who miss 

scheduled hours of work participation 

because they were caring for a family 

member with a disability. They 

suggested that, in the same way that we 

permit ‘‘deeming’’ to respond to the 

requirements of the Fair Labor 

Standards Act, we should allow lesser 

hours of participation to count for the 

full required number of hours when 

needed to make accommodations 

required under the ADA. 

Response: We agree with the 

commenters’ concerns that individuals 

with disabilities should have 

appropriate accommodations in their 

work assignments and believe this 

regulation provides States with more 

flexibility and incentives to work with 

people with disabilities than they have 

ever had previously. As we noted in 

response to earlier comments, the TANF 

work participation rates have always 

included people with disabilities. States 

can and must make necessary 

accommodations in the number of hours 

and types of activities they require of 

individuals with disabilities. 

As noted earlier, ACF is committed to 

working with States to explore 

additional approaches and innovative 

efforts to promote and support the 

employment of TANF recipients living 

with disabilities. As we work with 

States, we will begin to get a better 

understanding of the potential promises 

and logistical challenges of all such 

approaches. 

With respect to individuals caring for 

people with disabilities, the regulation 

makes two accommodations. First, the 

definition of a work-eligible individual 

excludes a parent caring for a disabled 

family member living in the home, as 

long as there is medical documentation 


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to support the need for that parent to 

remain in the home to care for the 

disabled family member. Second, the 

regulation gives States credit for 

excused absences for all work-eligible 

individuals in unpaid work activities. 

Thus, if a State excuses an individual 

who misses time because she must care 

for a disabled family member, the State 

could count those missed hours as 

actual participation, within the limits 

the regulation sets out. Please refer to 

§ 261.60 for further discussion of 

excused absences. 

B. Domestic Violence 

Comment: Some commenters asserted 

that the interim final rule conflicted 

with the Family Violence Option (FVO). 

One commenter noted, ‘‘The regulations 

are also silent on how domestic violence 

services are allowed and how domestic 

violence cases are treated.’’ Another 

commenter asserted, ‘‘Women need time 

to effectively remove the barriers that 

have prevented them from obtaining 

quality employment.’’ Another 

suggested that ‘‘the limited time allowed 

in job search and job readiness for 

barrier removal activities is inflexible 

and should not apply to family violence 

victims.’’

Response: Existing provisions in the 

law address work participation rate 

issues for States dealing with victims of 

domestic violence. A State that elects 

the Family Violence Option under 

Section 402(a)(7) of the Social Security 

Act must screen and identify victims of 

domestic violence, refer such 

individuals to services and, if needed, 

waive participation and other program 

requirements for as long as necessary to 

escape domestic violence. The rules at 

Part 260, Subpart B allow States to grant 

good cause domestic violence waivers to 

victims of domestic violence that waive 

various program requirements, 

including work requirements. States 

have broad flexibility in determining 

which program requirements to waive 

and for how long. Although these 

recipients remain in the work 

participation rate calculation, there may 

be some activities that meet one of the 

work activity definitions that would 

make them countable toward the 

participation rate. If a State fails to meet 

a work participation rate, we will 

determine that it had reasonable cause 

if the State can demonstrate that it failed 

to meet the rate due to granting federally 

recognized good cause domestic 

violence waivers. In this circumstance, 

we would recalculate the work 

participation rate taking out any 

families in which individuals received a 

federally recognized good cause 

domestic violence waiver of work 

participation requirements. 

We believe the 1999 TANF final rule 

regarding the treatment of victims of 

domestic violence ensures services and 

waivers for victims and provides 

adequate ‘‘reasonable cause’’ reduction 

or elimination of penalties for States. 

Consequently, we did not propose 

revision to Part 260, Subpart B in the 

interim final rule; therefore, general 

concerns related to rules on victims of 

domestic violence are outside the scope 

of this rulemaking. 

C. General Topics 

• Alternative Measures of 

Performance 

Comment: Several commenters 

suggested shifting the focus of 

participation from process to outcome 

measures. One commenter found that 

the existing participation rates were too 

limited for purposes of assessing State 

performance measuring comparability 

across States. The commenter suggested 

that we use alternative measures of 

program success, including measures 

related to poverty, the employment rates 

of current and former recipients, and the 

completion rates for applicants and 

recipients enrolled in education and 

training programs. One commenter 

recommended continuing the High 

Performance Bonus outcome measures, 

even though bonuses are no longer 

available under the DRA. Another 

commenter urged work participation 

credit for those families who get jobs 

and work their way off welfare. 

Response: We do not have the 

regulatory discretion to replace the 

existing work participation rate 

requirements with alternative, 

performance-based measures. 

Nevertheless, we do continue to track 

several of the outcome measures from 

the high performance bonus. 

• Negative Consequences and 

Challenging Standards of Participation 

Comment: Several commenters 

suggested that the interim final rule 

makes it more difficult for States to 

design effective programs to move 

families from welfare to work. Some 

commenters predicted that States may 

adopt punitive approaches to reduce the 

denominator for the work participation 

rate. 

Some commenters suggested that we 

do not appreciate the need for flexibility 

and the difficulty of meeting a 50- 

percent overall participation rate. As an 

example, one commenter thought that 

we failed to recognize ‘‘the reality that 

reaching a 50 percent participation rate 

is difficult in large part because of the 

many legitimate reasons why a recipient 

may not meet the full hourly 

participation requirements in any 

particular month, including illness, 

temporary gaps between work 

components, and family emergencies 

such as trying to forestall an eviction, 

the need to find new housing, the need 

to care for an ill relative who may not 

live with the recipient, or the need to 

attend to a domestic violence issue.’’

One commenter said that the rules 

‘‘would steadily diminish state 

flexibility through the imposition of 

rigid federal mandates.’’ Another stated, 

‘‘The new regulations have eliminated 

the states’ ability to be flexible in 

determining what they may assess for 

countable work activities when in 

reality the needs of the particular 

participants and states vary vastly.’’

Response: We do appreciate the 

difficulty in engaging a large and varied 

client population in countable work 

activities for enough hours to meet the 

work participation rate. Instilling the 

work habits and providing the supports 

that different families need to engage in 

work is a challenge that all States must 

strive to achieve. We have given serious 

consideration to the commenters’

concerns and would like to point out 

certain aspects of statute as well as 

others of the TANF rule that help States 

achieve the work participation rate. 

There are several categories of 

individuals that continue to be excluded 

from the calculation of the work 

participation rate under the new law. 

One of the largest is the State option to 

disregard, on a case-by-case basis, 

single-custodial-parent families caring 

for a child under the age of one year. A 

State may also disregard a family subject 

to a work-related sanction for up to 

three months in the preceding 12 

months. In addition, the interim final 

rule allowed States to exclude from the 

definition of ‘‘work-eligible individual’’

parents caring for a disabled family 

member living in the home. Our 

excused absence policy addresses 

concerns related to hours missed due to 

short-term illnesses or emergencies. 

Finally, States have a special reasonable 

cause provision if they miss the work 

participation rate because they serve a 

large number of families dealing with 

domestic violence issues. 

Also, we would like to emphasize that 

when States cannot count the 

participation of some individuals in 

certain activities because they do not 

meet one of the work activity definitions 

or because the hours of participation are 

not sufficient, the States should still 

serve these individuals. The 

requirements and expectations for each 

family should be set by the State taking 

into consideration the needs of the 

family, obligations under the ADA and 


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Section 504 of the Rehabilitation Act of 

1973, and program goals. Thus, in any 

individual case, a State may require 

fewer hours of an adult than needed to 

count toward the Federal participation 

rate and that family will not help the 

State meet its work participation rate. 

Similarly, a State may, and many do, 

require more hours of an adult than 

needed to count the family in the 

participation rate. Moreover, States 

continue to have the flexibility to allow 

families to engage in broader and 

different activities from those that count 

for the Federal participation rate. 

We are convinced that States can and 

will meet these challenges, thus 

dramatically improving the lives of 

families. We also believe that the 

standards must be challenging to ensure 

that the maximum number of recipients 

move toward self-sufficiency. This 

conviction is based on the welldocumented results and achievements 

made by States in response to PRWORA. 

We believe the DRA provides the 

appropriate steps and direction for the 

next phase of welfare reform. 

We are confident that, under the new 

rule, States that operate effective and 

efficient welfare-to-work programs will 

be able to satisfy their work 

participation rate standards and 

enhance the services to clients at the 

same time. 

• Partial Credit 

Comment: Several commenters 

suggested that we should give States 

partial or pro rata credit for individuals 

who are engaged in work activities for 

some hours, but not enough to be 

included in the work participation rate 

calculation. One commenter pointed out 

that this would avoid the current ‘‘allor-nothing’’ standard and would permit 

some individuals who have limitations 

to be credited with participating. 

Another maintained that partial credit is 

not prohibited, even if the rules do not 

specifically allow it. 

Response: Neither PRWORA nor the 

DRA provided for counting partial 

participation of a case in meeting the 

work participation rates; either the adult 

meets the requirements for being 

‘‘engaged in work’’ and the family 

counts in the rate or the adult does not 

meet the hours requirement and the 

State does not get credit for that family 

in the participation rate. We remind 

readers that the regulations at 

§§ 261.22(d)(1) and 261.24(d)(1) do 

provide the flexibility of counting a 

partial month of assistance as a month 

of participation if a work-eligible 

individual is engaged in work for the 

minimum average number of hours in 

each full week that the family receives 

assistance in that month. Please refer to 

the regulatory text of those sections and 

to the preamble discussion in the 

original TANF rule at 64 FR 17771. In 

addition, the excused absence policy 

described in § 261.60(b) allows a State 

to receive credit for short-term excused 

absences and allows some families that 

would otherwise fall short of the 

minimum hourly requirements to count 

in the participation rate. 

• Increased Costs 

Comment: Some commenters 

suggested that the new regulations 

would require States to increase 

participation in work activities, which 

would raise program costs. This, in turn, 

they thought, would force States to 

curtail services because TANF is a fixed 

block grant. 

Response: The dramatic decline in 

welfare caseloads since the 1996 welfare 

reform has produced savings that far 

exceed any additional costs from new 

work requirements. More specifically, 

TANF funding, measured on a per 

TANF family basis, was $9,100 in 1996 

(inflation-adjusted) compared to 

$15,977 in 2007 (projected), an increase 

of $6,877 per family, or 76 percent. 

While we recognize that States have 

dramatically extended work services 

and support benefits to low-income 

working families, and pre-kindergarten 

care and education to children that are 

not receiving ‘‘assistance,’’ we believe 

that States have sufficient resources to 

allocate among priority programs while 

implementing these new requirements. 

• Child Care Needs 

Comment: Some commenters thought 

that there was not enough child care 

funding to pay for the added costs 

associated with implementing the work 

requirements under the Deficit 

Reduction Act of 2005, particularly for 

child care for non-recipient parents. 

Response: Since 1996, Federal child 

care funding through the Child Care and 

Development Fund (CCDF) has more 

than doubled—from $2.2 billion in FY 

1996 to $4.8 billion in FY 2005. HHS 

data on Federal and State child care 

spending in just three programs—TANF, 

CCDF, and the Social Services Block 

Grant (SSBG)—show that spending 

increased by nearly 225 percent 

between FY 1996 and FY 2005, from 

$3.6 billion to $11.5 billion. The Deficit 

Reduction Act increases Federal child 

care funding in the CCDF from $4.8 

billion to $5 billion, effective FY 2006. 

In addition to increasing child care 

funding, the Deficit Reduction Act fully 

funds TANF at $16.5 billion per year for 

five years. With significantly lower 

caseloads than in 1996, we believe that 

States should have adequate funding to 

provide needed child care under the 

Deficit Reduction Act requirements. 

• Monitoring 

Comment: Several commenters 

suggested that the rule imposes rigid 

monitoring and reporting requirements. 

Some expressed concern that frequent 

demands for proof of participation 

could overburden providers or cause 

families to lose assistance. 

Response: We believe that the rule 

simply clarifies what has always been 

the expectation of law, of the original 

TANF rule, and of the requirements of 

45 CFR part 92: That a State should 

report only actual participation that it 

has adequately documented and 

verified. As a result of numerous single 

audit findings questioning the validity 

of participation rates, we decided to 

clarify this expectation in the rule so 

that States may avoid potential 

penalties. In addition, for the four 

activities involving paid employment, 

which historically have represented the 

bulk of State work participation, we 

have substantially reduced the burden 

on clients, employers, and States by 

allowing the reporting of projected 

actual hours of participation for up to 

six months based on current, 

documented hours of work. 

• Consultation 

Comment: One commenter stated that 

we did not consult Tribes about the 

interim final rule and that Tribes were 

expressly discouraged from providing 

input because the rule was directed at 

States and was not intended to impact 

Tribal TANF programs directly. 

Response: The rulemaking process 

included a period for public comment 

on the interim final rule. Tribes as well 

as other organizations and individuals 

were free to express their opinions and 

to offer advice on the rule. Several 

Tribes and Tribal Organizations took the 

opportunity to submit comments, which 

we have addressed in the preamble to 

this final rule. Further, ACF 

representatives actively participated in a 

National Summit on State and Tribal 

TANF in July 2006, at which State and 

Tribal representatives discussed the 

provisions of the DRA and the interim 

final rule in detail and expressed 

comments. The National Alliance of 

Tribal TANF, one of the Summit 

sponsors, summarized these comments 

and formally submitted them to us. 

They are also addressed in this 

preamble. 

D. Tribal TANF 

Comment: One commenter observed 

that Tribal TANF programs could be 

adversely affected by States that fail to 

meet the work participation rates 

because the funds that States transfer 

are critical to the operation of Tribal 

TANF programs. This commenter also 


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expressed concern that funding and 

regulatory changes to State TANF 

programs will negatively affect various 

Tribal programs. 

Response: State MOE funding plays 

an important role for Tribal TANF 

programs. We will continue to 

encourage States to support the Tribal 

TANF grantees with MOE funding; 

however, the decision to provide MOE 

funding rests solely with the States. 

States may also impose conditions on 

Tribal TANF programs on the use of 

State MOE funds. Primarily, the Federal 

role regarding State MOE is to ensure 

that States expend the required amount 

of funds in compliance with 

requirements. (For a more detailed 

discussion of Federal policy on MOE 

funds provided to Tribal TANF 

programs, please see our Policy 

Announcement, TANF–ACF–PA–00–4 

dated November 27, 2000.) 

We do not think it is likely that State 

TANF agencies will reduce MOE 

funding for Tribal TANF programs. If a 

State does fail a work participation rate, 

it must meet an 80 percent MOE 

requirement. States that meet the work 

participation rates need only spend at 

the 75 percent MOE level. Any State 

that may potentially fail either the 

overall or two-parent participation rate 

needs to ensure that it has expended 80 

percent of its historic level of spending, 

a five percentage point increase for 

many States. In addition to the need to 

expend additional MOE funds, we have 

heard no State indicate that it is 

contemplating any reductions in 

providing funding to Tribal TANF 

programs. 

Comment: A few commenters 

expressed concern that restrictions 

imposed by this regulation could create 

an influx of Tribal clients moving to 

areas in which Tribal TANF programs 

exist, thereby increasing the costs to 

these programs. Because Tribal funding 

is based on 1994 caseload data, Tribes 

have substantially limited ability to 

renegotiate effectively for increased 

funding. 

Response: We understand the 

commenters’ concerns; however, we 

have seen no evidence that this rule will 

prompt Tribal members to move into 

areas served by a Tribal TANF program 

or that such a potential influx would 

exceed the 1994 caseload level. In fact, 

if States effectively implement the DRA 

provisions, we expect further caseload 

declines. 

Comment: One commenter expressed 

opposition to any attempt to extend 

these regulations to the Tribal TANF 

program regulations. 

Response: As we noted in the 

preamble to the interim final rule, the 

regulatory changes promulgated in 

response to the enactment of the DRA 

only apply to States, the District of 

Columbia, and the Territories of Guam, 

Puerto Rico, the Virgin Islands, and 

American Samoa. We are not planning 

to amend the Tribal TANF program 

regulations at 45 CFR part 286 to 

comport with these DRA 2005 final 

rules. 

IV. Part 261—Ensuring That Recipients 

Work 

Section 261.2 What Definitions Apply 

to This Part? 

This section of the regulation defines 

work activities and work-eligible 

individuals. Section 407(d) of the Social 

Security Act specifies 12 separate and 

distinct activities. Under the original 

TANF rule, we chose not to define these 

work activities to provide maximum 

program design flexibility to States. We 

simply listed the 12 work activities in 

45 CFR 261.30 in the order they appear 

in the Act. As GAO found, this led to 

disparities in State definitions of work 

activities that resulted in inconsistent 

work participation measurement and 

undermined the principle of equitable 

treatment. In particular, States with 

narrow definitions were at a 

disadvantage in meeting the 

participation requirements compared to 

States with broader definitions. In 

addition, the GAO report (GAO–05–821) 

raised concerns that some States 

integrated activities to avoid various 

statutory limitations on some TANF 

work activities, such as the six-week 

time limit on counting hours spent in 

job search and job readiness assistance. 

The Deficit Reduction Act of 2005 

required HHS to promulgate regulations 

to ensure consistent measurement of 

work participation rates. The law 

specifically required us to determine 

whether an activity of a recipient of 

assistance may be treated as a work 

activity. Thus, in the interim final rule, 

we defined each of the countable work 

activities to promote consistency in the 

measurement of work participation rates 

and to maintain the integrity of the work 

participation rates. By defining work 

activities, we ensure that all States are 

judged on the same basis that is, that 

there is a level playing field. 

Our definitions follow the order of the 

list of work activities in section 407(d) 

of the Social Security Act. For ease of 

reference, we refer to the nine work 

activities that count for the first 20 

hours of required work or the 

corresponding 30-hour requirement for 

two-parent families (or 50-hour 

requirement for two-parent families 

receiving federally subsidized child 

care) as ‘‘core’’ activities and the three 

activities that can only count as 

participation after the core requirement 

is met as ‘‘non-core’’ activities. 

We were guided by four basic 

principles in developing the work 

activity definitions in this final rule. 

First, we attempted to define each 

work activity in a common sense way. 

If a particular activity was not explicitly 

listed in the statute, we attempted to see 

if it could fit under one of the 12 

activities listed in law. For example, 

treatment, counseling, and 

rehabilitation activities, in our 

judgment, fit best under job search and 

job readiness assistance, when such 

activity prepares an individual for work. 

However, we could not add wholesale 

categories of work activities to the 12 

listed in the law. Our task was to specify 

whether and where certain activities fit 

within these already existing statutory 

categories. 

Second, we defined each activity to 

focus on work and help move families 

to self-sufficiency. Work activities 

should help individuals develop the 

skills necessary to become job ready and 

go to work. We do not want families to 

exhaust their time-limited benefits and 

discover that they are not prepared to 

support themselves. 

Third, we tried, as far as possible, to 

make the definitions mutually exclusive 

of one another. Since Congress created 

12 distinct activities, we wanted to 

bring meaning to them as distinct 

activities. 

Fourth, we made supervision an 

explicit part of each definition. For 

programs to be successful, it is 

important that the case manager or 

provider knows what each person is 

supposed to be doing and that he or she 

is accountable on a timely basis for 

ensuring that the client actually 

performs such assigned tasks. 

Comments and Responses on CrossCutting Issues for Work Definitions 

We received many comments on this 

section of the interim final rule. Some 

comments applied to multiple activities 

or applied generally to defining the 

activities at all. We respond to those 

cross-cutting comments in this section 

and have grouped the comments and 

our responses by topic for the ease of 

the reader. We respond to comments 

that focus more narrowly on a specific 

definition in the discussion of each 

activity below. 

General Topics 

Comment: Some commenters wrote 

that the work activity definitions in the 

interim final rule narrowed the range of 

what States can count toward their work 


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participation rates and recommended 

giving States more flexibility in defining 

work activities. One commenter 

recommended allowing States to 

develop their own definitions. 

Response: The DRA directed HHS to 

define work activities to achieve greater 

consistency among States. For some 

States, the new definitions may narrow 

countable activities, but we believe they 

actually expand them in other States. 

For example, under the original rule, 

some States counted substance abuse 

and mental health treatment as 

community service or as job search and 

job readiness assistance. Some States 

did not count these activities at all, even 

if a substantial number of individuals 

participated in such treatment. Our new 

definitions make substance abuse 

treatment, mental health treatment, or 

rehabilitation activities an explicit part 

of job search and job readiness 

assistance. This will allow all States to 

count individuals participating in these 

activities and thus could actually 

increase work participation rates in 

these States. In general, we believe the 

work activity definitions specified in 

the interim final rule were reasonable 

and consistent with the goals of the 

TANF program, and thus we have 

retained them, with appropriate 

modification, in the final rule. As a 

practical matter, we do not believe that 

these definitions have a restrictive effect 

on what most States currently count 

because the dominant activity in most 

States has traditionally been 

unsubsidized employment, an activity 

whose definition most commenters did 

not find restrictive. 

Comment: Several commenters 

expressed the view that the emphasis on 

mutually exclusive activities restricts 

State flexibility in developing costeffective programs by making it more 

difficult for them to ‘‘blend’’ program 

activities. The commenters 

recommended that we make the 

definitions more ‘‘flexible’’ and permit 

program approaches that integrate and 

combine activities under one work 

activity definition. 

Response: Programs that combine 

work with training or other services 

have shown promise in helping TANF 

recipients make the transition to the 

labor force and move toward selfsufficiency. We believe that the final 

rule gives States the flexibility to 

operate programs of blended activities. 

Section 407(d) of the Act specifies 12 

separate and distinct activities. Thus, 

we have tried to define each activity to 

have a specific and distinct meaning, 

but it was not always possible to make 

them mutually exclusive. In fact, some 

types of activities can be categorized 

under more than one work activity 

definition. For example, many of the 

training activities counted under 

vocational educational training can also 

count under job skills training directly 

related to employment and education 

directly related to employment. The 

former is a core work activity that is 

limited to 12 months in a lifetime, 

whereas the latter are non-core activities 

that can only count once the core 

activity requirement has been met. 

Comment: Some commenters 

maintained that the most effective 

welfare-to-work programs included a 

variety of employment and education 

and training activities. In their opinion, 

mutually exclusive definitions would 

discourage States from combining work 

activities. Moreover, they maintained 

that doing so would require separate 

tracking of each activity and impose an 

added administrative burden. In 

addition, because some activities, such 

as job search and job readiness 

assistance and vocational educational 

training, have statutory limitations on 

their duration, the commenters thought 

that States might be reluctant to include 

these activities in a broader program 

that blends activities because it would 

limit the long-term use of those 

activities. Commenters urged us to 

allow States to combine activities and 

report all participation under one 

activity. Several commenters suggested 

that States should be allowed to count 

an individual participating in more than 

one activity in the activity that makes 

up the majority of the hours of 

participation. For example, many of 

these commenters recommended that 

we allow States to count a limited 

number of hours of job search or 

training as part of another activity, such 

as work experience, if the other activity 

represents the majority of the hours of 

participation. 

Response: We strongly support State 

programs that combine activities and 

believe that our definitions fit well with 

such blended programs. It is important 

that States report the hours of 

participation for each work activity in 

the appropriate category to ensure that 

the data are comparable across States. If 

an individual has exhausted the time 

allowed to count an activity, it does not 

prevent a State from continuing to 

combine it with other activities; it only 

affects what a State can report toward 

the participation rates. We note that a 

policy that allows some activities to 

count within others based on standards 

such as what constitutes a ‘‘significant 

majority’’ of hours would still require 

States to track the hours of each activity 

separately to determine which activity 

is the primary activity. Thus, combining 

the activities would not achieve the 

suggested administrative simplification. 

Comment: Many commenters 

expressed general support for education 

activities or for the ability to count a 

wider array of educational activities. 

Several commenters asserted that the 

regulations will limit access to 

education and training, and were 

concerned that this would hinder client 

access to higher paying jobs and 

undermine their efforts to become selfsufficient. For those with limited basic 

skills and language difficulties, some 

commenters proposed expanding the 

definitions of various core activities to 

increase opportunities of countable 

participation. Commenters also 

suggested that we expand the definition 

of vocational educational training to 

include education directed at achieving 

a baccalaureate or advanced degree. 

Response: We appreciate the value of 

education and training for all 

individuals. Some recipients need to 

develop skills to become employable; 

others benefit from education and 

training in order to advance in the 

workplace. While we cannot add 

educational categories to the explicit 12 

activities listed in the TANF statute, we 

believe that our definitions permit 

considerable flexibility to provide a 

range of education and training services 

to TANF families. Under vocational 

educational training, we permit a 

variety of postsecondary education 

activities, including associate degree 

programs, instructional certificate 

programs, industry skill certifications, 

and other course work. In addition, the 

definition of job skills training directly 

related to employment permits virtually 

all vocational educational training 

activities to count under that 

component as well. States may choose 

this activity for those individuals who 

have exhausted their 12-month limit on 

vocational educational training or to 

conserve these months for those who 

have sufficient additional participation 

in other core work activities. Remedial 

education and ESL can count under 

vocational educational training, if they 

are a necessary and regular part of the 

work activity, and also can count under 

education directly related to 

employment. States have considerable 

flexibility to mix and match work 

activities so that they can count a wide 

range of activities. Although the interim 

final rule did not permit States to count 

participation in baccalaureate or 

advanced degree programs in vocational 

educational training, we have been 

persuaded by commenters to allow such 

participation and have changed the 

definition accordingly. 


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Comment: Some commenters thought 

that the new work activity definitions 

‘‘do not allow for the singular economic, 

cultural, and geographic circumstances’’

that characterize some States. For 

example, they pointed out that the rural 

nature of some communities makes it 

difficult to serve some work-eligible 

individuals, both because the range of 

activities may be limited and also 

because various documentation and 

supervision standards are hard to apply. 

Response: We are sympathetic to 

concerns related to serving remote areas 

and areas where employment 

opportunities are limited due to high 

unemployment or other conditions. 

However, the statute does not make any 

allowance for such factors in the 

calculation of work participation rates, 

except that it limits the maximum 

overall rate to 50 percent. Under one of 

TANF’s predecessor programs, the Job 

Opportunities and Basic Skills Training 

(JOBS) program, States could exempt 

individuals living in remote areas, but 

Congress chose not to continue this 

exemption when it enacted TANF in 

1996. The law does provide penalty 

relief, though, if a State can demonstrate 

that high unemployment or regional 

recession caused or contributed to its 

failure to meet the work participation 

rates. Readers should refer to 

§§ 261.51(d) and 262.5 of this chapter 

for more information on penalty relief. 

Comment: Some commenters 

suggested that the work activity 

definitions exceeded our legal authority. 

One commenter noted, ‘‘Many states 

have used more expansive definitions 

over the past 10 years, and HHS has 

never suggested that they were in 

violation of the statute.’’ Another 

commenter asserted that there is ‘‘no 

statutory basis to impose a mutually 

exclusive list of definitions to what 

Congress said should be viewed as a 

whole.’’ Some commenters contended 

that specific regulatory provisions were 

not consistent with the statute. 

Response: The Deficit Reduction Act 

of 2005 specifically required us to 

determine ‘‘whether an activity * * * 

may be treated as a work activity. 

***’’ We believe the interim final rule 

was consistent with Congressional and 

statutory intent. We did not intend to 

suggest that States were in violation of 

the prior statute and rules. Rather, 

Congress saw a need for uniform 

definitions and the rule provides them. 

Comment: Some commenters wrote 

that aspects of our definitions were not 

necessary because they were not 

required by the statute, for example, the 

limitation that only supervised 

homework can count. 

Response: The statute is generally 

silent on what we should include in 

most definitions. In defining the work 

activities, we found it necessary to 

specify what can count as part of an 

activity and the conditions that must be 

met to ensure that actual participation 

in the activity occurs and thus keep 

definitions consistent across States. 

Comment: One commenter urged us 

to count as part of a work activity the 

time it takes to travel to and from the 

work or training site. The commenter 

thought this was particularly important 

in rural areas that are isolated and lack 

public transportation. 

Response: Travel time to and from 

work sites does not count toward the 

participation rates. We chose not to 

count commuting time to and from a 

work site because commuting is not 

‘‘engaging’’ in the activity for which the 

State gets credit and because this 

approach is analogous to the work 

world, since most employees receive no 

pay for the time it takes them to 

commute to their jobs. However, we do 

allow a State to count the time an 

individual spends in job search and job 

readiness assistance traveling between 

multiple interviews. Please refer to the 

preamble discussion of that work 

activity for more detail in this area. 

Daily Supervision 

Comment: Several commenters asked 

for clarification regarding the daily 

supervision requirement for unpaid 

work activities. Several commenters 

objected to the requirement that job 

search and job readiness assistance 

include daily supervision because they 

said it is a costly and time-consuming 

requirement. These commenters 

generally noted that the time and 

resources spent on daily supervision 

should be focused on providing direct 

services to help families move toward 

self-sufficiency. Several commenters 

suggested that we limit the requirement 

so that ‘‘someone with responsibility for 

oversight of the individual’s 

participation had contact with the 

recipient, and that the supervision does 

not have to be done by the TANF agency 

itself or an employment services 

contractor.’’ Some commenters 

recommended eliminating the 

requirement altogether. 

Response: We agree with many of 

these points and would like to clarify 

this requirement. Daily supervision 

means that a responsible party has daily 

responsibility for oversight of the 

individual’s participation, not 

necessarily daily, in-person contact with 

the participant. The goal of such 

supervision is to ensure that individuals 

are participating and making progress in 

their assigned activities. A work site 

sponsor, classroom instructor, 

contracted service provider, 

community-based provider, job search 

instructor, treatment provider, or even a 

TANF agency employee could fulfill 

that role. In addition, the supervision 

need not involve in-person contact, but 

can be by telephone or electronic 

contact where those methods are 

suitable. 

Daily supervision as described above 

is a central part of the final rule. It 

ensures that individuals who participate 

in work activities make progress in their 

assigned activities. Supervision is part 

of everyday life in paid employment, 

despite the cost and time involved, 

because it provides value. We should 

expect no less for all TANF work 

activities. 

Comment: One commenter asked for 

clarification regarding whether 

‘‘supervision is only required on days 

when an individual is scheduled to 

participate,’’ noting that it would not 

make sense to require supervision on 

the other days. 

Response: We agree and have clarified 

the final rule to indicate that 

supervision is only required for days 

when an individual is scheduled to 

participate. 

Distance Learning Activities 

Comment: Several commenters asked 

whether time spent in distance learning 

programs could count toward the work 

participation rates. They noted that this 

was particularly important in rural areas 

and that some programs keep track of 

the time individuals spend on a 

computer in ways that participants 

cannot change. 

Response: We agree that distance 

learning is an important way for some 

families to gain the skills needed to 

move toward self-sufficiency. We will 

count time spent in distance learning to 

the extent that such programs otherwise 

meet the work activity definitions and 

include supervision. A State should 

explain in its Work Verification Plan 

how it will provide supervision and 

monitor hours of participation in 

distance learning. 

Good or Satisfactory Progress 

Under the definitions in the interim 

final rule, two of the TANF work 

activities involving education required 

that participants make ‘‘good or 

satisfactory progress’’ in order for their 

hours of participation to count: 

Education directly related to 

employment and satisfactory attendance 

at secondary school or in a course of 

study leading to a certificate of general 

equivalence (GED). The preamble to the 


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interim final rule explained that this 

includes a standard of progress 

developed by the educational institution 

or program in which the individual was 

enrolled. It also said that good or 

satisfactory progress should be judged 

by both a qualitative measure of 

progress, such as grade point average, as 

well as a quantitative measure, such as 

a time frame within which a participant 

is expected to complete such education. 

We expressed interest in receiving 

comments that describe other possible 

criteria or definitions for what 

constitutes making ‘‘good or satisfactory 

progress.’’

Comment: Several commenters 

observed that the preamble to the 

interim final rule described ‘‘good or 

satisfactory progress’’ somewhat 

differently for the two activities to 

which it applied. In the case of 

‘‘education directly related to 

employment’’ we wrote that the 

standard could be developed by either 

the education institutions or the 

program. For ‘‘satisfactory attendance at 

secondary school,’’ we allowed the State 

or the educational institution/program 

to set the standard. The commenters 

asked for clarification of this policy and 

recommended a wide variety of 

approaches for setting ‘‘good or 

satisfactory progress’’ standards. Some 

commenters urged us to leave the 

standards to educational institutions 

and programs, while others 

recommended that States establish 

them. A number of commenters also 

proposed giving States the flexibility to 

choose to establish either or both 

qualitative and quantitative measures. 

Several commenters cautioned that 

the criteria for ‘‘good or satisfactory 

progress’’ should not discourage placing 

individuals with barriers in education, 

noting that they may require more time 

and help in meeting such standards. 

They suggested that the standards 

should include appropriate 

accommodations for individuals with 

disabilities. Other commenters 

recommended that we eliminate the 

requirement of ‘‘good or satisfactory 

progress’’ because many individuals 

with learning disabilities are often not 

identified by State agencies and fall 

through the cracks. 

Some commenters recommended 

creating good cause exceptions for those 

facing unusual or unexpected 

circumstances that prevented them from 

making progress as expected. Good 

cause exceptions, they maintained, 

would prevent States from being 

penalized when individuals participate 

for the required number of hours but are 

unable to progress due to various 

circumstances. Another commenter 

asked us to clarify that States would not 

be retroactively denied credit toward 

the participation rate because a client 

participated for the required hours but 

failed to make adequate progress. 

One commenter noted that the interim 

final rule did not specify the frequency 

with which ‘‘good or satisfactory 

progress’’ should be verified and 

commented that some measures of 

progress, such as grade point average, 

may not be available until the end of a 

quarter or semester. The commenter also 

explained that some educational 

programs, such as Adult Basic 

Education, may not have testing that 

produces grades to calculate a grade 

point average. The commenter 

recommended that States use 

‘‘subjective performance evaluations 

provided by the instructor to 

demonstrate progress * * * that simply 

indicate if academic performance was 

unsatisfactory or satisfactory.’’

Response: The commenters raised 

many compelling points. We believe 

that the easiest way to accommodate 

these concerns is simply to delete the 

requirement for ‘‘good or satisfactory 

progress’’ from the definitions of 

education directly related to 

employment and satisfactory attendance 

at secondary school or in a course of 

study leading to a GED. Although we 

believe such standards are valuable and 

should be part of any educational 

activity, based on the input from 

commenters, we have determined that 

the appropriate standards can vary 

based on too many circumstances to 

mandate their inclusion in these two 

activities. Educational institutions are 

generally in the best position to 

establish standards of progress, but they 

may not make separate determinations 

of progress based on the circumstances 

of individuals, a role a caseworker 

might best perform. Therefore, the final 

rule gives States flexibility in deciding 

whether to set standards of ‘‘good or 

satisfactory progress’’ and, if they do, to 

develop the standards that are best 

suited for their clients. 

Assessment 

Comment: Several commenters 

recommended that the definition of 

various work activities include the 

assessment of participants’ skills. 

Response: Our work activity 

definitions permit assessment of an 

individual’s suitability for a particular 

work activity. 

Section 261.2(b) Unsubsidized 

Employment 

In the interim final rule, we defined 

unsubsidized employment as full-or 

part-time employment in the public or 

private sector that is not subsidized by 

TANF or any other public program. We 

did not change the definition in the 

final rule. We have responded to 

comments concerning self-employment 

activities in the discussion of 

§ 261.60(c). 

Comment: Commenters found our 

definition of unsubsidized employment 

to be appropriate. 

Response: We agree and have retained 

the same definition in the final rule. 

Sections 261.2(c) and (d) Subsidized 

Private Sector Employment and 

Subsidized Public Sector Employment 

In the interim final rule, we defined 

both subsidized private sector 

employment and subsidized public 

sector employment as employment for 

which the employer receives a subsidy 

from TANF or other public funds to 

offset some or all of the wages and costs 

of employing a recipient. We described 

three possible subsidized employment 

program approaches: (1) To use TANF 

funds that would otherwise be paid as 

assistance to reimburse some or all of an 

employer’s costs; (2) to rely on a third 

party as the employer of record during 

the trial employment period, like a 

temporary staffing agency; and (3) to 

develop ‘‘supported work’’ programs for 

individuals with disabilities. 

In the final rule, we made a minor 

wording change to the definitions of 

each of these activities, substituting the 

word ‘‘individual’’ for ‘‘recipient.’’ We 

made this change both for consistency 

with other definitions and to make clear 

that these activities are allowable for 

any work-eligible individual. 

Comment: Several commenters asked 

whether participation in various 

supportive activities, such as substance 

abuse treatment, mental health 

treatment, and rehabilitation activities 

could count as subsidized private sector 

or public sector employment. These and 

other activities are often integrated as 

part of a supported work program, 

transitional jobs program, or other 

subsidized employment activity. 

Response: Hours of participation in 

various supportive activities can count 

if they are integrated parts of subsidized 

employment. This means that, in order 

to count, the individuals must be paid 

for all of the hours they participate in 

such activities. For example, some 

transitional jobs programs are structured 

to include direct work and 10 to 15 

hours of barrier removal or other 

activities, including mental health and 

substance abuse treatment, job search, 

and training. Participants are paid 

wages for all hours of participation. 

Otherwise, if the individuals are not 

paid while participating in these 


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activities, the participation should be 

reported as a blend of subsidized 

employment and another appropriate 

activity. Most likely this would be job 

search and job readiness assistance, but 

could be another activity. 

Comment: Several commenters noted 

that some individuals assigned to 

subsidized employment soon have 

earnings that are sufficient to make 

them ineligible for assistance. They 

asked whether such individuals could 

continue to count in the numerator of 

the participation rate. 

Response: Although we understand 

the commenters’ concern, the work 

participation rate calculations include 

only families with a ‘‘work-eligible 

individual.’’ (Please refer to the 

discussion of § 261.2(n) for more 

detailed information about the 

definition of ‘‘work-eligible 

individual.’’) If a State wants to count a 

family participating in subsidized 

employment that is ineligible for a 

regular assistance payment, it could 

create and pay an alternative assistance 

grant. The State could then count the 

family toward the rate. Of course, since 

the family retains assistance, this would 

not generate a caseload reduction credit, 

as might be the case otherwise. 

Comment: Several commenters asked 

whether employers would be required 

to hire and retain individuals engaged 

in subsidized employment once the 

subsidy period ended. The preamble 

guidance to the interim final rule stated, 

‘‘At the end of the subsidy period, the 

employer is expected to retain the 

participant as a regular employee 

without receiving a subsidy.’’ Some 

commenters explained that many 

transitional jobs programs place 

participants in short-term subsidized 

employment to provide experience, 

training, and guidance that enable that 

individual to obtain unsubsidized 

employment elsewhere, even though it 

may not result in a permanent position 

with the same employer. Other 

commenters recommended that we limit 

the expectation of continued 

employment to private sector employers 

to avoid creating a ‘‘revolving door’’ of 

subsidized employees. 

Response: The preamble language in 

this regard was a suggestion, not a 

requirement. We continue to caution 

that States should not allow employers 

to recycle TANF recipients in 

subsidized employment slots simply to 

reduce their competitive labor costs. 

The positions should lead to ongoing, 

stable employment or prepare 

individuals for such employment. 

Comment: Several commenters asked 

whether they must limit the duration of 

subsidized employment positions. They 

noted that the preamble to the interim 

final rule suggested ‘‘that States 

generally limit the duration of 

subsidized employment programs to six 

to twelve months.’’

Response: The limited duration is a 

recommendation, not a requirement. 

Longer placements may be appropriate, 

for example, in supported employment 

of individuals with disabilities or for 

other participants based on their 

individual circumstances, economic 

conditions, or other factors. 

Comment: One commenter noted, 

‘‘Congress listed public and private 

sector subsidized employment as 

separate work activities; therefore it is 

reasonable to have different 

expectations depending on the sector of 

the employer.’’ In particular, the 

commenter suggested that it may be 

appropriate to limit the duration of the 

employment subsidy to private sector 

employers ‘‘where there is an 

expectation of continued employment 

with that employer,’’ but that such 

limits should not be placed on public 

sector (and non-profit) employment. 

Response: We agree that durational 

limits help ensure that the primary 

benefit of the subsidy is to the 

employee, but do not see the need to 

apply different standards to the private 

and public sectors. We leave it to States 

to determine such limits regardless of 

whether they apply to private sector or 

public sector employment. 

Comment: One commenter 

recommended that States describe in 

their Work Verification Plans how a 

subsidized employment program will 

lead to unsubsidized employment 

‘‘where there is an expectation of 

continued employment with the same 

employer, and how the program will 

avoid displacement of current workers.’’

Response: We agree that the ultimate 

goal of subsidized employment is to 

move the individual to unsubsidized 

employment and off welfare. However, 

the purpose of the Work Verification 

Plan is to ensure that States report 

participation data that is consistent with 

the law and regulations and that States 

adequately verify the accuracy of that 

participation data. The Work 

Verification Plan does require States to 

describe how their services and 

programs meet the definition of a work 

activity. 

There is a statutory prohibition on 

displacement for all work activities in 

section 407(f) of the Act and the existing 

regulatory provision at § 261.70. Thus, 

we do not believe the Work Verification 

Plan needs to include this information. 

Comment: One commenter 

recommended that HHS ‘‘design the 

payment structure’’ to reflect the range 

of services offered under subsidized 

employment. 

Response: We believe the details of 

program design should be left to the 

States because the circumstances of 

individuals and the effectiveness of 

program activities may vary based on a 

number of factors. 

Section 261.2(e) Work Experience 

In the interim final rule, we defined 

work experience (including work 

associated with the refurbishing of 

publicly assisted housing) if sufficient 

private sector employment is not 

available, as a work activity performed 

in return for welfare that provides an 

individual with an opportunity to 

acquire the general skills, training, 

knowledge, and work habits necessary 

to obtain employment. We reminded 

readers that work experience 

participants continue to receive their 

TANF grants and that they do not 

receive wages or compensation by virtue 

of participating in the activity. 

Nonetheless, they may be considered 

employees for the purpose of the Fair 

Labor Standards Act (FLSA), which 

means that they must be compensated at 

no less than the higher of the Federal or 

State minimum wage. 

Comment: Several commenters 

suggested that work experience could 

sometimes be considered a ‘‘paid’’

activity. Others thought that the 

definition should exclude the phrase 

‘‘performed in return for welfare.’’

Response: We considered these views 

carefully but chose to retain the 

definition of work experience we 

published in the interim final rule, 

keeping it as an unpaid activity to 

distinguish it from the four ‘‘paid’’

activities that already exist. In our view, 

the purpose of work experience is to 

gain the skills needed to acquire a paid 

position. States that have work 

experience programs that involve the 

payment of wages should reclassify 

them as subsidized employment or onthe-job training. The fact that there may 

be an employer-employee relationship 

in a work experience assignment, 

triggering the minimum wage 

requirements of the FLSA, does not 

make the work activity ‘‘paid.’’ Rather, 

the individual is receiving 

compensation from the family’s TANF 

grant in lieu of wages. 

Comment: Several commenters asked 

us to clarify that not all work experience 

activities are subject to the FLSA. One 

commenter asked for clarification on 

who the employer is with respect to 

work experience positions—the State or 

the work site sponsor (if other than the 

State). The commenter was unsure 


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because the State provides worker’s 

compensation. 

Response: It is the responsibility of 

the Department of Labor to determine 

whether or not the FLSA applies to an 

activity and who the employer is. We 

recommend that readers direct any 

questions regarding the FLSA to the 

Wage and Hour Division of the U.S. 

Department of Labor at 1–866–4–

USWAGE, TTY 1–877–889–5627 or the 

following Web site: http://www.dol.gov/ 

esa/whd/flsa/index.htm. 

Comment: Several commenters asked 

whether the definition of work 

experience precludes a State from 

counting a participant who combines 

unsubsidized employment with work 

experience because the statutory 

language limits work experience to 

situations where ‘‘sufficient private 

sector employment is not available.’’ In 

addition, the interim final rule defined 

the purpose of work experience as 

improving the employability ‘‘of those 

who cannot find unsubsidized 

employment.’’

Response: The statutory language 

does not prevent States from using work 

experience for those who are in paid 

employment. We recognize that there 

may be circumstances in which an 

individual’s employment is not 

sufficient to meet the work activity 

requirement and a State may place such 

an individual in another work activity. 

In this circumstance, work experience 

could be appropriate because sufficient 

employment may not be available for 

‘‘full-time’’ work. Although we cannot 

strike the statutory phrase, ‘‘if sufficient 

private sector employment is not 

available,’’ we are clarifying that 

‘‘sufficient’’ means enough for full-time 

employment. 

Comment: Several commenters 

recommended that the definition of 

work experience (and community 

service) include ‘‘background checks 

and assessment of participants’’ skills as 

they related to a job site and required by 

a specific work experience slot.’’

Response: Our definition permits 

background checks and the on-site 

assessment of an individual’s suitability 

for a particular work experience slot. 

States must assess each recipient of 

assistance over 18 years of age or who 

has not finished high school (or the 

equivalent). 

Comment: Some commenters 

suggested that we consider training, 

education, and vocational educational 

training to be part of work experience. 

They noted that the preamble 

discussion of community service 

programs in the interim final rule 

offered a rationale for providing training 

within that activity, citing the example 

of an individual assigned to clerical 

support who needs to attend a computer 

training class. They suggested that a 

similar provision should apply to work 

experience and that we should expand 

it to include other forms of educational 

or vocational educational training 

activities. 

Response: States may wish to 

supplement work experience with 

training, but we do not believe that 

formal training, education, and 

vocational educational training 

programs should be considered part of 

work experience. Work experience is 

defined as work performed in return for 

welfare and is intended to provide an 

individual with an opportunity to 

acquire the general skills, knowledge, 

and work habits necessary to obtain 

employment. We make an exception in 

community service because that activity 

involves a service that is of direct 

benefit for the community and limited 

training may count if it is an integral 

part of the activity. We have deleted the 

reference to ‘‘training’’ in the definition 

of ‘‘work experience’’ to clarify this 

point, as that reference referred to 

training in general workplace skills, not 

to formal instruction that can be 

provided through other TANF work 

activities. 

Comment: Several commenters asked 

whether short periods of job search and 

job readiness assistance or vocational 

educational training could be embedded 

and counted within work experience. 

These commenters suggested that such 

programs are more effective than work 

experience alone and that not 

permitting such embedded activities to 

count would discourage States from 

combining work experience with 

activities designed to move TANF 

recipients into unsubsidized jobs. Other 

commenters contended that ESL should 

be included as part of work experience 

because the ability to speak English is 

a prerequisite for employment. 

Response: As we have noted before, 

we fully support State efforts to 

integrate and combine work activities. 

Reporting hours of work separately for 

the different activities should not 

impede a State’s ability to offer 

integrated services or encourage 

individuals to combine activities. We 

attempted to define activities so that 

they are mutually exclusive because the 

law provides 12 distinct activities, so in 

general, including activities that meet 

one of the other work activity 

definitions would be inappropriate, 

particularly in the case of activities with 

established limitations in statute, i.e., 

job search and job readiness assistance 

and vocational educational training. 

ESL is an educational activity that can 

count under vocational educational 

training, if it is a necessary and regular 

part of the work activity, and also can 

count under education directly related 

to employment. However, we note that 

States can count short absences from 

various activities to participate in, for 

example, a job search activity under the 

excused absence policy (described in 

§ 261.60(b) of this chapter). In addition, 

as we describe in the section on job 

search and job readiness assistance, we 

give States greater flexibility to count 

sporadic hours of participation in job 

search and job readiness assistance 

without triggering a full week in that 

activity that would otherwise count 

against its durational limits. 

Comment: One commenter 

recommended that we require States to 

‘‘consider TANF workers as employees 

of the state, eligible therefore for all 

state employee benefits and covered by 

all worker protection statutes.’’

Response: The DRA did not change 

the worker protections or employee 

benefits available to work activity 

participants, so the final rule does not 

make any changes to existing policy in 

this regard. The original TANF rule 

clarified that, notwithstanding specific 

language limiting the scope of the TANF 

rules, TANF programs are subject to 

Federal employment and nondiscrimination laws. These protections 

continue to apply under the final rule. 

Since there is no statutory basis for a 

requirement such as the commenter 

suggested, we do not believe we have 

the authority to require TANF workers 

to be considered employees of the State. 

State law generally governs whether an 

individual must be considered an 

employee or may be considered an 

employee for purposes of State 

employee benefits. Also, the worker 

protection statutes themselves define 

the situations that they cover, many of 

which apply to individuals participating 

in TANF work activities. 

Comment: One commenter asked for 

clarification that work experience 

positions could be created with private 

sector employers. The commenter stated 

that this would expand the number of 

placement opportunities and the 

chances for individuals to transition 

into unsubsidized employment. 

Response: Work experience positions 

may be created with public sector, 

private sector, community-based, faithbased, or nonprofit employers or work 

site sponsors. 

Section 261.2(f) On-the-Job Training 

In the interim final rule, we defined 

on-the-job training (OJT) as training in 

the public or private sector that is given 

to a paid employee while he or she is 


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engaged in productive work and that 

provides knowledge and skills essential 

to the full and adequate performance of 

the job. In the preamble to the interim 

final rule we invited comments on 

whether the definition of OJT should be 

broadened ‘‘beyond paid employment to 

include other aspects of training.’’

Comment: Several commenters 

suggested that we expand the definition 

to include unpaid training, such as 

occupational training, basic skills 

remediation, and English language 

instruction, as well as pre-employment 

skill upgrading. Several commenters 

noted that many employers provide 

both on-site and off-site training to 

employees. The commenters maintained 

that including unpaid training positions 

would help ensure that recipients 

receive needed work skills and would 

simplify reporting. Other commenters 

recommended including unpaid 

internships or externships, arguing that 

participants would have an opportunity 

to learn in a work setting that could lead 

to employment opportunities. 

Response: We considered all of these 

suggestions carefully in writing the final 

rule. Ultimately, we chose not to expand 

OJT to include unpaid training 

activities. We made this decision 

because, first, we could not reconcile 

the notion of unpaid training with being 

‘‘on-the-job,’’ and second, such unpaid 

training can count under a variety of 

other work activities, including 

vocational educational training and job 

skills training directly related to 

employment. We think this is the most 

common-sense way to bring meaning to 

the 12 distinct work components. 

Regarding the location of training, we 

would like to emphasize that paid 

training, whether provided off-site or at 

the work site, fits the definition of OJT. 

Comment: Several commenters 

recommended expanding the definition 

of OJT to include training for 

prospective employees in addition to 

paid employees. 

Response: We have not included 

training for prospective employees 

under OJT because they are not yet ‘‘onthe-job.’’ Instead, such training could 

count under other work activities, 

including vocational educational 

training or job skills training directly 

related to employment, depending on 

the nature of the training. 

Comment: Several commenters 

recommended including barrier-removal 

activities in OJT if integrated into the 

program. 

Response: We fully support the use of 

barrier-removal activities for individuals 

who need these services. States may 

generally include such services as part 

of a job search and job readiness 

assistance activity. Also, such activities 

can count as unsubsidized or subsidized 

employment if the individual is paid 

during the time of participation in such 

activities. 

Comment: Several commenters asked 

whether an employer was expected to 

hire an OJT participant, based on the 

statement in the preamble: ‘‘Upon 

satisfactory completion of the training, 

we expect the employer to retain the 

participant as a regular employee. 

***’’

Response: The preamble language was 

a suggestion, not a requirement. As with 

subsidized employment, we expect 

employers to provide training, guidance, 

and direction to help employees obtain 

unsubsidized employment, whether 

with the employer providing the 

training or with another employer. As 

long as the position is designed to lead 

to unsubsidized employment, the 

activity would meet the primary goal of 

the program. 

Section 261.2(g) Job Search and Job 

Readiness Assistance 

In the interim final rule, we defined 

job search and job readiness assistance 

as the act of seeking or obtaining 

employment, preparation to seek or 

obtain employment, including life skills 

training, and substance abuse treatment, 

mental health treatment, or 

rehabilitation activities for those who 

are otherwise employable. Such 

treatment or therapy must be 

determined to be necessary and certified 

by a qualified medical or mental health 

professional. We retained the general 

framework of the definition in the final 

rule, but deleted the requirement that an 

individual be ‘‘otherwise employable’’

because the term was confusing and 

raised concerns that it could potentially 

deny treatment to those who have a 

disability or face multiple barriers to 

employment. We also deleted the term 

‘‘certified’’ because it too created some 

confusion. The final rule requires that 

there must be a documented need for 

treatment or therapy determined 

necessary by a qualified medical, 

substance abuse, or mental health 

professional. 

The preamble to this section of the 

interim final rule also defined a ‘‘week’’

for purposes of counting no more than 

six weeks per fiscal year (or 12 weeks, 

for qualifying States) of job search and 

job readiness assistance, no more than 

four of which may be consecutive. We 

explained that the most commonly 

understood and simplest way to answer 

this question was to use the ordinary 

definition of a week: seven consecutive 

days, regardless of which day 

participation starts. We received many 

comments on this provision. Most 

commenters contended that six weeks 

was not enough time to help individuals 

with barriers to employment. Many 

others urged us to consider an hourly 

equivalent to these limitations to 

increase State flexibility. 

In order to respond adequately to the 

comments we received, we determined 

that it was necessary to include 

§ 261.34, which specifies the limitations 

on counting job search and job readiness 

assistance, in this final rule, despite the 

fact that it was not in the interim final 

rule. Based on these comments, we have 

adopted an hourly equivalent for 

purposes of the six-week (or 12-week) 

limit, giving States more flexibility to 

provide job search and job readiness 

assistance services, especially when 

such services are only needed for a few 

hours per week. We describe the 

policies on these limitations in more 

detail in the discussion of § 261.34, but 

also respond to comments on this topic 

here. 

For the ease of the reader, we have 

grouped the comments and our 

responses by topic within this section. 

Treatment of Barrier Removal Activities 

Comment: Many commenters 

welcomed the inclusion of substance 

abuse treatment, mental health 

treatment, and rehabilitation activities 

as countable activities. However, many 

commenters also expressed concerns 

about limiting these specific activities to 

the category of job search and job 

readiness assistance alone, an activity 

that can count for only six weeks in a 

fiscal year (or 12 weeks, for qualifying 

States). They said that these barriers to 

work are prevalent among the TANF 

population and that States need more 

time to address them than the 

durational limits allow. A number of 

commenters recommended that we 

allow these activities to count under 

community service, job skills training 

directly related to employment, or 

education directly related to 

employment. 

Response: Under the final rule, we 

generally limit the counting of 

substance abuse treatment, mental 

health treatment, and rehabilitation 

activities to the job search and job 

readiness assistance activity. In defining 

work activities, we tried to determine 

whether such services appropriately fit 

in any work component. The statute 

does not specifically name substance 

abuse treatment, mental health 

treatment, and rehabilitation activities 

as work activities or even otherwise 

refer to these services. Because these are 

activities designed to make somebody 

work-ready, we count them as job 


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readiness activities. We realize this 

means that counting participation in 

these activities is limited to six weeks 

(or 12 weeks, for qualifying States) in 

the preceding 12-month period, of 

which no more than four weeks may be 

consecutive, but this was the only 

category where it made sense to include 

them. However, if a portion of substance 

abuse treatment, mental health 

treatment, or rehabilitation service 

meets a common-sense definition of 

another work activity, then the hours of 

participation in that activity may count 

under the appropriate work category, 

such as work experience. In addition, if 

hours in unsubsidized, subsidized 

private sector, and subsidized public 

sector employment include treatment or 

rehabilitation services, a State may 

count those paid hours under that work 

category. 

Because counting participation in job 

search and job readiness assistance is 

time-limited by statute, we caution 

States to assess carefully the use of 

treatment, counseling, and 

rehabilitation activities so that they 

count participation in these activities 

only when they are needed to prepare 

recipients for work. 

Comment: Several commenters 

objected to the requirement that a 

qualified medical or mental health 

professional must determine when 

treatment or therapy is necessary. One 

commenter maintained that it could 

discourage some individuals from 

acknowledging the presence of such 

barriers and delay or prevent the State 

from addressing them. In addition, the 

commenter thought that the certification 

process would pose an administrative 

burden for the States. 

Response: Substance abuse treatment, 

mental health treatment, and 

rehabilitation activities are important 

activities that can help individuals 

overcome serious barriers to 

employment. We eliminated the 

requirement for a ‘‘certification’’ but we 

believe that States must document the 

need for such treatment or therapy by a 

qualified medical, substance abuse, or 

mental health professional to ensure 

that a proper diagnosis is made and an 

effective remedy is prescribed. 

Otherwise Employable 

Comment: Several commenters 

recommended that substance abuse 

treatment, mental health treatment, and 

rehabilitation activities should not be 

limited to those who are ‘‘otherwise 

employable.’’ They suggested that such 

a limitation may be a violation of the 

Americans with Disabilities Act of 1990 

(ADA) and Section 504 of the 

Rehabilitation Act of 1973 because 

States could use it to deny such 

treatment to those who have a disability 

or face multiple barriers to employment. 

The commenters noted that such 

individuals may need a broad range of 

services beyond job search and job 

readiness, such as subsidized 

employment or vocational educational 

rehabilitation, before they are 

employable. One commenter suggested 

that individuals who are not ‘‘otherwise 

employable’’ should be excluded from 

the definition of a ‘‘work-eligible 

individual.’’ Some commenters also 

claimed that the determination of who 

would be employable and who would 

not would create an added 

administrative burden. Finally, they 

noted that job search and job readiness 

assistance is already limited to six 

weeks per fiscal year and that this 

language was more restrictive than 

needed and could discourage States 

from providing these kinds of services 

to individuals facing barriers to work. 

Response: We think the commenters 

raised reasonable concerns. We never 

intended the phrase ‘‘otherwise 

employable’’ to exclude individuals 

who need more than one form of service 

or training before they could become 

employed from counting via 

participation in mental health or 

substance abuse treatment or 

rehabilitation activities. Our intention 

was to ensure that the necessary 

services that work-ready individuals 

may require were delivered in a logical 

and sequential fashion. Too frequently, 

an applicant or new recipient is 

automatically assigned to job search and 

job readiness assistance, regardless of 

the needs identified in the client’s 

initial assessment or in the individual 

responsibility plan. Because the 

counting of this activity is time-limited 

by statute, we wanted to ensure that 

such services were available and 

appropriately provided at the time they 

would do the most good in preparing for 

and finding work for participants. 

However, we agree that this phrase may 

be confusing or could be misconstrued. 

Thus, we have deleted it from the final 

rule; however, we still encourage States 

to develop and deliver services based on 

the individual needs of clients, rather 

than in automatic sequential steps. 

Domestic Violence Activities 

Comment: Some commenters 

recommended that we expand the 

definition of job search and job 

readiness assistance to include 

participation in domestic violence 

resolution activities. One commenter 

suggested that we should classify such 

activities as ‘‘rehabilitation activities.’’

The commenter noted that victims of 

domestic violence often require job 

readiness activities akin to 

rehabilitation activities to transition to 

self-sufficiency, citing the following 

examples of domestic violence 

resolution activities: ‘‘having to relocate 

due to the violence, apply for court 

orders of protection, attend court 

hearings, address children’s needs for 

trauma counseling or other supports, 

attend counseling and support groups at 

a domestic violence program, meet with 

case managers at domestic violence 

programs, etc.’’ One commenter 

explained that these were important 

activities that were apparently 

consciously omitted from the interim 

final rule. Another recommended 

allowing a certified domestic violence 

professional to certify the need for such 

activities. A number of commenters 

indicated that counting domestic 

violence resolution activities would 

address a problem noted in the 

preamble to the interim final rule, 

notably the concern that ‘‘States have 

been less effective in placing clients 

with multiple barriers in work, 

including * * * those subject to 

domestic violence.’’ They contended 

that the limitations of job search and job 

readiness assistance ‘‘exacerbate the 

difficulty victims have in participating 

and advancing towards financial 

stability.’’

Response: We fully support the efforts 

of States to identify victims of domestic 

violence and to assist them in accessing 

appropriate services to abate ongoing 

violence, to recover from physical and 

emotional trauma, and to help children 

cope with the effects of domestic 

violence. In the original TANF rule, all 

of Part 260, Subpart B was devoted to 

the special provisions for victims of 

domestic violence. Those rules are 

unchanged and continue to offer the 

same protections they have since their 

promulgation. The interim final rule did 

not make modifications to that part of 

the regulation, in part because it was 

outside the scope of our interim final 

rule authority, but also because we 

stand by those protections. We continue 

to encourage States to adopt the Family 

Violence Option (FVO), to implement 

comprehensive strategies to identify and 

serve domestic violence victims, and to 

grant federally recognized good cause 

domestic violence waivers where 

victims need them. 

Many domestic violence resolution 

activities should already meet the 

definition of job search and job 

readiness assistance because they 

accomplish the very goal of that work 

component: To help individuals go to 

work. Any domestic violence service 

that directly relates to preparing for 


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employment could be considered a job 

readiness activity. A State should 

describe the activities it will offer in its 

Work Verification Plan and explain how 

it prepares someone for employment. If 

the State provides domestic violence 

services as ‘‘rehabilitation activities,’’

they should be included in a service 

plan developed by a trained individual 

and must be designed to lead to work. 

We note that few States counted 

domestic violence resolution activities 

under the original rules, despite the 

flexibility they had to do so. 

In addition, as we noted in the crosscutting issues section of this preamble, 

existing provisions in the law address 

work participation rate issues for States 

dealing with victims of domestic 

violence. In particular, section 402(a)(7) 

of the Social Security Act and the rules 

at Part 260, Subpart B allow States to 

grant good cause domestic violence 

waivers to victims of domestic violence. 

States have broad flexibility to 

determine which program requirements 

to waive and for how long. Although 

these families remain in the work 

participation rate calculation, there may 

be some activities that meet one of the 

work activity definitions that would 

make them countable toward the 

participation rate. If a State fails to meet 

a work participation rate, we will 

determine that it had reasonable cause 

if the State can demonstrate that its 

failure was due to granting federally 

recognized good cause domestic 

violence waivers. As a matter of course, 

when we determine the amount of a 

penalty for failure to meet the work 

participation rate requirements, we 

recalculate the work participation rate 

taking out any families in which 

individuals received a federally 

recognized good cause domestic 

violence waiver of work requirements. 

This may result in no penalty or a 

reduction in the penalty associated with 

failure to meet the work participation 

rate. Please refer to § 261.51 for more 

information about the formula for 

calculating the work participation rate 

penalty. 

Comment: One commenter asserted 

that the interim final rule conflicted 

with the Family Violence Option in 

Federal law, which provides for waivers 

of requirements that would place 

victims of domestic violence at 

increased risk. The commenter added, 

‘‘As those situations are going to have to 

be determined on a case-by-case basis, 

the limited time for barrier removal 

activities is inflexible and should not 

apply to barrier removal for family 

violence victims.’’

Response: As the commenter noted, a 

State that elects the FVO must screen 

and identify victims of domestic 

violence, refer such individuals to 

services and, if needed, waive 

participation and other program 

requirements for as long as necessary to 

escape domestic violence. However, in 

providing this option to States, Congress 

did not remove such families from the 

denominator of the participation rate 

during the period of the domestic 

violence waiver. We believe the original 

rules concerning victims of domestic 

violence explained above ensure 

services and waivers for victims and 

provide necessary ‘‘reasonable cause’’

reduction or elimination of penalties for 

States. 

Other Activities 

Comment: Some commenters 

recommended expanding the definition 

of job readiness to include activities 

such as English as a Second Language 

(ESL) and remedial education—

activities that the preamble to the 

interim final rule indicated would not 

be countable. Other commenters 

suggested new activities, such as 

behavioral health services and parenting 

skills training. 

Response: As we indicated in the 

preamble to the interim final rule, only 

programs that involve seeking and 

preparing for work can meet the 

definition of job search and job 

readiness assistance. Although some of 

the activities commenters recommended 

are valuable and may be medically 

appropriate, they do not constitute work 

or direct preparation for work. Some 

activities meet the definition of one of 

the other 11 work activities. For 

example, ESL would more closely fit the 

definition of education directly related 

to employment and should be counted 

under that activity. 

Comment: One commenter expressed 

appreciation for ‘‘the ability to count the 

time spent in a substance abuse 

treatment facility or halfway house 

doing work activities such as preparing 

meals, housecleaning, or scheduling 

group activities.’’ The commenter 

suggested extending this to ‘‘persons 

living in supported residential facilities 

for both mental health and domestic 

violence reasons.’’

Response: We do not distinguish 

between countable work activities based 

on whether an individual lives in a 

residential facility or not. As long as the 

activity fits within an approved 

definition, it can count for participation 

rate purposes. 

Comment: Several commenters 

indicated that six weeks may not be 

long enough for a homeless person to 

find a job, implying that looking for 

housing might be a job readiness 

activity. 

Response: We appreciate the added 

challenges that homeless individuals 

face in entering and participating in the 

workforce. We encourage States to 

develop strategies that best meet the 

needs of their various client 

populations, including the homeless. 

Although a person with stable housing 

may have an easier time finding a job 

and performing well on the job, the act 

of looking for a home is not an 

employment activity. A job search and 

job readiness assistance activity must 

have a direct connection to improving 

employability or finding employment. 

Comment: One commenter suggested 

that we allow travel time required to 

complete job search activities to count. 

Travel is an integral part of job search, 

the commenter explained, as clients go 

from one interview to another, 

especially in large metropolitan or rural 

areas. 

Response: A State may count travel 

time between interviews as part of a job 

search and job readiness assistance 

activity, but not the travel time to the 

first job search interview or the time 

spent returning home after the last one. 

We make this distinction so that it is 

consistent with the treatment of other 

work activities and analogous to the 

work world, since most employees 

receive no pay for the time it takes them 

to commute to and from their jobs. 

Using Job Interviews as Proxy for Hours 

Comment: Several commenters urged 

allowing States to use a job application 

as a proxy for a standard set of hours of 

participation, e.g., completing one 

application or going on one interview 

would constitute two hours of 

participation. They contended that this 

approach is easier to administer and 

more consistent with existing State 

practice. 

Response: While we sympathize with 

the commenters’’ desire to minimize 

administrative burdens, we believe the 

most effective welfare-to-work programs 

incorporate close supervision and 

careful monitoring. This allows program 

administrators to track actual hours. 

Thus, we explicitly require States to 

report the actual hours of participation 

for each work activity. The rule does not 

allow a State to report estimated hours 

of participation based on the number of 

job search contacts an individual makes. 

Four-, Six-, and 12-Week Limits 

Comment: Several commenters 

suggested eliminating the six-week and 

other durational limits on job search 

and job readiness assistance because six 

weeks is not sufficient to address the 


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barriers faced by some recipients. Some 

commenters suggested limiting such 

extensions to those with short-term 

disabilities that need more than six 

weeks of treatment. 

Response: The six-week and other 

durational limitations are statutory and 

cannot be changed through regulation. 

Comment: Several commenters 

recommended not counting 

participation in job search and job 

readiness activities against the various 

durational limits under certain 

circumstances, including situations in 

which the participant does not have 

enough hours to count in the work 

participation rate or has enough hours 

to count in the rate without counting the 

hours in job search and job readiness 

assistance. Some commenters noted that 

States could simply fail to report such 

hours so as to avoid triggering the 

durational limits or report them under 

the category ‘‘Other Work Activities’’ on 

the TANF and SSP-MOE Data Reports, 

which reflects the hours of participation 

but does not apply them in determining 

the work participation rates or the 

durational limits. The commenters 

noted, however, that this would 

understate their true level of 

participation and could be construed as 

violating the ‘‘complete and accurate’’

data reporting standard. Instead, they 

recommended allowing States to submit 

this information, but not to count 

participation if it were not needed to 

meet the work participation rate. 

Response: We understand the 

commenters’’ concerns regarding the 

durational limits on job search and job 

readiness assistance, but these limits are 

set forth in the statute and we do not 

have the legal authority to ignore hours 

of participation reported under this 

activity. We strongly encourage States to 

report hours of job search and job 

readiness assistance that they do not 

wish to count toward the participation 

rate (and thus count against the various 

limits that apply to that activity) under 

the category ‘‘Other Work Activities’’ on 

their data reports, rather than to fail to 

report them at all because using the 

‘‘Other’’ category gives better 

information on the overall engagement 

levels of individuals, even though those 

hours do not contribute to State 

achievement in the work participation 

rates. However, we do not consider 

either using the category ‘‘Other Work 

Activities’’ or failing to report such 

hours at all as a violation of the 

requirement for complete and accurate 

data. 

Converting Weeks to Hours for the SixWeek (or 12-Week) Limit 

Comment: Several commenters 

contended that the definition of a week 

in the interim final rule was too rigid. 

It specified that even one hour of 

participation in job search and job 

readiness assistance triggered a week for 

the six-week (or 12-week) limit on the 

activity. They suggested defining a week 

in terms of countable hours for job 

search and job readiness assistance, that 

is, an hourly equivalent of six weeks. 

For example, one commenter 

recommended that we define six weeks 

as 120 hours for a single custodial 

parent with a child under six years of 

age and 180 hours for all other workeligible individuals. This 

recommendation was based on the fact 

that such families need an average of 20 

and 30 hours, respectively, to count 

toward the overall work participation 

rate. The commenters asserted that an 

hourly conversion would give States 

more flexibility to structure work 

activities to meet the needs of the 

participants. 

Response: In defining work activities 

and related terms, we had to balance 

legitimate practical concerns with 

statutory language. The statute limits job 

search and job readiness assistance to 

six weeks (or, under certain conditions, 

12 weeks), with no more than four 

consecutive weeks. These limitations 

were specifically included, in large part 

because, under the former JOBS 

program, unstructured and ongoing job 

search was the primary or only activity 

for many participants. We share the 

commenters’’ interest in increasing State 

flexibility and have redefined a ‘‘week’’

of job search and job readiness 

assistance for the six-week (or 12-week) 

limit based on the average number of 

hours required for an individual’s 

family to count in the overall work 

participation rate. For this purpose, one 

week equals 20 hours for a work-eligible 

individual who is a single custodial 

parent with a child under six years of 

age and equals 30 hours for all other 

work-eligible individuals. Thus, six 

weeks of job search and job readiness 

assistance equates to 120 hours for the 

first group and 180 hours for all others. 

For those months in which a State can 

count 12 weeks of this activity, these 

limits are 240 hours and 360 hours, 

respectively. To ensure consistency 

with other provisions in this rule, we 

have modified the requirements under 

§ 261.34 to make these limits apply to 

the preceding 12-month period, rather 

than each fiscal year. For example, the 

statute allows States to disregard from 

the work participation rate calculation 

families that have been subject to a 

work-related sanction for up to three 

months in ‘‘the preceding 12-month 

period.’’ Similarly, this same time frame 

is used for the ‘‘excused absence’’

policy. 

Defining a week in this way allows 

States to provide job search and job 

readiness assistance activities 

incrementally and stretched over an 

entire year or in six actual weeks, 

depending upon how the State chooses 

to structure its particular work program 

for an individual. Defining a week in 

this manner is consistent with 

Congressional intent because it provides 

an overall cap on the amount of job 

search and job readiness assistance that 

States can count as work participation, 

while still giving States the ability to 

provide recipients with meaningful job 

search and job readiness assistance 

activities. 

Counting Sporadic/Episodic Periods of 

Job Search and Job Readiness Assistance 

Comment: Some commenters objected 

to counting limited periods of 

participation in job search and job 

readiness assistance as a full week of 

participation in the activity. They 

contended that this would discourage 

States from engaging individuals in this 

activity or sending them on job 

interviews. They suggested giving States 

flexibility to integrate short periods of 

participation in this activity with other 

countable activities. They noted that 

even a single hour of job search reported 

in a week would ‘‘constitute a full week 

for purposes of the limitation [on 

counting job search and job readiness 

assistance].’’ They maintained, ‘‘The 

statutory time limit on these activities 

was designed to prevent clients from 

being left to languish indefinitely in 

unproductive job search, not to create 

barriers to helping recipients move into 

unsubsidized employment after 

participating in other services.’’ Several 

commenters suggested alternative 

methods of counting job search and job 

readiness assistance. One commenter 

recommended excluding ‘‘weeks in 

which less than half of the hours of 

countable participation are from job 

search and job readiness assistance.’’

Some commenters used terms like 

‘‘significant majority’’ to refer to the 

hours needed to constitute the primary 

activity. 

Response: We understand the concern 

that an individual participating for one 

hour in job search and job readiness 

assistance could use up an entire week 

of this limited activity. By defining six 

weeks as 120 hours for a single 

custodial parent of a child under age six 

or 180 hours for all other work-eligible 


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individuals (and 12 weeks as 240 hours 

or 360 hours, respectively) States can 

now engage individuals for limited 

periods of time without using a entire 

week for purposes of the six-or 12-week 

limit. This approach provides sufficient 

flexibility for States to structure their 

job search and job readiness assistance 

activities and obviates the need for 

alternative methods, such as excluding 

weeks in which a minority of hours of 

participation come from job search and 

job readiness assistance activities. 

Moreover, States continue to have the 

flexibility to conserve these weeks by 

reporting sporadic hours under ‘‘Other 

Work Activities’’ on the TANF Data and 

SSP-MOE Data Reports (though these 

hours would not count toward the 

participation rates) or to count such 

hours under our excused absence policy 

as part of another countable activity. 

Please refer to § 261.60 for more detail 

about excused absences. 

Flexibility in Counting Hours of 

Participation 

Comment: Several commenters 

suggested giving States the flexibility to 

count hours of participation in job 

search and job readiness assistance as a 

non-core activity without triggering any 

of the durational limitations on this 

activity, if the individual meets the core 

hours participation requirement through 

some other activity. The commenters 

explained that this would not 

undermine the core activity 

requirement, but would allow some 

individuals to benefit from additional 

time spent in a job search and job 

readiness assistance activity. Also, 

several commenters suggested that, if 

we use an hourly equivalent, then any 

hours that exceed the 20 or 30 hours per 

week required to meet the participation 

rate should not count against the hourly 

limitation on this activity. 

Response: We do not have the 

statutory authority to disregard hours of 

participation in job search and job 

readiness assistance if the hours are 

counted toward the calculation of the 

work participation rate. Moreover, ‘‘core 

activity’’ is simply a term we use to 

indicate that hours of participation in 

that activity can count toward the first 

20 hours of participation; an activity 

does not become ‘‘non-core’’ once an 

individual meets the core requirement 

and durational limits do not cease to 

apply to them. Of course, once a family 

meets the minimum hours required to 

count in the work participation rate, a 

State may assign an individual to 

whatever activity it chooses, including 

job search and job readiness assistance. 

However, any hours reported under this 

activity count toward the six-week limit. 

We encourage States to report hours of 

participation that they do not wish to 

have counted against the durational 

limits under the category ‘‘Other Work 

Activities’’ on their TANF Data and 

SSP-MOE Data Reports, which reflects 

the hours of participation but does not 

apply them in determining the work 

participation rates. This would also 

apply to hours that are beyond the 

TANF statutory requirements to count 

toward the participation rates. In fact, 

under the final rule, a State should 

report only those hours of job search 

and job readiness assistance that are 

needed to meet the work requirements, 

because reporting ‘‘extra’’ hours would 

not help a State meet the rate and would 

draw down the time-limited hours for 

the six-week (or 12-week) limit. In 

contrast, under the interim final rule, it 

did not matter whether a State reported 

one hour or 40 hours for an individual—

either would trigger a week toward the 

durational limits. We have written the 

rule this way to give States the most 

flexibility possible while maintaining 

the spirit of the law. 

We would also like to point out that 

States have the additional flexibility to 

count short absences from various 

activities to participate in a job search 

activity under the excused absence 

policy (described in § 261.60(b) of this 

chapter). 

Defining Four Consecutive Weeks 

Comment: As with the six-week (or 

12-week) limit, some commenters 

suggested converting the four-week 

limit to an hourly equivalent. 

Response: In the final rule, we have 

modified this definition. For the sixweek (or 12-week) limit on counting 

participation in job search and job 

readiness assistance, we define a week 

as 20 hours for a work-eligible 

individual who is a single custodial 

parent of a child under six years of age 

and as 30 hours for all other workeligible individuals. However, for the 

limit of no more than four consecutive 

weeks of job search and job readiness 

assistance we have retained the 

definition in the interim final rule: 

seven consecutive days. In other words, 

any hours of participation in job search 

and job readiness assistance during the 

course of a seven-day period triggers a 

week for the four-week limit. Once an 

individual has four consecutive weeks 

of participation, that individual’s 

participation in job search and job 

readiness assistance may not count for 

one week, i.e., seven consecutive days. 

In order to bring meaning to the 

statutory language, we had to interpret 

‘‘four consecutive weeks’’ in this 

manner. Under the hourly conversion 

the rule permits for the total limitation 

on job search and job readiness 

assistance, a State could meet this limit 

while counting hours over the course of 

multiple calendar weeks. However, 

because the four-week limit is 

specifically a ‘‘consecutive’’ week 

restriction, we think an hourly 

conversion in this instance would not 

meet the very clear bounds set by 

Congress. If we used an hourly accrual 

system here, it might take many 

calendar weeks to reach 80 or 120 hours 

and they would in no way be 

‘‘consecutive.’’ Thus, we think it is 

reasonable to use the more rigorous 

definition of a week in this context to 

meet the legislative requirement but 

incorporate overall flexibility in 

counting job search and job readiness 

assistance hours. 

We would also like to address the 

concern that the limit of counting no 

more than four consecutive weeks of 

participation in this activity would lead 

States to disrupt treatment regimens for 

individuals who need short periods of 

substance abuse treatment, mental 

health treatment, or rehabilitation 

activities each week. We stress that this 

limitation applies to what a State may 

count for participation purposes, not on 

what an individual can or should do; 

thus, the law does not require an 

individual to take a week’s break from 

an activity, but does constrain what the 

State may report for that week. The 

requirements and expectations for each 

family should be set by the State taking 

into consideration the needs of the 

family, obligations under the ADA and 

Section 504 of the Rehabilitation Act of 

1973, and program goals, as opposed to 

what counts for participation rate 

purposes. While we cannot remove this 

statutory limit, we suggest that States 

have several options in how to treat 

such situations. We urge States to 

consider these options carefully to take 

full advantage of the flexibility in the 

law and our final rule in this area. If an 

individual has sufficient hours from 

other activities or other weeks in the 

month, the State will be able to count 

that individual’s family in the 

participation rate without worrying 

about the fifth consecutive week in 

treatment. A State could consider using 

the excused absence policy, which, 

under the final rule is also available as 

an hourly equivalent, to accommodate 

short periods of treatment. In addition, 

given that the overall work participation 

rate is never more than 50 percent of the 

caseload and likely less, we do not 

anticipate a significant impact on the 

ability of States to meet the work 


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participation rate because of the four 

consecutive weeks limitation. 

Three or Four Days as a Week of 

Participation 

Comment: Several commenters 

contended that the statute requires that 

participation in job search and job 

readiness assistance should not be 

considered a week unless it is for more 

than four days in a seven-day period. 

One commenter explained that section 

407(c)(A)(2)(ii) allows a State to count, 

not more than once per individual, 

participation in job search and job 

readiness activities ‘‘for 3 or 4 days 

during a week’’ as having participated 

for the week. The commenter contended 

that the ‘‘clear implication’’ of this was 

that an individual would have to 

participate for more than four days 

during a seven-day period to count as a 

week. 

Response: There are several possible 

interpretations of the statute’s reference 

to a week. In the interim final rule, we 

defined a week as seven consecutive 

days. We disagree with the commenter’s 

interpretation that the statute requires 

all other weeks of job search and job 

readiness to consist of more than four 

days of participation in the activity. 

However, these comments led us to 

reexamine the meaning of a week under 

the various limitations of this activity, 

including the ‘‘3 or 4 day’’ provision. 

We have concluded that this provision 

allows a State to apply the average 

hours that an individual participates 

during three or four days to the 

remaining days in the week. In this 

context, we consider a week to be five 

days rather than seven, because the 

standard work week is a five-day week. 

We used a seven-day standard in other 

contexts to account for the fact that 

typical week includes five working days 

and two weekend days. 

To illustrate this policy, consider the 

following example. If an individual 

participated an average of five hours per 

day in job search and job readiness 

assistance for three days in a week, a 

State could assume that such individual 

participated the same five hours the 

remaining two days of that week and 

thus, a State could assume and count 

total participation of 25 hours in this 

activity for that week. In our example, 

this would also use up 25 hours of the 

client’s hourly limitation under the sixweek limit for job search and job 

readiness assistance. 

Qualifying for 12 Weeks 

Comment: Several commenters asked 

for clarification regarding how a State 

can qualify to count up to 12 weeks of 

participation in job search and job 

readiness assistance per fiscal year due 

to high unemployment or by qualifying 

as a ‘‘needy State.’’ Several commenters 

suggested that HHS clarify that a State 

that qualifies in one month qualifies for 

the extended counting of job search and 

job readiness assistance for the entire 

year. 

Response: A State with an 

unemployment rate that is at least 50 

percent greater than the national rate or 

that qualifies as a ‘‘needy State’’ may 

count up to 12 weeks of participation in 

job search and job readiness assistance 

in the preceding 12-month period. Prior 

to publication of this final rule, the 

regulation applied the 6- or 12-week 

limit on a fiscal year basis, but under 

this final rule we now use the preceding 

12-month period as the basis for this 

durational limit to make it more 

consistent with the treatment of other 

work participation rate related 

provisions. Program Instruction TANF–

ACF–PI–2006–04 explains the criteria to 

qualify for 12 weeks, how a State finds 

out if it does, and in which months it 

can count extended participation in job 

search and job readiness assistance. The 

Program Instruction is available at: 

http://www.acf.hhs.gov/programs/ofa/ 

pi-ofa/pi200604.htm. 

Comment: One commenter asked for 

clarification regarding whether a State 

actually had to access the Contingency 

Fund before counting up to 12 weeks of 

participation in job search and job 

readiness assistance. 

Response: No, a State does not have 

to receive contingency funds to count 12 

weeks of participation. If a State 

qualifies to receive contingency funds 

for a month, it may also count 12 weeks 

of job search and job readiness 

assistance for that month. Please refer to 

Program Instruction TANF–ACF–PI–

2006–04 available at: http:// 

www.acf.hhs.gov/programs/ofa/pi-ofa/ 

pi200604.htm. 

Section 261.2(h) Community Service 

Programs 

In the interim final rule, we defined 

community service programs as 

structured programs in which TANF 

recipients perform work for the direct 

benefit of the community under the 

auspices of public or nonprofit 

organizations. We limited community 

service programs to projects that serve a 

useful community purpose and those 

that are designed to improve the 

employability of recipients. These two 

criteria were and continue to be 

important because we do not want 

someone to reach the time limit and 

discover that the family is no longer 

eligible for a cash benefit under the 

TANF program but the adult is no more 

employable than when he or she started 

in community service. 

We made a technical change to the 

wording of the definition in the final 

rule to clarify that all work-eligible 

individuals can count for participation 

in this activity. The language in the 

interim final rule limited it to TANF 

recipients only. 

Comment: The preamble of the 

interim final rule described the purpose 

of community service as improving the 

employability ‘‘of recipients not 

otherwise able to obtain employment.’’

Several commenters asked whether this 

precluded a State from counting a 

participant who combined paid 

employment with community service. 

Response: The preamble was not 

meant to preclude States from using 

community service for those who are 

employed. We recognize that there may 

be circumstances in which an 

individual’s employment is not 

sufficient to count for participation and 

a State would need to place such an 

individual in another work activity to 

count the family for that month. In such 

a circumstance, community service 

could be appropriate because sufficient 

employment may not be available for 

full-time work. 

Comment: One commenter asked us 

to clarify that the term ‘‘program’’ does 

not preclude self-initiated community 

service activities. 

Response: Self-initiated community 

service activities can count as long as 

they are approved by the State, 

described in the Work Verification Plan, 

and meet the two key elements of the 

definition, i.e., that they provide a direct 

benefit to the community and improve 

the employability of the participant. 

Comment: Several commenters 

recommended that we expand the 

definition of community service to 

include barrier removal activities such 

as substance abuse treatment, mental 

health treatment, rehabilitation 

activities, and domestic violence 

counseling and related services. 

Otherwise, they insisted, States will 

discontinue providing these services. 

These commenters contended that 

counting these activities under job 

search and job readiness assistance is 

too restrictive and does not permit 

States to provide these services in a 

meaningful way. 

Response: Community service 

activities must meet the two key 

elements of the activity’s definition, i.e., 

that they provide a direct benefit to the 

community and improve the 

employability of the participant. 

Generally, they would not include 

activities that primarily benefit a family 

or the individual participant, such as 


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substance abuse treatment, mental 

health and rehabilitation activities, and 

family violence counseling. While these 

activities are important and beneficial, 

they are not primarily directed to 

benefiting the greater community. 

Moreover, we believe that States can 

provide treatment services in 

meaningful ways under our rules. We 

refer readers to the preamble discussion 

of the definition of job search and job 

readiness assistance. 

Comment: One commenter 

recommended that we count a range of 

non-traditional work activities as 

community service in remote areas with 

high unemployment. This would 

include traditional subsistence hunting 

and fishing activities, as well as other 

culturally relevant activities. The 

commenter explained that hunting and 

fishing affect the community because, 

they emphasize, ‘‘a significant element 

of cultural and spiritual values that 

emphasize collective efforts in 

harvesting and sharing of the harvest 

throughout the community.’’ The 

commenter also noted that these 

activities ‘‘promote self-sufficiency by 

reducing reliance on non-traditional 

foods that are imported at high cost. 

***’’ The commenter added that these 

and other activities ‘‘strengthen and 

reinforce cultural and community 

values that, in the long term, benefit 

individuals and families.’’

Response: Various non-traditional 

activities may count if they meet the 

definition of one of TANF’s 12 

activities. It is possible, for example, 

that some of the activities described 

would meet the definition of 

community service programs, if the 

items produced are shared by the 

community and collected as part of a 

structured and supervised activity. 

Although we sympathize with the 

commenter about difficulties presented 

by high unemployment and remoteness, 

we do not have the authority to add new 

activities. And, as we explained earlier 

in the preamble, the statute does not 

make any allowance for such factors, 

except that it limits the maximum 

overall work participation rate to 50 

percent. Whereas TANF’s predecessor 

program, AFDC, allowed States to 

exempt individuals living in remote 

areas, the TANF law did not continue 

this exemption. 

Comment: Several commenters asked 

us to clarify whether or not all 

community service activities are subject 

to the FLSA. 

Response: The determination of 

whether or not the FLSA applies to an 

activity is a decision for the Department 

of Labor. We recommend that readers 

direct any questions regarding the FLSA 

to the Wage and Hour Division of the 

U.S. Department of Labor at 1–866–4–

USWAGE, TTY 1–877–889–5627 or the 

following Web site: http://www.dol.gov/ 

esa/whd/flsa/index.htm. 

Comment: Several commenters 

maintained that ‘‘caring for a disabled 

family member’’ should be considered 

community service, if it includes 

activities designed to improve the 

employability of participants. They 

contended that, in some cases, caring for 

a disabled family member could prepare 

individuals for jobs or ‘‘home health 

care certification or nursing credits 

through partnerships with community 

colleges.’’ In such circumstances, the 

commenter recommended that we allow 

States to count the individual in the 

numerator and the denominator. This, 

they suggested, would make the policy 

similar to the treatment of parents 

receiving Supplemental Security 

Income (SSI) benefits in our definition 

of a work-eligible individual. Another 

commenter added that counting parents 

caring for a disabled family member as 

community service reduces public costs 

by keeping some individuals out of a 

nursing home. 

Response: Caring for a disabled family 

member cannot count as a community 

service program, even if it improves the 

employability of the caregiver, because 

the activity does not provide a direct 

benefit to the community. However, to 

the extent that the activity is part of a 

certification or degree program, it could 

likely count under another activity, 

such as vocational educational training 

or job skills training directly related to 

employment. We have no data on 

whether counting caring for a disabled 

family member as a community service 

activity would reduce some public 

costs, but we note that the policy in the 

final rule allowing a State to exclude 

families in which a parent is caring for 

a disabled family member from the 

denominator of the work participation 

rate calculation would likely have a 

similar effect on public costs. 

Comment: One commenter questioned 

the requirement that community service 

must involve work for the direct benefit 

of the community. The commenter 

added, ‘‘No other TANF activity has 

such a requirement.’’ The commenter 

disagreed with our interpretation that 

the term ‘‘program’’ following the listing 

of community service in the statute 

meant that the activity should involve 

structure and supervision. 

Response: We adopted what we 

believe is a common-sense definition 

that limits community service programs 

to projects that serve a useful 

community purpose. We agree that no 

other TANF activity has such a 

requirement, but that is because the 

primary purpose of the other activities 

is to help individuals move toward selfsufficiency. Although that is also an 

objective of this activity, we give 

meaning to the term ‘‘community 

service.’’ The DRA directed the 

Secretary of Health and Human Services 

to define work activities, suggesting 

that, while Congress did not have a 

specific definition in mind, it deferred 

to the Department’s judgment. 

Moreover, we believe all 12 TANF 

activities should have structure and 

supervision, regardless of whether the 

term ‘‘program’’ is used in the name of 

the activity. 

Comment: Several commenters 

questioned the need for community 

service to improve the employability of 

participants. One commenter found that 

the interim final rule’s definitions of 

work experience and community service 

are substantially similar and violate the 

principle of ‘‘mutually exclusive’’

activities. The commenter 

recommended making a distinction 

between these activities by removing the 

requirement that community service be 

designed to promote employability. 

Response: Under our definitions, the 

principal distinction between work 

experience and community service 

programs is that the latter activity must 

serve a useful community purpose. We 

believe that participation in a 

community service program should 

improve the employability of recipients 

to prevent an individual from reaching 

the time limit without becoming more 

employable than when he or she started 

in that program. We have therefore 

retained this feature of the definition in 

the final rule. 

Comment: One commenter objected to 

the ‘‘daily supervision’’ requirement for 

TANF work activities with respect to 

community service, arguing that some 

community service activities are 

‘‘intrinsically difficult to supervise,’’

such as Big Brother/Big Sister programs 

or visiting the elderly. 

Response: In response to comments, 

we have revised the regulatory language 

relating to daily supervision in the final 

rule. As described in the preamble to 

§ 261.2, ‘‘Daily supervision means that a 

responsible party has daily 

responsibility for oversight of the 

individual’s participation, not 

necessarily daily, in-person contact with 

the participant.’’ Thus, many organized 

community service programs could 

meet this criterion. However, all 

community service programs must be 

structured programs that provide a 

direct benefit to the community and 

improve the employability of the 

participant. It is unclear whether the 


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programs the commenter describes meet 

all of these criteria. 

Comment: One commenter said, 

‘‘Very few community service sites are 

equipped to handle either large numbers 

of volunteers for the 20 or 30 hours 

required for a primary activity or in our 

rural areas, to provide the supervision.’’

Response: Many community service 

providers have programs that meet our 

definition of community service for the 

number of hours required to satisfy the 

work participation requirements. If an 

individual’s hours fall short of the 

minimum hours needed, a State should 

be prepared to find time in another 

activity to make up the shortfall. This is 

not different from past TANF policy. 

Section 261.2(i) Vocational 

Educational Training 

In the interim final rule, we defined 

vocational educational training (not to 

exceed 12 months with respect to any 

individual) as organized educational 

programs that are directly related to the 

preparation of individuals for 

employment in current or emerging 

occupations requiring training other 

than a baccalaureate or advanced 

degree. 

Postsecondary Education 

Comment: Several commenters 

recommended expanding the definition 

of vocational educational training to 

include postsecondary education. One 

commenter asked that we specify that 

an associate degree program is a 

countable vocational activity. 

Response: The definition of 

vocational educational training in the 

interim final rule already permitted a 

wide range of postsecondary 

educational activities, including 

programs that consist of both academic 

and vocational for-credit course work. 

Completion of these programs can 

provide an associate of arts (AA), 

associate of science (AS), or associate of 

applied science (AAS) degree in fields 

defined as vocational. Common fields of 

study include: business, computer and 

information science, health-related 

professions, communication 

technologies, personal services, 

protective services, construction, 

automotive technology, and 

transportation. Associate degree 

programs can take two or more years to 

complete. Because they generally 

combine coursework with actual work, 

some portion could count as vocational 

educational training, while some could 

count as on-the-job training (if paid) or 

work experience (if unpaid). The only 

type of postsecondary education that 

was excluded in the interim final rule 

was education directed at receiving a 

baccalaureate or advanced degree, 

which the final rule permits. 

Baccalaureate Degrees 

Comment: Several commenters 

objected to the definition of vocational 

educational training because it 

specifically excluded education directed 

at receiving a baccalaureate or advanced 

degree. They recommended striking the 

phrase ‘‘requiring training other than a 

baccalaureate or advanced degree.’’

They explained that people with 

baccalaureate degrees, on average, earn 

significantly more than those with a 

high school diploma. In addition, they 

noted that the number of individuals 

likely to be enrolled in such programs 

would be small and States should 

therefore have the flexibility to 

determine whether or not to count them. 

Others suggested that we make an 

exception to the restriction on counting 

participation in a baccalaureate or 

advanced degree program where the 

client is 12 months away from 

completing such a degree because the 

earnings gain from completing the 

degree would increase the chances of 

permanently leaving welfare. 

Response: We agree with the 

commenters and have expanded the 

definition of vocational educational 

training. In the interim final rule, we 

searched for other Federal definitions, 

especially in the U.S. Department of 

Education, of vocational education and 

related terms. In particular, we 

examined the regulatory definition of 

vocational education governing the Carl 

D. Perkins Vocational and Applied 

Technology Act (34 CFR 400.4(b)). That 

definition provided for a range of 

educational and training programs 

preparing individuals for employment 

‘‘in current or emerging occupations 

requiring other than a baccalaureate or 

advanced degree.’’ However, since the 

publication of the interim final rule, this 

terminology has changed. The Carl D. 

Perkins Career and Technical Education 

Improvement Act of 2006 (Pub. L. 109–

270) was signed into law on August 12, 

2006. The new law changed the 

definition of ‘‘vocational education,’’

now called ‘‘career and technical 

education,’’ to eliminate the restriction 

against participation in a baccalaureate, 

master’s or doctoral degree program. 

In view of these changes and the 

comments we received, we are 

expanding the definition of vocational 

educational training to include 

organized educational programs that 

lead to a baccalaureate or advanced 

degree. We continue to caution that, 

given the statutory 12-month limitation 

on participation in vocational 

education, States can only count one 

year of participation in vocational 

educational training for any individual 

toward the work participation rate. 

Education leading to a baccalaureate or 

advanced degree also counts under job 

skills training directly related to 

employment (a non-core activity), as 

long as it is directly related to a specific 

job or occupation. 

Comment: Several commenters 

thought that the preamble to the interim 

final rule was inaccurate when it stated, 

‘‘the TANF program was not intended to 

be a college scholarship program for 

postsecondary education.’’ The 

commenters noted that TANF provided 

broad flexibility in use of TANF funds, 

including funds for higher education. 

Response: We agree that expenditures 

for higher education are allowable uses 

of funds, even under the interim final 

rule. In addition, under the final rule, 

participation in a baccalaureate or 

advanced degree program can count 

toward the work participation rate. 

Remedial/ESL 

Comment: Several commenters 

expressed support for the inclusion of 

basic skills education as a component of 

vocational educational training. 

However, some expressed concern 

because the preamble indicated that it 

would count only if it were of ‘‘limited 

duration.’’ These commenters noted that 

participation in vocational educational 

training is, by definition, of limited 

duration—12 months in a lifetime. They 

also noted that some programs combine 

basic skills education and vocational 

training for the entire duration of the 

program. They recommended 

eliminating the restriction related to the 

duration of this component. 

Response: We agree that there may be 

circumstances in which some 

individuals require basic skills 

education as an ongoing and regular 

part of the vocational educational 

training activity. As a result of these 

comments, we have reconsidered our 

stance on the ‘‘limited duration’’

requirement set forth in the preamble to 

the interim final rule. Therefore, basic 

skills education may count as vocational 

educational training as long as it is a 

necessary or regular part of the 

vocational educational training. Each 

State should describe in its Work 

Verification Plan how it integrates basic 

skills education into its definition of 

vocational educational training and how 

it will ensure that vocational training 

remains the primary focus of the 

program. 

Comment: Some commenters asked 

for clarification regarding whether ESL 

could be integrated into vocational 

educational training in the same way 

that ‘‘basic skills’’ training can be. They 


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explained that ESL may be a 

prerequisite for employment and that it 

is especially important due to the 

increase in the number of immigrants. 

As with basic skills training, they 

contended that there should be no limit 

on counting participation in this 

activity, as long as the individual has 

not exhausted the 12 months that this 

activity can count in total. 

Response: As we noted in the 

response above with respect to basic 

skills education, ESL can also be 

integrated within a vocational 

educational training activity as long as 

it is a necessary or regular part of the 

vocational educational training. The 

State need not demonstrate that the 

training is of limited duration as long as 

it integral to the vocational education, 

not a stand-alone program. Each State 

should describe in its Work Verification 

Plan how it integrates ESL or other 

language instruction into its definition 

of vocational educational training and 

how it will ensure that vocational 

training remains the primary focus of 

the program. For example, a vocational 

educational training provider could 

provide a statement indicating that a 

participant in an otherwise approved 

vocational educational training activity 

requires such instruction to participate 

in the program and that such instruction 

is integrated into the activity. 

Comment: Some commenters 

suggested that we allow States to adopt 

a range of approaches to providing 

vocational educational training 

programs, including programs that 

‘‘frontload’’ these activities for those 

who are not ready for the vocationallyoriented training. They pointed out that 

after a few months of intensive 

instruction, participants can improve 

their basic skills to take full advantage 

of a vocational educational training 

program. Thus, they recommended that 

we consider these activities to qualify if 

they are part of a sequence of activities 

leading to a vocational educational 

training activity, even if the initial 

period of participation involves no 

vocationally-oriented training. 

Response: We do not believe that a 

sequenced approach fits within a 

definition of vocational educational 

training. Although basic skills education 

and English language instruction may 

help prepare individuals for vocational 

educational training, the programs must 

be provided in combination with 

vocational instruction. Otherwise, the 

definition of this activity would 

essentially permit any stand-alone 

educational activities to count in this 

category. Stand-alone educational 

activities may count as either education 

directly related to employment or job 

skills training directly related to 

employment. 

Comment: Some commenters 

suggested amending the definition of 

vocational educational training to 

include adult basic education and ESL 

even if they do not prepare individuals 

for a specific job. They asserted that 

such basic skills are needed to compete 

in the workplace and are crucial for 

making an individual more employable. 

For example, one commenter urged us 

to count English language instruction as 

vocational educational training when an 

individual needs such instruction to 

succeed in the workplace. Some 

commenters indicated that this was 

especially important for refugees, noting 

that it is very difficult for refugees who 

do not speak English to become 

employed. 

Response: We understand the 

commenters’ concerns, but we do not 

believe it would be appropriate to 

expand the definition of vocational 

educational training to allow these 

stand-alone activities. They may count 

as either education directly related to 

employment or job skills training 

directly related to employment. We 

believe that Congress intended these 

activities to count as non-core activities. 

When Congress created TANF, it listed 

12 allowable work activities. Of these, 

nine were what we refer to as ‘‘core 

activities’’ that count toward meeting 

the first 20 hours of a 30-hour average 

weekly requirement. The only 

educational activity among these was 

vocational educational training. Since 

neither Congress nor the U.S. 

Department of Education included basic 

education and ESL as part of its 

definition of vocational education, we 

believe it is clear that these activities 

must be part of one of the three non-core 

educational activities. 

Comment: One commenter suggested 

that we consider pursuit of a high 

school diploma, such as GED testing, to 

be vocational educational training. The 

commenter noted that such 

participation is consistent with the 

definition of the activity in the interim 

final rule, which defined this activity as 

‘‘organized educational programs that 

are directly related to the preparation of 

individuals for employment in current 

and emerging occupations * * *.’’

Response: We do not agree that such 

education should count as vocational 

educational training. Even when 

vocational education is provided in high 

school, minor parents attending high 

school in a vocational education track 

count as participating in ‘‘satisfactory 

attendance in secondary school or in a 

course of study leading to a certificate 

of general equivalence.’’ This avoids 

triggering the 12-month lifetime limit on 

participation in vocational educational 

training. For older adults, pursuit of a 

high school degree or GED would more 

appropriately be classified as education 

directly related to employment. 

Comment: Several commenters asked 

whether vocational rehabilitation 

activities were considered ‘‘vocational 

educational training.’’

Response: We would consider 

vocational rehabilitation activities that 

are organized educational programs 

directly related to preparing individuals 

for employment in current or emerging 

occupations to be vocational 

educational training. Any vocational 

rehabilitation activities that do not meet 

these criteria might meet the definition 

for job search and job readiness 

assistance or job skills training directly 

related to employment and should 

count under those activities, as 

appropriate. 

Other Training 

In the preamble to the interim final 

rule, we asked for comments on how 

States currently implement their 

vocational educational training 

programs and whether we should 

broaden the definition we used in the 

interim final rule. We noted that the 

current definition of vocational 

educational training ‘‘could overlap 

with other TANF work activities that 

provide training, including on-the-job 

training and job skills training.’’

Comment: One commenter cautioned 

us not to narrow the definition of 

vocational educational training just to 

distinguish it from on-the-job training or 

job skills training. The commenter 

pointed out, ‘‘it is easy to imagine the 

same training being provided under 

vocational educational training as that 

provided by an employer through onthe-job training or job skills training 

directly related to employment, 

particularly for lower-skilled TANF 

participants.’’

Response: We agree and have not 

narrowed the definition. The allowable 

overlap among various work activities 

can help States structure their programs 

to maximize learning opportunities for 

participants. In particular, many forms 

of vocational educational training may 

take two or more years to complete, 

beyond the 12-month lifetime limit 

under the program. By carefully 

structuring participation, States can 

count participation under several of the 

existing work activities. For example, 

obtaining a degree to become a licensed 

practical nurse usually takes about two 

years to complete and usually involves 

a combination of classroom instruction 

and clinical activities. Clinical training 


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in a hospital or other setting could 

count as work experience or community 

service because if, in the course of their 

training, individuals are providing a 

service to the community through a 

hospital or an elderly center, such 

participation would meet the definition 

of those activities. If participants are 

paid, they might count under 

unsubsidized employment or on-the-job 

training. Once they have met the core 

activity requirement through these 

activities, additional classroom 

instruction could be reported under job 

skills training directly related to 

employment. 

Specific Occupation 

Comment: Several commenters did 

not believe we should limit the 

definition of vocational educational 

training to ‘‘activities that give 

individuals the knowledge and skills to 

perform a specific occupation—as 

opposed to more generally preparing 

them to become more employable in a 

range of occupations.’’ The commenters 

contended that basic and remedial 

education should count as vocational 

educational training. 

Response: Basic and remedial 

education clearly fall under the category 

of education directly related to 

employment, and so cannot serve as a 

stand-alone activity under vocational 

educational training. However, as we 

explained in the preamble to the interim 

final rule, such education can count as 

part of vocational educational training 

as an embedded activity as long as it is 

a necessary and regular part of the 

program. 

Comment: Several commenters 

contended that the description of 

vocational educational training in the 

preamble to the interim final rule 

unnecessarily limited it to specific 

occupations. They maintained that this 

was not good policy and that it was not 

consistent with the TANF statute, 

noting that some activities in the statute 

included the phrase ‘‘directly related to 

employment,’’ but that vocational 

educational training was not one of 

them. They urged that, on this basis, we 

expand the definition to include 

training and education activities that 

were not related to a specific 

occupation, but that improve 

employability more generally. 

Response: Our definition of 

vocational educational training was 

originally based on the Department of 

Education’s description of the term. 

This definition clearly related the term 

to educational programs directly related 

to employment in ‘‘current or emerging 

occupations.’’ However, this does not 

mean that the activity is limited to a 

specific job, but rather to a broadly 

defined job category. 

12-Month Limit 

Comment: One commenter suggested 

that time spent in vocational 

educational training should only count 

against the 12-month limit ‘‘when hours 

in this activity, either alone or in 

combination with hours from other 

activities, enable a recipient to meet the 

work rates. If an individual does not 

have the overall necessary hours to meet 

the rate, time spent in this activity 

should not count against the 12-month 

limit.’’

Response: The statute places a 

lifetime 12-month limit on participation 

in vocational educational training. As 

with durational limits for job search and 

job readiness assistance, we do not have 

the statutory authority to disregard 

hours of participation reported in this 

category from counting against the 

lifetime 12-month limit. We encourage 

States to include hours of work 

participation in this category that do not 

count toward the work participation 

rates under the category ‘‘Other Work 

Activities’’ on their TANF and SSP–

MOE Data Reports or to count such 

hours under our excused absence policy 

as part of another countable activity. 

Please refer to § 261.60 for further 

discussion of excused absences. 

Deeming 

Comment: Several commenters 

suggested that individuals who attend 

vocational educational training 

programs be ‘‘deemed’’ to meet the work 

rate as long as they are full-time 

students and are making satisfactory 

progress. One commenter also suggested 

options for dealing with less than fulltime participation, including a 

proportional counting methodology. 

Response: The interim final rule made 

explicit a long-standing ‘‘actual hours’’

standard and we retain that policy in 

the final rule. We do not deem full 

participation simply because someone is 

a full-time student and makes good or 

satisfactory progress. However, the final 

rule allows States to count up to one 

hour of unsupervised homework for 

each hour of classroom time. Thus, as a 

practical matter, many individuals who 

attend school full-time would, in fact, 

satisfy the work participation standards. 

Section 261.2(j) Job Skills Training 

Directly Related to Employment 

In the interim final rule, we defined 

job skills training directly related to 

employment as training or education for 

job skills required by an employer to 

provide an individual with the ability to 

obtain employment or to advance or 

adapt to the changing demands of the 

workplace. Job skills training can 

include customized training to meet the 

needs of a specific employer or it can be 

general training that prepares an 

individual for employment. This can 

include literacy instruction or language 

instruction when such instruction is 

explicitly focused on skills needed for 

employment or combined in a unified 

whole with job training. 

Comment: Several commenters 

suggested that the interim final rule 

defined this activity too narrowly by 

excluding ‘‘barrier removal activities 

such as substance abuse counseling and 

treatment, mental health services, and 

other rehabilitative activities.’’ The 

commenters asserted that these 

activities should be considered like 

other training activities because they are 

needed to prepare an individual for 

employment. One commenter 

contended that because barrier removal 

activities were not explicitly excluded 

from the definition of job skills training 

directly related to employment, it is 

within our authority to interpret this 

activity to include them. 

Response: As we indicated in the 

preamble to the interim final rule, we 

tried to look for appropriate categories 

for each activity. We explained that it 

would not be appropriate to include 

barrier removal activities, such as 

substance abuse counseling and 

treatment, mental health services, and 

other rehabilitative activities under the 

category of job skills training directly 

related to employment. Under our 

definitions, barrier removal activities 

are job readiness activities, not job skills 

training directly related to employment. 

States continue to enjoy flexibility to 

serve individuals, but in some cases are 

limited in what they can count. We 

encourage States to work with 

individuals with multiple barriers, but 

they should keep in mind that the 

definition of job skills training focuses 

on education or training that is designed 

specifically to help individuals move 

into employment. 

Section 261.2(k) Education Directly 

Related to Employment, in the Case of 

a Recipient Who Has Not Received a 

High School Diploma or a Certificate of 

High School Equivalency 

In the interim final rule, we defined 

education directly related to 

employment, in the case of a recipient 

who has not received a high school 

diploma or a certificate of high school 

equivalency, as education related to a 

specific occupation, job, or job offer. 

This definition included courses 

designed to provide the knowledge and 

skills for specific occupations or work 


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settings, but may also include adult 

basic education and ESL. Where 

required as a prerequisite for 

employment by employers or 

occupations, this activity may also 

include education leading to a GED or 

high school equivalency diploma. 

We made a minor change to the 

wording of this definition in the final 

rule, adding the words ‘‘work-eligible’’

before ‘‘individual.’’ We made this 

change both for consistency with other 

definitions and to make clear that this 

activity is allowable for any workeligible individual. Although the 

statutory name of the activity refers to 

a ‘‘recipient’’ who has not received a 

high school diploma or certificate of 

equivalency, we think that a workeligible individual who is not a 

recipient of assistance could also 

participate in this activity and have 

those hours count for participation rate 

purposes. 

Comment: One commenter noted that 

the situation of immigrants and refugees 

who hold a high school diploma from 

overseas but do not have an American 

high school diploma or GED should 

warrant an exception to the requirement 

that individuals not have these 

credentials as a prerequisite for 

participating in the activity. The 

commenter explained, ‘‘These 

individuals may lack the skills and 

credentials employers require from 

native high school graduates.’’ The 

commenter urged a clarification that 

such individuals could participate in 

this activity and that such participation 

include English language instruction. 

Response: The statute limits 

participation in this activity to 

individuals who have not received a 

high school diploma or a certificate of 

high school equivalency. We recognize 

that some individuals may have 

received a high school diploma from 

other countries that may not be directly 

comparable with an American high 

school diploma. Moreover, it would be 

difficult for TANF agencies to verify 

whether or not individuals have or have 

not obtained degrees or credentials from 

overseas. We therefore give States the 

flexibility to determine on a case-bycase basis whether such individuals 

qualify for this activity. A State that 

uses this option should describe in its 

Work Verification Plan how it will make 

such a determination. 

Comment: One commenter 

recommended that we allow States to 

deem individuals who make ‘‘good or 

satisfactory progress’’ as having met 

‘‘the minimum hours of independent 

study recommended by the educational 

program.’’ Those with unsatisfactory 

performance would receive credit for 

only the verified and documented hours 

of classroom time. 

Response: States must report actual 

hours of participation. We have 

eliminated the requirement for ‘‘good or 

satisfactory progress’’ as part of the 

Federal definition of this work activity. 

We encourage States to monitor progress 

using both qualitative and quantitative 

measures, but do not impose a specific 

standard. Please refer to the crosscutting issues related to the definitions 

at the beginning of this section of the 

preamble for further discussion of this 

issue. 

Comment: Several commenters 

recommended allowing this activity to 

count for high school graduates or those 

with a certificate of high school 

equivalency, but who score low on 

reading or math assessments. 

Response: We do not have the 

statutory authority to expand the scope 

of this activity to include those with a 

high school degree or a certificate of 

high school equivalency. 

Section 261.2(l) Satisfactory School 

Attendance at a Secondary School or in 

a Course of Study Leading to a 

Certificate of General Equivalence, in 

the Case of a Recipient Who Has Not 

Completed Secondary School or 

Received Such a Certificate 

In the interim final rule, we defined 

this activity to mean regular attendance, 

in accordance with the requirements of 

the secondary school or course of study, 

at a secondary school or in a course of 

study leading to a certificate of general 

equivalence, in the case of a recipient 

who has not completed secondary 

school or received such a certificate. 

The former is aimed primarily at minor 

parents still in high school, whereas the 

latter could apply to recipients of any 

age. Unlike ‘‘education directly related 

to employment,’’ this activity is not 

restricted to those for whom obtaining a 

GED is a prerequisite for employment. 

However, it may not include other 

educational activities, such as adult 

basic education or language instruction 

unless they are linked to attending a 

secondary school or a GED program. 

As in education directly related to 

employment, we made a minor change 

to the wording of this definition in the 

final rule, replacing ‘‘recipient’’ with 

‘‘work-eligible individual.’’ We made 

this change both for consistency with 

other definitions and to make clear that 

this activity is allowable for any workeligible individual. Again, although the 

statutory name of the activity refers to 

a ‘‘recipient’’ who has not received a 

high school diploma or certificate of 

general equivalence, we think that a 

work-eligible individual who is not a 

recipient of assistance could also 

participate in this activity and have 

those hours count for participation rate 

purposes. 

Comment: One commenter noted that 

with respect to ‘‘good or satisfactory 

progress’’ for this activity to count, the 

standard ‘‘must’’ include both a 

qualitative and quantitative measure of 

progress. 

Response: We have eliminated the 

requirement for ‘‘good or satisfactory 

progress’’ as part of the Federal 

definition of this work activity. We 

encourage States to monitor progress 

using both qualitative and quantitative 

measures, but do not impose a specific 

standard. Please refer to the crosscutting issues related to the definitions 

at the beginning of this section of the 

preamble for further discussion of this 

issue. 

Section 261.2(m) Providing Child Care 

Services to an Individual Who Is 

Participating in a Community Service 

Program 

In the interim final rule, we defined 

providing child care services to an 

individual who is participating in a 

community service program as 

providing child care to enable another 

TANF recipient to participate in a 

community service program. In the final 

rule, we have clarified that this is an 

unpaid activity and must be a structured 

program designed to improve the 

employability of individuals who 

participate in it. Alternatively, if an 

individual receives payment for 

providing child care, the State should 

report that individual’s hours as 

unsubsidized employment. 

Comment: One commenter 

recommended counting providing child 

care for a TANF recipient in community 

service as extending to two-parent 

families in which one parent stays home 

with the children while the other 

participates in community service. The 

commenter stated that children that 

have more time with their parents, 

especially during their early years, have 

better outcomes. This would also reduce 

public costs for child care and other 

services. 

Response: We agree that parental time 

with children is extremely important. 

However, in a two-parent family, one 

parent cannot count as participating by 

providing child care for his or her own 

child while the other parent participates 

in community service because the 

activity neither involves supervision nor 

helps the parent providing child care 

prepare for employment. 

Comment: Several commenters noted 

that it would be difficult to apply a 

daily supervision standard for an 


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individual who is participating as a 

child care provider for a TANF recipient 

in community service. Some of the 

commenters recommended counting 

this activity as self-employment and 

allowing States to develop methods for 

projecting a typical number of hours per 

week. 

Response: We have clarified in the 

final rule that this activity is both 

unpaid and structured to improve an 

individual’s employability. The degree 

of supervision and methods for 

reporting hours would depend on how 

the State structures this activity. 

Because it is an unpaid activity, 

projecting hours would not be 

appropriate. 

Comment: One commenter 

recommended expanding the definition 

of the activity to include providing 

child care not only to a TANF recipient 

in community service, but also to 

someone in a MOE-funded program. 

Response: We agree with the 

commenter that this activity should 

include providing child care for a 

recipient of TANF or SSP–MOE 

assistance in community service. 

Section 261.2(n) Work-Eligible 

Individual 

The DRA required us to include 

families receiving assistance under a 

separate State program (SSP) in the 

work participation rates if the funding 

for those programs is counted towards 

the State’s maintenance-of-effort (MOE) 

requirement, and to specify the 

circumstances under which a parent 

living with a child receiving assistance 

should be included in the work 

participation rates. 

In the interim final rule, we used the 

new term work-eligible individual to 

describe anyone whose participation in 

work activities is required in the 

calculation of the work participation 

rate. We drew the term from the heading 

to the statutory provision requiring us to 

include families receiving assistance 

under a SSP–MOE program and to 

specify the circumstances under which 

a parent residing with a child recipient 

of assistance should be included in the 

work participation rates. 

We have made modifications to the 

definition of a work-eligible individual, 

but we have not changed our general 

approach to who is included in the final 

rule. We continue to define a workeligible individual as either: (1) An 

adult (or minor child head-ofhousehold) receiving assistance under 

TANF or a separate State program; or (2) 

a non-recipient parent living with a 

child receiving assistance. There 

continue to be exclusions that apply 

specifically to the non-recipient parents 

and others that apply more broadly to 

the definition. 

As under the interim final rule, a nonrecipient parent living with a child 

receiving assistance is not a workeligible individual if the parent is: A 

minor parent who is not a head-ofhousehold; a non-citizen who is 

ineligible to receive assistance due to 

his or her immigration status; or, at 

State option on a case-by-case basis, a 

recipient of Supplemental Security 

Income (SSI) benefits. We deleted the 

phrase ‘‘or spouse of the head-ofhousehold’’ in the minor parent 

exclusion of the interim final rule 

because such individuals are not 

required to participate when they do 

receive assistance. Thus, only a minor 

parent who is the head of household is 

required to be included in the 

participation rate, whether she is 

receiving assistance or is a nonrecipient. We have also added a case-bycase exclusion for recipients of Aid to 

the Aged, Blind, or Disabled under Title 

XVI of the Social Security Act, which, 

in the Territories of Puerto Rico, Guam, 

and the Virgin Islands, is analogous to 

SSI. 42 U.S.C. 1381 note et seq. 

More broadly, the definition excludes 

a parent, whether or not a recipient of 

assistance, who is caring for a disabled 

family member living in the home. The 

State must provide medical 

documentation to support the need for 

the parent to remain in the home to care 

for the disabled family member. We 

have eliminated the interim final rule 

provision that permitted a parent to be 

excluded only if the disabled family 

member did not attend school on a fulltime basis. We have also added a State 

option to exclude on a case-by-case 

basis a parent who is a recipient of 

Social Security Disability Insurance 

(SSDI) benefits. As with a parent caring 

for a child with a disability, the SSDI 

exclusion applies regardless of whether 

the parent receives TANF or not. 

As in the interim final rule, we do not 

consider an adult in a family served 

under an approved Tribal TANF 

program using State MOE funding to be 

a work-eligible individual, unless the 

State includes the family in calculating 

work participation rates, as permitted 

under § 261.25. 

Unless excluded for one of the 

reasons outlined above, the term workeligible individual includes all nonrecipient parents living with a child 

receiving assistance and all adult 

recipients of assistance. 

We received many comments 

suggesting that we exclude additional 

groups of individuals from the 

definition of a work-eligible individual. 

We considered each of these suggestions 

carefully as we developed the final rule. 

We appreciate the concerns the 

commenters raised, both about a State’s 

ability to engage certain groups of 

individuals and about the 

appropriateness of encouraging States to 

engage other individuals in work by 

including them in the work 

participation calculation. We address 

these concerns below. 

Comment: Some commenters asked us 

to clarify that non-parental caretakers in 

child-only cases continue to be 

excluded from the work participation 

rate calculation. One commenter 

recommended excluding all nonparental caretakers, even those ‘‘who 

were sufficiently needy that they 

qualified for TANF.’’ The commenter 

asserted that not excluding them could 

discourage non-parental caretakers from 

taking custody of children. 

Response: Child-only cases in which 

a parent does not reside with the child, 

such as when a grandparent cares for 

the grandchildren, do not include workeligible individuals. In such cases, the 

grandparents or other non-parental 

caretakers are not recipients of 

assistance themselves and thus do not 

meet the first part of the work-eligible 

individual definition. Neither do they 

meet the second part of the definition 

because they are not non-recipient 

parents living with recipient children. If 

a grandparent or other caretaker does 

receive assistance, then that adult 

would be a work-eligible individual; we 

do not have the authority to exclude 

non-parental caretaker relatives 

receiving assistance from the work 

participation rate calculation. The DRA 

limited our authority to determine 

whether a parent living with a child 

receiving assistance should be included 

or excluded from the work participation 

rate. Cases where a caretaker relative 

receives assistance have been included 

in the work participation rate since the 

inception of TANF and continue to be 

under the final rule. 

Comment: Some commenters wanted 

us to exclude fugitive felons and parole 

violators from the definition of workeligible individual; others contended 

that convicted drug felons and those 

ineligible because of past fraud should 

not be work-eligible individuals. They 

maintained that States are prohibited 

from using TANF dollars or counting 

State MOE dollars for serving these 

felons and thus it is unfair to require 

their inclusion in the work participation 

rate calculation. 

Response: Similar to a parent that 

incurs a work sanction, a case in which 

a parent is a fugitive felon, parole 

violator, or a drug felon is subject to a 

reduced grant by virtue of the behavior 


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of that parent. We think it would be 

inappropriate to treat such cases 

differently from parents who abide by 

the law. More importantly, we strongly 

believe that it is in the best interest of 

the children in such families if States 

engage the parents in work activities, 

helping them off welfare and out of 

poverty. Thus, we have not made the 

suggested changes. 

We would also like to clarify a State’s 

limitations and flexibility with regard to 

funding fugitive felons, drug felons, and 

individuals convicted of fraudulently 

misrepresenting residence. Fugitive 

felons and parole violators may not, by 

statute, receive federally funded 

‘‘assistance,’’ as defined at 45 CFR 

260.31. An individual who is convicted 

of fraudulently misrepresenting his or 

her place of residence in order to 

receive assistance simultaneously from 

two or more States may not, by statute, 

receive federally funded ‘‘assistance’’

for ten years after his or her conviction. 

That includes ‘‘assistance’’ paid with 

pure Federal funds or with commingled 

State and Federal funds. That individual 

may receive ‘‘assistance’’ using 

segregated State TANF funds or separate 

State program funds. He or she may also 

receive non-assistance benefits, i.e., 

benefits that are outside the regulatory 

definition of ‘‘assistance,’’ such as nonrecurrent benefits that do not extend 

beyond four months or supportive 

services for the employed. An 

individual convicted of a drug felony 

may not, by statute, receive TANFfunded ‘‘assistance,’’ regardless of 

whether the funds are all Federal, 

commingled Federal and State, or 

segregated State funds, unless the State 

opts out of or limits the duration of the 

prohibition by passing a State law; 

however, that individual may receive 

‘‘assistance’’ using separate State 

program MOE funds and may receive 

TANF-funded non-assistance benefits. 

Thus, while restrictions apply, there are 

opportunities to use TANF or certain 

MOE funds to support the family and 

engage the individuals in work. 

We remind readers that the law does 

not prohibit spending Federal or State 

funds on an individual who commits 

‘‘an intentional program violation.’’

States may choose to impose such 

penalties against individuals who 

commit program fraud, or for other 

reasons, but they are not prohibited 

from spending Federal funds on these 

cases. 

Comment: A couple of commenters 

urged us to exclude for a limited time 

period from the definition of workeligible individual refugees and certain 

other legal immigrants who cannot 

speak English, have little education, and 

low levels of literacy. The commenters 

explained that it may take time to 

improve their English proficiency to a 

level that enables them to participate 

fully in the labor market. 

Response: We have not excluded 

refugees from the definition of workeligible individual. TANF recipients 

who happen to be refugees should be 

treated like other TANF recipients. 

States should determine the most 

appropriate activities, which may be 

English language skills or a combination 

of language training and other services, 

and then engage the clients in those 

activities to the greatest extent possible. 

We refer readers to the discussion of 

vocational educational training, which 

clarifies that we have modified the 

definition of that activity to permit ESL 

to count for the entire 12 months that 

the activity may count under the law, as 

long as the language training is a 

necessary or regular part of the 

vocational educational training. 

Comment: A few commenters urged 

us to exclude from the definition of 

‘‘work-eligible’’ all parents who are not 

in the assistance unit. Some asserted 

that not doing so creates an incentive to 

impose full-family sanctions and 

ignores the impact such policies have 

on children. 

Response: We did not exclude all 

parents who are not in the assistance 

unit because Congress specifically 

directed HHS to specify the 

circumstances under which a parent 

residing with a child who is a recipient 

of assistance should be included in the 

work participation rates. Since parents 

who were themselves recipients of 

assistance were already part of the rates 

(other than those subject to either of two 

special statutory exclusions), it was 

apparent that Congress intended us to 

look at families in which the parent did 

not receive TANF assistance but the 

child did. In addition, as we explained 

in the preamble to the interim final rule, 

we considered in turn each type of 

family in which a parent resides with a 

child recipient of assistance to 

determine whether it was appropriate to 

include that group of families in the 

calculation of the work participation 

rates. We believe that our definition 

appropriately focuses on those parents 

who can benefit from work activities 

and whose participation will help move 

the family into employment and out of 

poverty. 

We appreciate the commenters’

concern about the well-being of families 

in which the adult is subject to a 

sanction. We note that States have other 

options when a family refuses to comply 

with work requirements. A State that 

does not wish to use a full-family 

sanction need not do so. 

We repeat that not all ‘‘work-eligible 

individuals’’ are required to engage in 

work for a specified number of hours. 

The State still determines what each 

individual must do in accordance with 

its laws and policies. The definition of 

a work-eligible individual defines the 

denominator, and is a guideline of who 

should be engaged in work activities. 

We believe that our definition creates 

reasonable expectations of States. But, 

Congress established an overall work 

participation rate of 50 percent. This 

leaves room for a State to decide if an 

individual should be excused from work 

requirements, whether because of a 

disability, lack of access to 

transportation, the need for other 

services, or some other reason, 

regardless of whether they are in the 

assistance unit or not. 

Comment: Some commenters asserted 

specifically that adults whose needs are 

removed from the assistance unit due to 

a sanction should not be considered 

work-eligible individuals, because the 

family’s grant has already been reduced 

and it is difficult to get such adults to 

comply with the work requirements. 

Response: To ensure consistent 

treatment, we believe it is appropriate to 

include all of the sanctioned parents of 

child-only cases in the definition of 

‘‘work-eligible individual.’’ A State may 

either reduce the grant by a fixed 

percentage or fixed dollar amount or 

remove the needs of the adult; only the 

latter approach results in a child-only 

case. In the interim final rule, we 

clarified specifically why we included 

as work-eligible individuals sanctioned 

cases in which the adult’s needs are 

removed from the case due to a workrelated sanction, but the child continues 

to receive assistance. The effect on a 

family’s grant of removing a parent’s 

needs from the assistance unit is similar 

to the effect of a fixed percentage or 

dollar amount sanction. Yet, under the 

original TANF rule, these cases without 

an adult were excluded from the 

calculation of work participation rates 

as child-only cases. Cases in which the 

grants were reduced by a fixed 

percentage or dollar amount due to a 

work-related sanction were, by law, 

excluded for a maximum of only three 

months in a 12-month period. The final 

rule treats all cases with a work-related 

sanction in the same manner. 

Comment: Some commenters 

recommended excluding the nonrecipient parents of children who 

continue receiving assistance after their 

parents have received 60 months of 

Federal assistance. One commenter 

explained that States cannot require 


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such parents to participate and, as a 

result, including them would lower 

work participation rates. Another stated 

that, because the State can no longer 

assist the parent with TANF funds, it is 

unfair to impose a work requirement. 

Response: The final rule continues to 

include as work-eligible individuals 

parents that are no longer included in 

the assistance unit because they have 

exhausted their time-limited benefits, 

but for whom the State has chosen to 

extend benefits on behalf of their 

children. We made this decision for 

several reasons. First and foremost, it 

provides an incentive for States to work 

with every case right from the 

beginning. Then, clients can preserve as 

much of their time-limited benefit as 

possible. Second, we are very concerned 

about the negative consequences for 

children living in families with reduced 

benefits for long periods. The adults in 

families whose needs have been 

removed from the grant are the most 

likely to be ignored. They face long-term 

poverty and other negative 

consequences because States are no 

longer helping them acquire work skills 

and find employment. Third, we do not 

believe the only alternative to including 

such families in the work participation 

rate is to impose a full-family sanction 

and ignore the family completely. One 

alternative for those who reached the 

Federal time limit is to use the law’s 

flexibility to provide Federal assistance 

to up to 20 percent of the caseload via 

a hardship extension. If a family still 

needs help after 60 months, then the 

hardship extension is the Federal safety 

net designed for that very purpose. 

Finally, we included parents that have 

reached the time limit because we think 

it is the best way to make the 

participation rates consistent across 

States, one of our charges under the law. 

We also remind readers that States 

have considerable flexibility in deciding 

which families to assist with Federal 

versus State funds, even when it comes 

to families reaching the 60-month time 

limit. The time limit applies only to 

families receiving Federal or 

commingled funds, not to all funds. A 

State could use either segregated or 

separate State funds to assist families 

that have received 60 months of Federal 

assistance. 

Comment: A couple of commenters 

maintained that the definition of workeligible individuals should not include 

persons served in a separate State 

program funded with MOE dollars who 

would not be eligible for TANF, 

including non-qualified non-citizens. 

Some commenters suggested that States 

should decide whether or not to include 

as work-eligible individuals noncitizens receiving SSP assistance so as 

not to penalize a State for humanitarian 

efforts. 

Response: We appreciate the concerns 

that the commenters expressed for State 

flexibility in deciding which families to 

assist through separate State programs. 

However, we include these nonqualified individuals because the 

participation rates are based on all 

adults who receive assistance, either in 

the TANF program or in a SSP. Since 

these non-qualified non-citizens receive 

assistance, they are included by the 

statute. As with other non-recipient 

parents included as work-eligible 

individuals, we believe that the children 

in such families will be better off if 

States engage the parents in work 

activities, helping them increase their 

incomes and move off welfare. 

Comment: A number of commenters 

suggested we give States the option to 

exclude an individual served under 

SSDI or under a State-funded disability 

program from the definition of workeligible individual. The commenters 

reasoned that our rationale for including 

SSI recipients on a case-by-case basis 

applied equally well to non-recipient 

parents served by these other disability 

programs. 

Response: We agree with the 

arguments the commenters made with 

respect to SSDI recipients. Unlike SSI 

recipients, SSDI recipients often are also 

TANF recipients; therefore, we have 

modified the rule to allow a State to 

exclude on a case-by-case basis a parent 

who is recipient of SSDI from the 

definition of work-eligible individual. 

We did not find the commenters’

arguments as persuasive with respect to 

State disability programs. Because State 

disability determinations and eligibility 

could vary so widely from one 

jurisdiction to the next, we think that 

making this exclusion would not meet 

our mandate to make the work 

participation rates more consistent. 

Rather, we think it more appropriate to 

rely on a Federal standard of disability 

for the purpose of excluding parents 

from the definition of work-eligible 

individual. 

Comment: Many commenters urged 

us to exclude from the definition cases 

in which a parent’s SSI or SSDI 

application is pending a decision 

(including the appeal of an adverse 

decision). Some suggested that we 

should exclude applicants who meet the 

disability standard. They argue that 

parents whose disabilities are 

sufficiently grave to qualify them for SSI 

or SSDI but do not yet receive it would 

have as much difficulty working as 

someone whose application has been 

approved. Commenters also urged us to 

exclude individuals who would qualify 

for SSI or SSDI but for the durational 

requirements of those programs, i.e., 

that the physical or mental impairment 

can be expected to result in death or has 

lasted or can be expected to last for a 

continuous period of at least 12 months. 

Response: We appreciate that 

individuals with disabilities may have 

limitations in their ability to work. 

When the limitations are severe enough, 

an individual may qualify for and 

receive SSI or SSDI. However, applying 

for either program is no guarantee that 

the Social Security Administration 

(SSA) will find that the applicant meets 

its definition of disability and will 

approve the application. In fact, the 

majority of initial applicants are denied 

benefits. The SSI and SSDI approval 

process involves not just a simple 

determination that an individual suffers 

from a disability on an approved list, 

but also a determination that the 

individual cannot engage in any 

substantial gainful activity. We believe 

that a Federal standard of disability is 

appropriate to ensure consistency in 

excluding parents from the definition of 

work-eligible individual. Since SSI and 

SSDI applicants have not yet met that 

standard, the regulation does not 

exclude them from the definition of 

work-eligible individual. However, as 

we explain later, States may 

retroactively exclude adults in these 

families from the TANF Data and SSP–

MOE Data Reports once they are 

approved for SSI or SSDI benefits and 

thus are no longer considered to be 

work-eligible individuals. This partly 

addresses the concerns raised by the 

commenters. 

We do want to clarify the status of 

TANF parents who ‘‘meet the SSI or 

SSDI criteria for severity.’’ In some 

cases, SSA makes a presumptive 

disability determination for SSI or SSDI 

benefits, based on the nature of an 

applicant’s impairment and other 

considerations. In such a case, SSA pays 

expedited benefits while the applicant 

awaits a final decision. These 

individuals are in fact receiving SSI or 

SSDI benefits and thus the State would 

have the option to include or exclude 

them from the definition of workeligible individual. If subsequently, SSA 

denies the application, the individual 

would no longer be receiving SSI or 

SSDI benefits and thus would qualify as 

a work-eligible individual. 

Parents in TANF cases who do not 

qualify for SSI or SSDI due to the 

durational requirements are not 

excluded from the definition of workeligible individual because they do not 

receive benefits under those programs. It 

is not appropriate to exclude them, due 


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to the temporary nature of their 

disabilities. For example, States should 

prepare an individual who is recovering 

from an accident or heart attack for 

work, examples several commenters 

cited as temporary disabilities. The 

participation rate that Congress 

established provides ample room for 

States to exempt individuals with 

temporary illnesses or incapacities from 

participating in work activities. Indeed, 

under TANF’s predecessor program, 

JOBS, States could exempt individuals 

who were ill or temporarily 

incapacitated, but the 1996 TANF law 

did not include these exemptions. 

Comment: Many commenters asked 

us to permit States to exclude applicants 

for SSI or SSDI from the definition of 

work-eligible individual retroactively 

back to the date of their applications 

once those applications are approved. 

They explained that the SSI/SSDI 

disability determination process can be 

lengthy and, once a determination is 

made, benefits are paid retroactively for 

earlier months. 

Response: We agree with many of the 

comments and, within limits, have 

amended the rule to allow States to 

revise work participation data—

including information on which 

individuals are or are not workeligible—after initially reporting it. 

Quarterly TANF and SSP–MOE Data 

Reports are due within 45 days of the 

end of the quarter. States are free to, and 

often do, revise data relating to previous 

quarters within the fiscal year. Because 

a State is not liable for a reporting 

penalty until the end of the quarter after 

the end of a fiscal year, a State may, 

until December 31, submit its final data 

for the previous fiscal year. Thus, a 

State that learns that a former workeligible individual has been approved 

for SSI or SSDI and for whom prior 

State TANF or SSP–MOE benefits are 

reimbursed may revise its data for that 

individual by December 31 for the 

months in the preceding fiscal year in 

which the individual received benefits 

under one of those programs. If the 

individual’s application for SSI or SSDI 

predates the beginning of the previous 

fiscal year, the State could not revise 

data back to the date of application 

because only data from the previous 

fiscal year may be revised by December 

31. Please refer to § 265.7(b) for further 

discussion of the timing for revising 

work participation and caseload data 

and to §§ 265.4 and 265.8 for more 

information on when quarterly reports 

are due and when penalties apply. 

Comment: Some commenters 

recommended giving States longer than 

until December 31 to amend TANF and 

SSP–MOE Data Reports for determining 

work-eligible individual status due to 

the lengthy approval process for 

disability benefits. One commenter 

suggested that we give States until the 

point at which we finalize the 

participation rate calculations for a 

fiscal year. Another suggested March 31, 

six months after the end of the fiscal 

year, as an appropriate deadline. 

Response: While it is true that 

disability determinations can be 

lengthy, we have clarified that the 

deadline for retransmitting data is 

December 31 because after that date, 

States are liable for data reporting 

penalties. 

Comment: One commenter urged us 

to exclude recipients of the programs 

offered by ‘‘209(b) States’’ from the 

definition of work-eligible individual in 

the same way we do SSI recipients. The 

commenter contended that those 

programs have criteria that are stricter 

than SSI and thus should also be 

excluded. 

Response: The designation ‘‘209(b) 

State’’ refers to a mechanism by which 

the State determines eligibility for 

Medicaid, not eligibility for SSI or any 

other disability program. Most States, 

known as ‘‘1634 States,’’ provide 

automatic Medicaid coverage for 

recipients of SSI, but they have the 

option of continuing to apply standards 

that predated the SSI program and are 

more restrictive than those of the SSI 

program. Those States are called ‘‘209(b) 

States,’’ a reference to a provision in the 

1972 law that created the SSI program. 

While such a State may have more 

restrictive criteria for Medicaid, this 

provision does not affect eligibility for 

SSI in the State and thus has no bearing 

on our definition of work-eligible 

individual. 

Comment: One commenter urged us 

to clarify that supported work for 

individuals with disabilities (as 

discussed in the preamble concerning 

subsidized employment) is a countable 

activity for work-eligible individuals 

receiving SSI or SSDI whom the State 

opts to include in the work participation 

rate. 

Response: Any activity that can count 

toward the work participation rate for 

other work-eligible individuals can also 

count for SSI and SSDI recipients whom 

the State opts to include, including 

those participating in a supported work 

program for individuals with 

disabilities. Except where the statute 

explicitly imposes a restriction (e.g., for 

certain educational activities), we do 

not limit countable activities to any 

subset of work-eligible individuals. 

Comment: One commenter thought 

the way we structured the definition of 

work-eligible individual with respect to 

SSI recipients was inequitable because 

it subjects individuals to the 

requirements of both TANF and SSI. 

The commenter maintained that by 

including SSI recipients within the 

definition of a work-eligible individual 

and allowing States to exclude them on 

a case-by-case basis we created an 

inequity. The commenter urged us to 

exclude all such individuals as a class 

and allow States to include them on a 

case-by-case basis. 

Response: We think the commenter 

misunderstood the purpose of this 

provision. First, the definition of workeligible individual only includes a SSI 

recipient when a State opts to include 

such an individual. A State must make 

a choice in each case and report data on 

the case accordingly. Because there is a 

child receiving assistance, a TANF case 

exists and the State must report data on 

that family, including information on 

the work status of the adult or adults in 

the family. No case is automatically 

included; the State reports the data to us 

for each case. Second, the rule does not 

subject individuals to the requirements 

of both SSI and TANF. Presumably, a 

State would not choose to include a SSI 

recipient as a work-eligible individual 

unless that individual had sufficient 

hours of work to allow the family to 

count in the numerator of the 

participation rate. Moreover, this option 

does not subject the SSI recipient to 

additional rules of the TANF program. 

The family is already subject to the 

applicable rules of TANF, because a 

child is receiving assistance. The SSI 

parent has no further work obligation 

because the State chooses to use the 

hours that individual works in the 

participation rate calculation. 

Comment: Some commenters 

recommended that we exclude from the 

definition of work-eligible individual 

those ‘‘who are refugees, asylees, or 

legal permanent residents who may 

qualify for TANF or MOE-funded 

assistance but are ineligible for SSI 

based on their immigration status.’’

Response: While some refugees and 

asylees are in fact eligible to receive SSI 

under current law, we do not believe the 

recommendation to exclude parents 

ineligible for SSI due to their 

immigration status is practical. Because 

these parents are ineligible for SSI, the 

Social Security Administration will not 

process their disability determinations. 

We, therefore, cannot ascertain whether 

or not they would have met the 

appropriate disability standards and 

qualified for SSI. 

Comment: One commenter urged us 

to provide the same exclusion for 

recipients of Title XVI benefits (Aid to 


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the Aged, Blind or Disabled in the 

Territories) as we do for SSI recipients. 

Response: We agree with the 

commenter and have modified the rule 

accordingly. 

Comment: A couple of commenters 

thought our approach to individuals 

with disabilities and the definition of a 

work-eligible individual did not make 

sense. They pointed out that we exclude 

a parent caring for a disabled family 

member living in the home but not the 

disabled family member that needs full 

time care. 

Response: The exclusion for a parent 

caring for a disabled family member 

living in the home primarily affects 

cases in which a parent cares for a 

disabled child. Obviously, a disabled 

child would not be subject to work 

requirements. While in some cases the 

disabled family member may be a 

second parent, we did not want to 

broaden the exclusions from the work 

participation rates beyond those that 

already exist in the statute. 

Comment: One commenter objected to 

the way the work-eligible individual 

definition addressed two-parent families 

in which one parent has a disability. 

The commenter pointed out that if the 

State finds that a parent has a disability 

but the individual does not yet receive 

SSI or SSDI, the family would not be 

part of the two-parent participation rate 

but would be included in the overall 

rate. If there is medical documentation 

to support it, the parent without a 

disability will be exempted from the 

work-eligible category because she is 

needed in the home to care for a 

disabled family member. However, the 

family would still be in the work 

participation rate because the parent 

with a disability would still be a workeligible individual obligated to engage 

in work for 30 hours per week to count 

for participation. 

Response: We believe the final rule 

addresses most of the commenter’s 

concerns. This is a confusing area 

because one provision relates to 

disability in general and is a State 

determination, and another relates 

specifically to qualifying for SSI or 

SSDI, a Federal determination. If a State 

finds that one parent in a two-parent 

family has a disability then, by statute, 

the family comes out of the two-parent 

work participation rate. If the parent 

that the State found to have a disability 

does not receive SSI or SSDI, then he or 

she would continue to be a workeligible individual, just as a single 

parent waiting for SSI or SSDI 

determination would be, and the family 

would continue to be part of the overall 

rate. In all other respects, the two-parent 

family is treated the same way as the 

single-parent family for determining 

whether the parents are work-eligible 

individuals. If both parents receive 

either SSI or SSDI, then both would be 

excluded from the definition of a workeligible individual. As we noted above, 

within limits States may retroactively 

revise their data when individuals meet 

SSI or SSDI criteria. 

Comment: Several commenters 

recommended that we exclude parents 

on TANF who are caregivers of family 

members with disabilities, regardless of 

whether the family member with a 

disability lives in the same home as the 

parent. The commenters explained that 

the burden of providing care for family 

members living elsewhere may be just 

as great or greater. 

Response: The purpose of the TANF 

program is to enable parents or relatives 

to care for children ‘‘living in the home’’

and to take necessary steps to become 

self-sufficient. While we appreciate the 

burden that having a family member 

outside the home that needs care places 

on a family, the TANF program is not 

designed to provide such care. Parents 

of TANF families face significant 

challenges to care for everyone in their 

immediate household, and to prepare 

for or maintain employment that will 

allow them to provide for their family. 

Given these critical responsibilities and 

the time-limited nature of TANF 

assistance, we do not agree that parents 

should be excluded from the definition 

of a work-eligible individual in order to 

provide care for someone outside the 

home. 

Comment: Some commenters also 

suggested that we exclude from the 

definition of work-eligible individual 

extended family members such as aunts, 

uncles, and grandparents who were both 

receiving assistance and caring for a 

disabled family member. 

Response: We are sympathetic to the 

situation of non-parental relatives who 

are both receiving assistance and caring 

for a disabled family member. The 

statute (section 407(i)(1)(A)(i)(IV) of the 

Act) only gives us the authority to 

determine ‘‘the circumstances under 

which a parent who resides with a child 

who is a recipient of assistance should 

be included in the work participation 

rates’’; thus, a non-parental relative who 

receives assistance must be a workeligible individual. Since we do not 

have the authority to exclude nonparents from the participation rate, this 

provision only excludes parents caring 

for a disabled family member living in 

the home. A relative would only be a 

work-eligible individual if he or she 

received TANF assistance (the first part 

of the work-eligible individual 

definition) or were a parent of another 

child recipient of assistance (the second 

part of the definition). 

Comment: Many commenters took 

issue with the fact that the exclusion 

under the interim final rule for parents 

caring for a disabled family member 

living in the home applied only when 

the family member with a disability did 

not attend school full-time. Some said 

that parents with children with 

disabilities in school should be treated 

the same as other TANF participants 

who must care for a disabled family 

member not in school. They pointed out 

that children with severe disabilities 

often cannot attend school regularly due 

to medical care needs, even if they are 

enrolled full time. Others noted that 

after-school care and care during school 

holidays (especially the summer) is 

difficult to find for children with 

disabilities, even if they attend school 

on a full-time basis. Some asked us to 

modify the exclusion so that a parent 

would not be ‘‘work-eligible’’ if the 

child’s disability-related needs prevent 

the parent from working. Another 

proposed that we give the State the 

option to include the hours of such a 

parent in the work participation rate on 

a case-by-case basis, based on criteria it 

set out in its Work Verification Plan. 

Some asked for clarification regarding 

whether the exclusion applied to 

children with disabilities who are fulltime students but must be tutored at 

home or are home-schooled. 

Response: We appreciate the 

difficulties of caring for a disabled 

family member, even when he or she is 

enrolled in school full time. The 

commenters raised many compelling 

arguments about the need for a parent’s 

care even when a family member with 

a disability goes to school full time. 

Based on these comments, we have 

expanded the exclusion to apply when 

a family member’s disability requires 

care-giving that prevents the parent 

from working, whether or not the family 

member is enrolled or attending school. 

Please refer to § 261.2(n)(2)(i). Our 

intent had been to ensure that only 

parents who would be unavailable 

during working hours because they were 

caring for family members would be 

excluded from the definition. To that 

end, we have also revised the medical 

documentation requirement, which is 

now included in the regulation itself 

(also at § 261.2(n)(2)(i)). Medical 

documentation must show that a parent 

caring for a disabled family member 

cannot engage in work because he or she 

is needed in the home to provide that 

care. Thus, under the final rule, any 

parent caring for a disabled family 

member will not be considered ‘‘workeligible’’ as long as there is 


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documentation to show that it is 

medically necessary for the parent to 

provide the care and, as a result, cannot 

engage in work. We believe the policy 

in the final rule will be both simpler to 

administer and more equitable. 

The rule does not permit parents who 

have such medical documentation to be 

included in the participation rate 

calculation on a case-by-case basis if 

they are working. If a medical 

professional has documented that the 

parent needs to be in the home to care 

for a disabled family member, then we 

believe it is inappropriate for these 

parents to be working. Thus, there is no 

need for a case-by-case option. Clearly, 

if the medical status of the disabled 

family member or the living 

arrangements of the family changes, the 

State should then report the parent as a 

work-eligible individual and engage the 

parent in work. States should regularly 

reassess the status of excluded parents 

who are caring for disabled family 

members. Closely monitoring family 

situations will enable parents, who are 

no longer needed in the home, to gain 

the skills and work experience that 

leads to independence. 

We would like to stress that this 

exclusion for a parent caring for a 

disabled family member does not 

absolve the State of its responsibility to 

help TANF recipients find appropriate 

child care, including care for children 

with disabilities. We recognize that the 

special care that some children with 

disabilities need may be less available 

and may be more expensive. States 

should take these considerations into 

account as they develop and budget for 

their child care programs. A State may 

not exclude a child who has a disability 

from available child care, if doing so 

would prevent the parent from gaining 

needed skills, finding work, and moving 

the family out of dependency. 

Comment: One commenter 

recommended that the definition of 

work-eligible individual allow for the 

exclusion of individuals who are unable 

to participate in activities for the 

required number of hours due to a 

disability. 

Response: The regulation does not 

exclude such individuals from the 

definition of work-eligible. We refer 

readers to the discussion of individuals 

with disabilities in the cross-cutting 

issues section that appears earlier in this 

preamble. 

Subpart B—What Are the Provisions 

Addressing State Accountability? 

PRWORA required States to meet two 

separate work participation rates—the 

overall rate that has been 50 percent 

since FY 2002 and the two-parent rate 

of 90 percent since FY 1999. A State 

that fails to meet the required 

participation rates is subject to a 

monetary penalty. The Deficit 

Reduction Act of 2005 retained the 50- 

percent participation requirement 

overall and the 90-percent requirement 

for two-parent families, but included 

families in separate State programs in 

the calculation of the respective work 

participation rates. 

In the interim final rule, we modified 

the provisions of this subpart to reflect 

the new statutory requirements to 

include separate State program families, 

as well as the requirement to determine 

when to include non-recipient parents 

residing with children who receive 

TANF assistance in the calculation of 

the work participation rates. We did so 

using the new definition of ‘‘workeligible individual’’ discussed in detail 

in the preamble to § 261.2(n) of this 

part. 

Section 261.20 How will we hold a 

State accountable for achieving the 

work objectives of TANF? 

Under the interim final rule, as under 

the original TANF rule, this summary 

section outlined how we held a State 

accountable for meeting work 

requirements. We did not receive 

comments on this section and have 

made no changes to it in the final rule. 

Section 261.21 What overall work rate 

must a State meet? 

This section of the interim final rule 

incorporated in regulatory text the 

statutory requirement for a State to 

achieve an overall work participation 

rate of 50 percent, minus any caseload 

reduction credit to which it is entitled. 

We did not receive comments on this 

section and have made no changes to it 

in the final rule. 

Section 261.22 How will we determine 

a State’s overall work rate? 

The Deficit Reduction Act of 2005 

modified the work participation rate 

calculation to include families with an 

adult or minor child head-of-household 

in SSP-MOE programs and required us 

to determine the circumstances under 

which a family in which a parent 

residing with a child receiving TANF 

should be included in the calculation. 

The interim final rule modified the prior 

language in this section to reflect the 

new calculation and adopted the use of 

the term ‘‘work-eligible individual’’ for 

that purpose. It also continued the 

policy established under prior rules of 

allowing a State to count a family that 

received assistance for only a partial 

month in the work participation rate if 

a work-eligible individual is engaged in 

work for the minimum average number 

of hours in each full week that the 

family receives assistance. 

We corrected one typographical error 

but made no other changes to the 

regulatory text of this section. 

Comment: One commenter asked for 

clarification regarding whether the 

addition of families in separate State 

programs was effective in FY 2006 or FY 

2007. 

Response: Families receiving 

assistance through a separate State 

program are added effective FY 2007. 

While the interim final rule as a whole 

took effect with its publication on June 

29, 2006, all the provisions relating to 

the work participation rate—including 

the revised caseload reduction credit, 

the new work definitions, and the 

revisions to which cases are part of the 

calculation itself—take effect in FY 2007 

(October 1, 2006), the first fiscal year 

that begins after the law and regulations 

came into existence. 

Comment: One commenter asked us 

to exclude families residing in Alaska 

Native villages from the work 

participation rate calculation, due to 

‘‘the state’s unique circumstances and 

the challenges inherent in serving needy 

families in Alaska’s most remote and 

economically depressed communities.’’

Response: The law does disregard 

from the 60-month time limit on the 

receipt of Federal assistance any months 

that an adult receives assistance while 

living in Indian country or in an Alaska 

Native Village where at least 50 percent 

of the adults are not employed. We do 

not have the authority under the statute 

to make a similar exclusion from the 

work participation rate calculation. 

Comment: One commenter asked us 

to exclude from the denominator 

families ‘‘during their first 30 days of 

eligibility.’’ The commenter noted that it 

takes several weeks to process an 

application, as well as additional time 

to learn program requirements and 

develop a work plan. ‘‘It is unrealistic 

to expect that this process can be 

completed quickly enough for new 

participants to engage in sufficient 

hours of work activities during their 

initial 30 days to meet the work 

participation rate.’’ Another commenter 

stated that the rule does not provide a 

State option to count participation for 

families that receive an initial partial 

month of assistance. 

Response: As we noted in the 

preamble to the original TANF final 

rule, ‘‘* * * we cannot simply decide 

that some period of time for which an 

individual receives assistance—such as 

time prior to assignment in a work 

activity or a partial month of 

assistance—should not be considered a 


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period of assistance and therefore 

exclude the individual’s family from the 

participation rate for that month. On the 

contrary, if a family receives assistance 

for any portion of a month, then we 

must include the family in the 

denominator of the participation rate for 

that month. * * *’’ (See 64 FR 17774.) 

However, §§ 261.22(d) and 261.24(d) do 

provide the flexibility to count a partial 

month of assistance as a month of 

participation if a work-eligible 

individual is engaged in work for the 

minimum average number of hours in 

each full week that the family receives 

assistance in that month. 

Comment: One commenter suggested 

that, if a State opts to count in the work 

participation rate a family in which a 

parent receives SSI (or SSDI), we should 

allow the State to exclude the family 

from the denominator of the rate, 

counting it only in the numerator. 

Response: We do not think we should 

include any family in the numerator 

that we do not also include in the 

denominator. To do so would skew the 

participation rate. The State has the 

flexibility to decide on a case-by-case 

basis whether to include it or exclude it, 

but any case that the State wants to 

count in the numerator must also be in 

the denominator. 

Comment: A couple of commenters 

asked about the meaning of 

§ 261.22(b)(2), which permits a State to 

exclude from the work participation rate 

calculation for up to three months in a 

12-month period a case that is subject to 

a penalty for refusing to work. 

Specifically, the commenters wanted 

clarification on whether ‘‘subject to a 

penalty’’ means the State has reduced or 

terminated a family’s grant or whether 

it could refer to a family that the State 

has notified of its intent to penalize but 

whose benefits it has not yet reduced or 

terminated. After notification, the 

commenters pointed out that due 

process or conciliation period 

requirements in the State often cause a 

lag of one or two months before the 

State actually reduces or terminates the 

family’s grant. The commenters 

explained that, if we use the former 

interpretation, as we have when asked 

by States for policy clarification, then 

States that impose a full-family sanction 

‘‘receive little practical value from this 

provision’’ compared to States that 

impose a penalty by reducing a family’s 

grant. 

Response: This rule does not change 

our long-standing interpretation of 

when a family is ‘‘subject to a penalty.’’

During a conciliation or notice period, 

before the State actually reduces or 

terminates the family’s grant, a family is 

not ‘‘subject to a penalty.’’ Before that 

time, the family is at risk of a penalty 

but not subject to it. We think this is the 

most reasonable interpretation of the 

statute. In the original TANF rule, we 

included the following language at 

§ 261.22(b)(3): ‘‘If a family has been 

sanctioned for more than three of the 

last 12 months, we will not exclude it 

from the participation rate calculation.’’

(Emphasis added.) Further, in the 

interim final rule, we reiterated this 

concept in § 261.22(b)(2) as well, 

specifying that ‘‘if a family with a workeligible individual has been penalized 

for refusal to participate in work 

activities for more than three of the last 

12 months, we will not exclude it from 

the participation rate calculation.’’

(Emphasis added.) In both instances, 

this language makes clear that the State 

must actually have imposed the penalty 

before we exclude the family from the 

participation rate calculation. 

We have applied this interpretation 

since the beginning of TANF because it 

encourages a State to take action to 

resolve the problem that led to the 

sanction in the first place. If we were to 

consider a family ‘‘subject to a penalty’’

when the State had merely notified the 

family of the possibility that it would 

reduce or terminate benefits, it could 

benefit from disregarding the family 

from the participation rate regardless of 

whether it provides services to address 

barriers to employment or works to 

resolve a dispute. 

With respect to the effect of our 

interpretation of this provision on a 

State that chooses to impose a fullfamily sanction instead of reducing the 

family’s benefits, our interpretation 

treats the period before actual 

imposition of a sanction in the same 

way for all States, regardless of whether 

a State’s policy choice is for a full or 

partial sanction. If a State chooses a fullfamily sanction, then the family is 

removed from the work participation 

calculation indefinitely and as a result 

benefits from an indefinitely smaller 

denominator. 

Comment: One commenter asked for 

clarification on ‘‘whether the ‘other 

sanctioned’ individuals who now will 

be considered work-eligible participants 

will have the same exclusion from the 

count for three months out of twelve as 

those sanctioned for participation 

failure.’’

Response: If the family of a workeligible individual is subject to a 

penalty for refusing to work, the State 

may exclude that family from the work 

participation calculation for that month 

as long as the family has not been 

penalized for more than three of the last 

12 months. If the family’s sanction is for 

a different cause, such as failure to 

cooperate with child support 

enforcement, then the case stays in the 

work participation rate. 

Comment: We received a comment 

concerning §§ 261.22(c)(1) and (c)(2). 

The first section provides a State with 

the option not to require a single 

custodial parent of a child under age 

one to engage in work and the second 

allows it to disregard such a family from 

the work participation rate. The 

commenter noted, ‘‘The preamble to the 

final TANF regulations in the April 12, 

1999 Federal Register indicates that 

these two provisions are not dependent 

on each other, but rather, a state can 

exclude such a case from the work 

participation rate calculation without 

having to exclude it from engaging in 

work activities.’’ The commenter urged 

us to include the same clarification in 

this preamble to avoid any confusion. 

Response: The commenter is correct 

that the preamble to the original TANF 

rule clarified that point. We wrote, 

‘‘Based on the comments and after 

reexamining the statutory provision, we 

agree that we need not link the State’s 

option not to require a single custodial 

parent of a child under 1 to work to the 

exclusion of such parents from the rate 

calculations. The State can make 

separate decisions about exempting and 

excluding a family from its rate. The 

statute describes a certain individual, 

that is, ‘a single custodial parent caring 

for a child who has not attained 12 

months of age’ and then separately 

indicates that ‘such an individual’ may 

be disregarded in calculating the 

participation rates. We have rewritten 

the regulation to allow disregard of a 

family with such an individual, since 

the rates actually measure families and 

not individuals.’’ The overall framework 

of this provision did not change in this 

rule, including the distinct natures of 

these two points. 

Section 261.23 What two-parent work 

rate must a State meet? 

This section of the interim final rule 

incorporated in regulatory text the 

statutory requirement for a State to 

achieve a two-parent work participation 

rate of 90 percent, minus any caseload 

reduction credit to which it is entitled. 

We did not receive comments on this 

section and have made no changes to it 

in the final rule. 

Section 261.24 How will we determine 

a State’s two-parent work rate? 

This section of the rule is analogous 

to § 261.22 but applies to the two-parent 

rather than the overall work 

participation rate. The interim final rule 

modified the calculation of the twoparent rate to include families served in 


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SSP–MOE programs. The Deficit 

Reduction Act, as we noted before, 

required us to determine the 

circumstances under which a family in 

which a parent living with a child 

receiving TANF should be included in 

the work participation rates, which we 

did in the definition of ‘‘work-eligible 

individual’’ in § 261.2(n). The interim 

final rule provided a minimum 

definition of a two-parent family for the 

two-parent work participation rate 

calculation. 

We made no changes to this section 

in the final rule. 

Comment: One commenter asked for 

clarification regarding whether the 

addition of two-parent families in 

separate State programs was effective in 

FY 2006 or FY 2007. 

Response: Two-parent families 

receiving assistance through a separate 

State program are added effective FY 

2007. While the interim final rule as a 

whole took effect with its publication on 

June 29, 2006, all the provisions relating 

to the work participation rate including 

the revised caseload reduction credit, 

the new work definitions, and the 

revisions to which cases are part of the 

calculation itself take effect in FY 2007 

(October 1, 2006), the first fiscal year 

that begins after the law and regulations 

came into existence. 

Comment: One commenter stated that 

when a two-parent family is included in 

the overall participation rate it is 

counted as if it were two separate 

households, rather than as a single 

family or household and thought that 

was unfair, because ‘‘all the benefits in 

being a married or stable two-parent 

family are lost.’’

Response: The overall participation 

rate includes each family once. A twoparent family counts in the overall rate 

in the same way that any other family 

does: based on the hours of 

participation of one work-eligible 

individual. If the second parent has 

hours of participation, those count only 

toward the two-parent participation 

rate, which, by statute, can combine the 

hours of both parents. 

Section 261.25 Do we count Tribal 

families in calculating the work 

participation rate? 

We would like to clarify existing 

policy with respect to counting Tribal 

families in the State TANF work 

participation rate. During our listening 

tour sessions around the country, it 

came to our attention that some readers 

may not fully understand the 

requirements of this section of the rule. 

In the preamble to the original TANF 

regulation, we explained that a State has 

the option to include or exclude 

families receiving assistance under a 

Tribal TANF or Tribal Native 

Employment Works (NEW) program 

from the denominator of the State TANF 

participation rates. But to count any 

family in the numerator of the State’s 

participation rate for a month, the 

family must meet the standards for 

counting a family in the State rate, both 

with respect to hours of participation 

and countable activities. We went on to 

stress that this was true regardless of 

whether the family received assistance 

under a State TANF program, a Tribal 

TANF program, or a Tribal NEW 

program. 

This standard continues to apply 

under the final TANF rule. To count 

toward a State’s participation rate, the 

family must meet the standards of that 

rate. Therefore, if a Tribe offers 

activities that meet the definition of 

countable State work activities and 

engages individuals for the requisite 

hours to meet the State rate, the State 

may choose on a case-by-case basis to 

include such families in the calculation 

of the State’s participation rate. 

However, if the Tribal program defines 

and includes countable activities that do 

not meet the work activity or workeligible individual definitions of this 

final rule, such activities may not count 

toward the State’s participation rate. Of 

course, any family that the State wishes 

to count in the numerator must also be 

included in the denominator. 

We received few comments on this 

section and have not changed the 

regulatory text from the interim final 

rule. 

Comment: A couple of commenters 

took issue with the phrase ‘‘at State 

option’’ in this section of the rule, 

arguing that the State cannot opt to 

include Tribal TANF families without 

the consent of the Tribe. The 

commenters thought that the wording 

ignored Tribal sovereignty and they 

urged us to change it. 

Response: This regulatory wording 

comes from section 407(b)(4) of the Act 

and remains unchanged from the 

original TANF rule. While the law and 

regulations give States the option to 

include Tribal TANF or Tribal NEW 

participants in the State work 

participation rates, Tribal sovereignty is 

not at issue because States will need to 

confer with Tribes to know whether 

individuals are participating in 

activities and meeting standards that 

comport with the requirements of the 

State’s work participation rate. This 

provision does not give States control 

over Tribal programs or governments. A 

State cannot opt to include families 

unless they are already participating in 

accordance with State TANF 

participation standards. If the Tribe’s 

program does not meet that standard, 

the State simply would not be able to 

opt to include those families. 

Comment: One commenter pointed 

out that the Federal regulations 

governing Tribal TANF and NEW 

programs allow flexibility in defining 

work activities and the hours of 

participation. State TANF programs 

working with Tribal populations not 

covered by the Tribal TANF or NEW 

programs do not have the same 

flexibility. The commenter thought this 

was inequitable and urged us to grant 

States the same flexibility when 

providing services to American Indians 

living on reservations. 

Response: We do not have the 

authority to implement the commenter’s 

suggestion. The difference between 

State and Tribal TANF work 

participation requirements is statutory. 

Section 412(c) of the Social Security Act 

allows Tribal TANF programs to 

negotiate work activities and hours of 

participation, whereas section 407 of the 

Act, which specifies State work 

requirements, does not permit such 

flexibility. 

Subpart C—What Are the Work 

Activities and How Do They Count? 

The interim final rule did not change 

the structure of this subpart but did 

make some important additions to 

§§ 261.31 and 261.32. In particular, the 

rule added provisions to allow States to 

‘‘deem’’ participation in core hours 

when the minimum wage laws of the 

Fair Labor Standards Act (FLSA) 

preclude an individual that works the 

maximum allowed from participating 

for all of the required core hours. The 

final rule maintains this basic policy of 

the interim final rule but we have 

modified the regulatory text in response 

to comments. 

Section 261.31 How many hours must 

a work-eligible individual participate for 

the family to count in the numerator of 

the overall rate? 

We received many comments relating 

both directly and indirectly to this 

subpart of the regulations. 

Dozens of readers offered comments 

about individuals with disabilities, 

urging us to provide relief in the hours 

they must engage in work activities and 

generally to structure the regulations to 

encourage States to work with the 

people with disabilities. We refer 

readers to the cross-cutting issues 

section of this preamble for an 

overarching discussion of how the 

regulations address the needs of 

individuals with disabilities. We 


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respond to specific issues related to 

hours of participation for people with 

disabilities in that cross-cutting section 

as well. We have grouped the comments 

and our responses by topic for the ease 

of the reader. 

We received numerous comments 

about the provisions in the interim final 

rule that permit a State to ‘‘deem’’

participation when an individual is 

restricted by the minimum wage laws 

from engaging in sufficient hours to 

meet the core hours requirements of the 

participation rates. 

The interim final rule allowed States 

to ‘‘deem core hours’’ for TANF families 

with a work-eligible individual 

participating in work experience or 

community service who works the 

maximum number of hours permitted 

under the minimum wage requirements 

of the Fair Labor Standards Act (FLSA), 

but still falls short of the core hours 

requirement. The final rule continues 

this general policy. As in the interim 

final rule, it limits deeming to States 

that combine TANF (or SSP–MOE) and 

food stamp benefit amounts when 

calculating maximum hours. A State can 

achieve this by adopting the miniSimplified Food Stamp Program (miniSFSP), an option that simply permits 

States to count the value of food stamps 

in determining maximum hours. In 

accordance with the FLSA and the 

applicable regulations at 29 CFR 

531.29–531.32 and guidance issued by 

the Department of Labor (DOL) this can 

include facilities such as child care and 

transportation subsidies but might 

include other subsidies. We recommend 

that any questions regarding the FLSA 

should be directed to Office of the 

Assistant Secretary for Policy, Office of 

Compliance Assistance Policy. Their 

Web site is: http://www.dol.gov/ 

compliance. 

Food Stamp Issues 

Comment: Several commenters raised 

questions about what is involved to 

implement a food stamp workfare 

program and questioned why it is 

necessary. 

Response: To ‘‘deem core hours,’’ the 

preamble of the TANF interim final rule 

required States to adopt a food stamp 

workfare program and conform TANF 

and Food Stamp Program (FSP) 

exemption policies under the SFSP. 

Since then, we have been informed by 

the Food and Nutrition Service (FNS) at 

the U.S. Department of Agriculture that 

neither of these is necessary. A miniSFSP alone allows a State to count the 

value of food stamps with the TANF (or 

SSP–MOE) benefit in determining the 

maximum number of hours permitted 

under the FLSA. The TANF work 

experience or community service 

program then automatically serves in 

place of the food stamp workfare 

program. 

Comment: Several commenters asked 

about the preamble guidance that said 

the SFSP ‘‘must be structured to match 

food stamp exemptions to those of the 

TANF program so that work 

requirements could be applied to as 

many work-eligible individuals as 

possible.’’ One commenter suggested 

that we ‘‘clarify that states do not need 

to make parents of young children 

mandatory Food Stamp Employment 

and Training (FSET) participants in 

order to include food stamp benefits in 

the calculation of countable hours and 

qualify them for the deeming 

provision.’’ The commenter noted that 

the FSP exempts parents with children 

under six years of age from mandatory 

participation and that changing the food 

stamp exemptions to match those of the 

TANF program would require States to 

impose food stamp sanctions on such 

parents when they do not comply with 

TANF’s work requirements. 

Response: Since the publication of the 

interim final rule, the FNS has 

explained that a State can create a miniSFSP that will allow it to count the 

value of food stamps toward this FLSA 

calculation but that it does not need to 

conform the exemption for the age of 

youngest child between food stamps 

and TANF or expand the use of food 

stamp sanctions. For additional 

information see the Food and Nutrition 

Service’s Web site at: http:// 

www.fns.usda.gov/fsp/whats_new.htm. 

Under the heading, ‘‘What’s New,’’ item 

25 for Fiscal Year 2006 provides a 

sample letter for States to request a 

mini-SFSP and additional questions and 

answers on implementing the miniSFSP. 

Comment: Several commenters asked 

whether the SFSP is required. 

Response: Yes, a State must 

implement at least a mini-SFSP in order 

to combine food stamp and TANF (or 

SSP–MOE) benefits for the purpose of 

calculating maximum hours. ACF 

intended to allow States to qualify for 

deeming only if they combine food 

stamp and TANF benefits. The State 

should notify FNS of its desire to 

implement a mini-SFSP that replaces 

the FSP work obligation rules with 

TANF rules. A State that has not 

implemented a mini-SFSP cannot deem 

core hours for participation rate 

purposes, but must still combine TANF 

with allowable facilities, in accordance 

with applicable DOL guidance and 

regulations in order to maximize the 

number of work hours permitted under 

the FLSA. Allowable facilities usually 

include child care and transportation 

subsidies, but might include other 

subsidies. We recommend that any 

questions regarding the FLSA should be 

directed to Office of the Assistant 

Secretary for Policy, Office of 

Compliance Assistance Policy. Their 

Web site is: http://www.dol.gov/ 

compliance. 

Comment: Some commenters objected 

to the requirement to include food 

stamp benefits in the calculation of the 

number of hours needed to satisfy the 

work participation rate. They asserted 

that this undermined State flexibility 

and created inequities because some 

families would have to work off a food 

stamp grant, while others would not, 

because of variations in circumstances, 

such as the receipt of child support and 

family size. Some contended that 

including food stamp benefits in the 

requirement was punitive. 

Response: We considered the 

comments carefully but have retained 

the requirement to include food stamp 

benefits in order to deem core hours of 

participation. The main effect of the 

commenters’ recommendation would be 

to reduce the number of hours that a 

State could require an individual to 

participate in work activities while still 

counting in the work participation rate. 

We believe that participation in work 

activities is crucial for families to move 

from dependence on public support to 

increased self-sufficiency. Further 

reducing the hours required is contrary 

to the goals of the TANF program. We 

do not believe that the policy generates 

inequities, because the number of hours 

that a family must participate to count 

in the work participation rate is directly 

based on the value of the combined 

benefits, up to a maximum. If a family 

has a reduced work obligation because 

of deeming, it is because that family 

receives less support from the 

government than a family with a higher 

work obligation—just as someone who 

works fewer hours in paid employment 

earns less than someone who works 

more hours at the same wage. 

The new policy is not intended to be 

punitive. Rather, it gives States the 

opportunity to count a family in the 

participation rate with fewer hours of 

real participation than the State would 

otherwise need. We adopted the policy 

so that a State would not have to place 

an individual in another core activity 

once that individual worked the 

maximum hours possible under the 

FLSA rules. This makes it more likely, 

not less likely, that a person would meet 

the participation rates. 

Comment: Several commenters asked 

whether the SFSP provisions apply to 


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families receiving assistance through a 

separate State program. 

Response: FNS does not distinguish 

between TANF and SSP–MOE 

programs; therefore, the mini-SFSP 

provisions can apply to a SSP. As long 

as a State combines a family’s SSP–MOE 

grant with its food stamp allotment, we 

will permit deeming in a SSP in the 

same way as we do TANF. 

Fair Labor Standards Act (FLSA) Issues 

Comment: One commenter asked ACF 

to approach the Department of Labor 

(DOL) to specify the benefits package a 

State can use in the FLSA calculation 

and requested that the list of such 

benefits include child care and 

transportation costs. Another 

commenter recommended that we 

include other Federal benefit programs, 

such as subsidized housing assistance 

and Medicaid. 

Response: The determination of 

whether or not the FLSA applies to an 

activity and which benefits must be 

used in the minimum wage calculation 

are matters that must be resolved by 

each State with the Department of 

Labor. The final rule does not require 

the inclusion of these benefits for the 

purpose of deeming core hours. We 

chose not to require States to include 

these benefits because doing so would 

further complicate the calculation of 

deemed core hours. We recommend that 

any broader questions regarding the 

FLSA should be directed to the Office 

of the Assistant Secretary for Policy, 

Office of Compliance Assistance Policy. 

Their Web site is: http://www.dol.gov/ 

compliance. 

FLSA Deeming Issues 

Comment: Several commenters 

recommended that we expand the 

deeming policy from satisfying the core 

work activity requirement to the entire 

work requirement. The commenters 

were concerned that even if some 

individuals were deemed to meet the 

20-hour requirement, they would not be 

able to find other activities to meet the 

remaining 10 hours needed to satisfy the 

average weekly participation 

requirements. Some commenters 

asserted that requiring additional 

participation in non-core activities 

would create logistical and 

transportation problems for TANF 

administrators and families alike. They 

also noted that it may be difficult to find 

programs that offer additional activities 

for an average of just 10 hours per week. 

Response: We adopted the deeming 

policy so that States would be able to 

count participants toward the core 

activity requirement if they participated 

in a work experience or community 

service activity as much as permitted 

under the FLSA rules. Work experience 

and community service programs are 

often reserved for individuals who have 

difficulty participating in TANF’s other 

core work activities. In the absence of 

the deeming policy, work experience 

and community service participants 

who were prevented by the FLSA from 

meeting the core hours requirement and 

could not find paid employment would 

have to participate in vocational 

educational training or job search and 

job readiness assistance to count them 

in the rate. But, oftentimes States are 

reluctant to engage individuals in these 

activities when they need only a few 

hours to count because they are subject 

to durational limits. We chose not to 

expand deeming to the required noncore hours because many of these 

participants can benefit from one of 

TANF’s non-core activities, primarily 

either job skills training directly related 

to employment or education directly 

related to employment. A State would 

not have to engage a client in only 10 

hours per week of the non-core activity. 

If a program and an individual’s needs 

call for more hours, the State could still 

place the individual in that program. 

We would also like to point out that 

allowing States to deem does not 

impose any new or additional logistical 

or transportation problems. On the 

contrary, the new deeming policy 

provides additional flexibility and in 

doing so significantly reduces logistical 

and transportation problems. For 

example, a family with a 20-hour 

requirement that the State deems under 

this provision will count with just one 

activity. Under prior rules, the State 

would have had to find that family 

another core activity. 

Comment: One commenter asked 

whether the deeming policy could apply 

in Puerto Rico because it does not 

participate in the Food Stamp Program 

and thus cannot adopt a SFSP. 

Response: The final rule permits 

deeming in States that have adopted the 

SFSP. Puerto Rico operates the 

Nutrition Assistance Program which is 

funded by a block grant in lieu of the 

Food Stamp Program. This block grant 

provides sufficient flexibility so that the 

value of food stamps, or their 

equivalent, could count without the 

need for the SFSP. Therefore, Puerto 

Rico may deem core hours, when 

necessary, as long as it counts the value 

of Nutritional Assistance Program 

benefits in determining the individual’s 

work obligation. 

Comment: One commenter asked if 

our reference to the 30 or 50 hours for 

two-parent families was a mistake in 

drafting the regulation. 

Response: The reference to the 30 or 

50 hours is not a mistake. Under the 

statute, the core hours requirement for 

the two-parent rate is 30 or 50 hours, 

depending on whether or not the family 

receives federally subsidized child care. 

Child Support Collections and the FLSA 

Minimum Wage 

Comment: Several commenters 

suggested that we remind States that the 

TANF assistance benefit used in the 

FLSA calculation must be the net 

amount of assistance provided after 

subtracting from the benefit the amount 

of any current child support collection 

retained by the State and Federal 

governments to offset the cost of 

providing that assistance. 

Response: We agree. In determining 

the maximum number of hours of work 

experience and/or community service 

that may be required of a recipient to 

meet the minimum wage requirements 

of the FLSA, States should calculate the 

amount of assistance net of any child 

support collections received in the 

month and retained to reimburse the 

State or Federal government for the 

current month’s assistance payment. 

Under the community work 

experience provisions of the former 

JOBS program, the portion of child 

support collection, if any, used to 

reimburse the amount of AFDC was 

explicitly excluded by law. Section 

482(f)(1)(B)(i) of the Social Security Act 

outlining the minimum wage formula 

specified that ‘‘* * * (and the portion 

of a recipient’s aid for which the State 

is reimbursed by a child support 

collection shall not be taken into 

account in determining the number of 

hours that such individual may be 

required to work).’’

This prior provision of law is no 

longer in effect, but we believe that 

States should use the amount of 

assistance, net of the retained child 

support collection so that they do not 

require a parent to ‘‘work off’’ assistance 

amounts that the non-custodial parent 

has repaid. We are not specifying the 

operational procedure that States must 

follow to determine the benefit amount, 

net of retained child support. Under the 

prior law, States generally used one of 

two approaches. Under retrospective 

budgeting, States used the income less 

child support collections received in the 

budget month to determine the benefit 

amount used to calculate the work 

experience obligation for the payment 

month. Under prospective budgeting, 

States used the ‘‘best estimate’’ of 

income less child support collections 

for the month, based on prior 

experience. This works better in wage 


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withholding cases where regular child 

support collections may be predicted. 

The Deficit Reduction Act of 2005 

created incentives to States to send 

more child support collected on behalf 

of families on TANF to the families 

themselves in both current and former 

assistance cases. Beginning October 1, 

2009, or as early as October 1, 2008, at 

State option, a State may elect to pay the 

family a portion of the assigned support 

obligation. The State will not be 

required to pay to the Federal 

Government the Federal share of the 

‘‘excepted portion’’ of such collections 

if the State pays the excepted portion to 

the family and disregards it in 

determining TANF assistance. The 

‘‘excepted portion’’ may not exceed 

$100 per month, or in the case of a 

family that includes two or more 

children, $200 per month. 

Under this new DRA provision, the 

State should not deduct the State and 

Federal portions of assigned support 

collections that it ‘‘passes-through’’ to 

the family in calculating the ‘‘net’’

payment to the family that can be 

counted in determining the number of 

hours an individual can be required to 

work. For example, if a family with two 

children receives $500 in TANF and the 

State collects assigned child support in 

the amount of $250 and elects to ‘‘passthrough’’ $150 to the family, the ‘‘net’’

payment that can be counted for FLSA 

purposes would be $400. See OCSE–

AT–07–05 for further information 

concerning pass-through payments in 

former as well as current assistance 

cases. The State could also, of course, 

claim its share of the pass-through 

toward its MOE requirement. 

Other ‘‘Deeming’’ Issues 

Comment: Several commenters 

proposed expanding the ‘‘deeming’’

concept to work-eligible individuals 

who work the maximum number of 

hours allowed by a doctor to receive full 

credit for their participation. Other 

commenters recommended that we 

allow States to deem individuals who 

are working ‘‘as many hours as their 

medically documented reasonable 

accommodation plans allow as meeting 

the federal work requirement.’’ Another 

commenter suggested that States be 

‘‘allowed to count recipients who 

participate in work activities for the 

number of hours required under an 

employment plan that includes 

accommodations for disabilities (or 

accommodations based on a recipient’s 

need to care for a family member with 

a disability) as having met the federally 

required number of hours of 

participation.’’ The commenter went on 

to note that this approach is consistent 

with the treatment of families in work 

experience or community service who 

were working ‘‘less than the minimum 

number of hours to satisfy the 

participation rates.’’ The commenters 

asserted that these options would 

encourage States to do more to engage 

these individuals. 

Response: We extended the deeming 

option to participants in work 

experience and community service 

because the FLSA provisions may 

actually prevent a State from meeting 

the ‘‘core’’ work requirement using 

these two activities. We did not extend 

the deeming option to other groups 

because we believe that Congress, in 

setting the maximum 50 percent 

participation rate, recognized that some 

families might not be able to work the 

full hours required. We encourage States 

to continue to work with these families 

to help move them to work and selfsufficiency. Our final rule does allow 

States to exclude recipients of Federal 

disability programs and those caring for 

a disabled family member from the 

definition of work-eligible individual. 

For more discussion of how the rules 

affect individuals with disabilities, 

readers should refer to the cross-cutting 

issues section at the beginning of this 

preamble. 

Section 261.32 How many hours must 

a work-eligible individual participate for 

the family to count in the numerator of 

the two-parent rate? 

We did not receive any comments that 

were directed strictly at this section of 

the regulations; however, the comments 

that we addressed in the previous 

section, § 261.31 of this subpart, often 

applied equally to this section. We refer 

readers to the discussion there and to 

the preamble about the definition of 

work-eligible individual in § 261.2 of 

this subpart for further discussion of 

counting two-parent families toward the 

two-parent participation rate. 

Section 261.34 Are there any 

limitations in counting job search and 

job readiness assistance toward the 

participation rates? 

In the interim final rule, we did not 

make any changes to the various 

limitations in counting job search and 

job readiness assistance. Indeed, we did 

not include this section of the TANF 

rules in the interim final rule at all. 

After reviewing the comments we 

received, we have concluded that it is 

necessary to include this section in 

order to clarify how States should apply 

the various limits on counting job 

search and job readiness assistance. 

In the final rule, we define a week for 

each of the limits in this section. For the 

six-week (or 12-week) limit on 

participation in job search and job 

readiness assistance, we define one 

week as 20 hours for a work-eligible 

individual who is a single custodial 

parent with a child under six years of 

age and as 30 hours for all other workeligible individuals. Thus, six weeks of 

job search and job readiness assistance 

equates to 120 hours for the first group 

and 180 hours for all others. For those 

months in which a State can count 12 

weeks of this activity, these limits are 

240 hours and 360 hours, respectively. 

To make this section more consistent 

with other work participation rate 

provisions, we modified the six-week 

(or 12-week) limit to apply to ‘‘the 

preceding 12-month period,’’ rather 

than to a fiscal year. We also define 

‘‘four consecutive weeks’’ and clarified 

the provision that allows an individual 

who participates in job search and job 

readiness assistance for ‘‘3 or 4 days 

during a week’’ to count ‘‘as a week of 

participation in the activity.’’

Subpart D—How Will We Determine 

Caseload Reduction Credit for 

Minimum Participation Rates? 

PRWORA created a caseload 

reduction credit that reduces the 

required work participation rate that a 

State must meet for a fiscal year by the 

percentage that a State reduces its 

overall caseload in the prior fiscal year 

compared to its caseload under the Title 

IV-A State plan in effect in FY 1995. 

The calculation excludes reductions due 

to Federal law or to State changes in 

eligibility criteria. The Deficit Reduction 

Act of 2005 recalibrates the credit by 

changing the base year to FY 2005. 

We received only a handful of 

comments relating to subpart D. We 

made one change to the regulatory text 

in § 261.42 and we also clarified our 

policy with respect to excluding ‘‘excess 

MOE’’ in § 261.43. We explain both of 

these below. 

Section 261.40 Is there a way for a 

State to reduce the work participation 

rates? 

Comment: A few commenters 

questioned the effective date of the 

regulations governing the caseload 

reduction credit with the recalibrated 

base year. They asked us to clarify that 

the original base year of FY 1995 applies 

to the FY 2006 credits and that the new 

base year of FY 2005 applies to the FY 

2007 credits. 

Response: The commenters are correct 

that we will not use the new base year 

of FY 2005 until we calculate the FY 

2007 caseload reduction credits. For 

that year’s credits, we will compare FY 

2005 to FY 2006 to determine the 


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caseload reduction credit to which 

States are entitled. The FY 2005 base 

will apply from that point forward. 

While the interim final rule as a whole 

took effect with its publication on June 

29, 2006, all the provisions relating to 

the work participation rates—including 

the revised caseload reduction credit, 

the new work definitions, and the 

revisions to which cases are part of the 

calculation itself—take effect in FY 2007 

(beginning October 1, 2006), the first 

fiscal year that begins after the law and 

regulations came into existence. 

Comment: One commenter suggested 

that we allow the caseload reduction 

credit to apply in ‘‘real time,’’ as 

opposed to applying it ‘‘backwardlooking’’ as it currently does. The 

commenter contended that rewarding a 

State for ‘‘present reductions’’ would 

give it an incentive to keep working to 

reduce the caseload rather than ‘‘resting 

on past laurels.’’

Response: The statute establishes the 

structure of the caseload reduction 

credit and thus is beyond our authority 

to change. We think that Congress chose 

to update the base year of the 

calculation for precisely the reason that 

the commenter noted, finding it no 

longer appropriate to reward a State in 

its participation rate for caseload 

declines it achieved many years earlier. 

Section 261.41 How will we determine 

the caseload reduction credit? 

This section of the interim final rule 

specified the method that we use for 

calculating the caseload reduction 

credit. In the final rule, we corrected 

two typographical errors in paragraph 

(c) that erroneously referred to ‘‘the FY 

2005 comparison-year’’ caseload when 

they should have read ‘‘the FY 2005 

base-year’’ caseload. 

Comment: One commenter requested 

clarification of the data a State should 

report to establish the FY 2005 base-year 

caseload for two-parent families in 

which one parent receives TANF and 

the other does not. The commenter 

stated, ‘‘The interim final rule defines a 

non-recipient parent living with a child 

receiving assistance as a work-eligible 

individual. Under this definition, 

single-parent households with nonrecipient second parents will be 

included in the two-parent caseload.’’

The commenter suggested that the FY 

2005 baseline include these two-parent 

cases to ensure caseloads are 

comparable when calculating caseload 

reduction credit. 

Response: The commenter raises a 

valid point. Under this rule, the 

minimum definition of a two-parent 

family has changed. Since the old 

definition applied to FY 2005, a State 

submitting a caseload reduction report 

based on the two-parent caseload would 

have caseload data based on the old 

definition for FY 2005 and the new one 

for the comparison-year caseload. We 

have changed the rule at § 261.40(d) to 

provide for adjusting data in this kind 

of situation. To correct such an 

inconsistency, a State may adjust its FY 

2005 two-parent caseload data as part of 

its caseload reduction report. A State 

that wishes to make such an adjustment 

should explain in its report how it 

arrived at the adjusted number. Please 

refer to the instructions to form ACF–

202, the Caseload Reduction Report, for 

further information. 

Section 261.42 Which reductions 

count in determining the caseload 

reduction credit? 

Comment: A couple of commenters 

noted that we deleted part of this 

section that listed types of eligibility 

changes a State might make and for 

which it cannot receive a caseload 

reduction credit. One thought this 

deletion was inadvertent; another 

believed that the language remains 

relevant as States consider new program 

designs. All commenters urged us to 

restore the language. 

Response: We have restored the 

language in the final rule. We had 

removed the text in the interim final 

rule because it was strictly illustrative 

and we thought States had enough 

experience with the caseload reduction 

credit to know the types of changes in 

eligibility criteria that they need to 

include on the caseload reduction 

report. We also did not want to suggest 

that the list in the original rule was 

exhaustive; States must report all 

changes in eligibility between the base 

year and the comparison year. However, 

since commenters found the language 

particularly useful, we restored the 

language with the clarification that the 

list is not comprehensive. 

Comment: One commenter urged us 

to permit eligibility changes that 

increase the caseload to count for credit 

above and beyond offsetting the effect of 

changes that decrease the caseload. The 

commenter reasoned that, since we had 

established the offset by regulation, 

rather than implementing a statutory 

provision, we have authority to expand 

it in this way. Further, the commenter 

suggested that failing to do so would be 

fundamentally unfair. 

Response: It is our longstanding 

policy to permit caseload expansions 

from eligibility changes to offset 

changes that decrease the caseload. We 

originally established this policy to 

allow the caseload reduction credit to 

reflect a more accurate picture of the 

change in the caseload. However, we 

have never allowed caseload increases 

to do more than offset decreases, in 

other words, to credit a State for greater 

caseload reduction than it actually 

experienced. The interim final rule 

incorporated that policy in 

§ 261.42(a)(3) and the final rule retains 

that provision. 

Section 261.43 What is the definition 

of a ‘‘case receiving assistance’’ in 

calculating the caseload reduction 

credit? 

When we published the interim final 

rule, this section remained largely 

unchanged from the original TANF 

rules. Subsection (a) explains that we 

calculate the caseload reduction credit 

using cases that receive assistance, 

either TANF or SSP–MOE assistance. In 

the final rule we have made minor 

wording changes to this subsection to 

remove extraneous language and 

thereby improve the clarity and 

understanding of exactly which cases 

are included in the calculation. We have 

made no substantive change in the 

definition of cases used in the 

calculation. 

Subsection (b) allows a State to 

exclude from the caseload reduction 

credit calculation cases on which the 

State has spent ‘‘excess MOE,’’ that is, 

MOE in excess of the amount it needs 

to meet its MOE requirement. If a State 

applies this provision, for the 

comparison-year caseload we would use 

the sum of the State average monthly 

TANF and SSP–MOE assistance 

caseloads, minus cases whose receipt of 

assistance is attributable solely to MOE 

funds in excess of the State’s 80- or 75- 

percent MOE requirement. Since the 

publication of the interim final rule, this 

‘‘excess MOE’’ provision has drawn 

considerable attention. In our listening 

sessions across the country, it was a 

topic of considerable discussion and 

also elicited formal comments on the 

interim final rule. Prior to issuing these 

rules, only one State had ever made use 

of it since its inception in the original 

TANF regulation. 

Because of this new interest in the 

excess MOE provision, we thought it 

would be helpful to specify the 

methodology for calculating excess 

MOE and have revised this subsection 

to incorporate the specifics of this 

calculation. If a State wishes to have us 

take its excess MOE spending into 

account in the caseload reduction credit 

calculation, it needs to follow this 

methodology as part of its Caseload 

Reduction Report (form ACF–202). 

One problem in calculating excess 

MOE is that a given dollar of MOE 

spending cannot track to a given case. 


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Since the caseload reduction credit 

considers only cases receiving 

‘‘assistance’’ and not all cases, it is 

nonetheless important to develop an 

approach for determining the share of 

State spending on assistance that is in 

excess of its MOE requirement. Some 

methodologies would over-represent the 

amount of spending on ‘‘assistance’’ that 

was indeed excess MOE. For example, 

a methodology that assumed that all 

spending on two-parent families came 

from excess MOE would, in effect, 

artificially manipulate the credit, 

especially the two-parent credit. 

Therefore, we think that the only fair 

and reasonable approach is to consider 

average costs per case when 

determining how many cases were 

funded with excess MOE and thus 

should be excluded from the caseload 

reduction credit calculation. In fact, the 

only method we have approved prior to 

this final rule used average costs per 

case. 

Our method divides the total TANF 

(Federal and State) and SSP–MOE 

spending on assistance for the 

comparison year by the State’s average 

monthly assistance caseload (combined 

TANF and SSP–MOE) for the 

comparison year to arrive at an average 

annual assistance cost per case for the 

fiscal year. The method then computes 

total spending on assistance as a 

percentage of total spending. We use 

total spending because spending with 

Federal and State MOE funds on 

assistance are largely interchangeable. If 

we based the calculation solely on MOE 

funds, the size of the credit would vary 

not based on the amount of excess State 

MOE spending, but rather on the 

distribution of assistance spending 

between State MOE and Federal funds. 

We then subtract the required 80 

percent of historic State expenditures 

(80-percent MOE requirement) from the 

State’s actual MOE expenditures and 

multiply the remaining ‘‘excess MOE’’

by the percentage of spending on 

assistance. Finally, we divide this 

excess MOE spending on assistance by 

the average annual assistance spending 

per case to determine how many cases 

were funded with excess MOE. If the 

excess MOE calculation is for a separate 

two-parent caseload reduction credit, 

we multiply the number of assistance 

cases funded with excess MOE by the 

average monthly percentage of twoparent cases in the State’s total (TANF 

plus SSP–MOE) average monthly 

caseload. All financial figures in the 

methodology must agree with data 

reported on the State’s ACF–196 TANF 

Financial Report and all caseload data 

must agree with information reported on 

the ACF–199 TANF Data Report and 

ACF–209 SSP–MOE Data Report. 

The following example illustrates our 

methodology. In this example we are 

calculating a FY 2007 caseload 

reduction credit, which will reduce the 

State’s FY 2007 required participation 

rate, and thus the comparison year is FY 

2006. Assume that the State’s total MOE 

for FY 2006 equals $100 million and its 

Federal spending in FY 2006 equals 

$175 million for a combined total of 

$275 million. Of this amount, total 

spending on assistance (combined 

Federal and State) equals $110 million. 

This means spending on assistance 

equals 40 percent of total spending 

($110 million divided by $275 million). 

The State’s combined TANF and SSP–

MOE average monthly caseload, as 

reported on the TANF Data and SSP–

MOE Data Reports for FY 2006, equals 

20,000. Therefore, the average spending 

on assistance per case equals $5,500 

($110 million divided by 20,000). The 

State’s 80-percent MOE requirement 

equals $80 million, so it spent $20 

million above that level. Of that ‘‘excess 

MOE,’’ we attribute that $8 million, or 

40 percent, to assistance spending. 

Finally, we divide that $8 million by the 

average assistance spending of $5,500 

per case to conclude that 1,455 of 

20,000 average monthly cases were 

funded with excess MOE and should be 

subtracted from the FY 2006 caseload in 

the caseload reduction credit 

calculation. 

We require the use of 80 percent MOE 

rather than 75 percent because the 

statutory requirement is for 80 percent 

MOE spending unless a State meets the 

work participation requirements for the 

year. If a State meets both participation 

rates for the comparison year, and thus 

its required MOE drops to 75 percent, it 

may revise its caseload reduction credit 

to reflect the lower required MOE level. 

It is possible that we will already have 

that information for the comparison 

when we calculate the caseload 

reduction credit; if so and the State met 

both rates, we will use 75 percent at that 

time. 

We have revised the Caseload 

Reduction Report (form ACF–202) to 

include a new worksheet and made 

some other changes to the form to assist 

a State in claiming excess MOE as part 

of the caseload reduction credit. 

Comment: Several commenters noted 

that we retained the provision that 

allows a State that spends MOE funds 

in excess of its required level to report 

for the caseload reduction credit only 

the pro rata share of cases receiving 

assistance that is required to meet the 

basic MOE requirements. The 

commenters urged us to retain the 

provision in the final rule. 

Response: The final rule does retain 

the provision allowing a State to receive 

caseload reduction credit for excess 

MOE spending. During our listening 

tour for the interim final rule, we 

expressed doubts about this provision 

and suggested that we might not retain 

it. Our concerns were and remain that: 

(1) The provision has not proved 

effective in encouraging States to spend 

additional MOE funds, as most States 

spend only to the level required; and (2) 

the interaction between this provision 

and the new flexibility in the DRA 

concerning the types of expenditures 

that can count for MOE, particularly 

that a State can spend MOE on nonneedy families, could result in large, 

artificial caseload reduction credits. 

We do want to clarify that, if a State 

uses this provision and receives 

caseload reduction credit for excess 

MOE spending, it may not subsequently 

revise its reported financial data to 

reduce the level of State MOE 

expenditures for which it received such 

credit and replace those expenditures 

with Federal ones. It would be 

inherently unfair to credit a State for 

expenditures of State funds that it later 

reports did not come from State funds. 

Section 261.44 When must a State 

report the required data on the caseload 

reduction credit? 

Comment: One commenter asked us 

to put back language that the interim 

final rule deleted stating that we would 

issue the caseload reduction credits by 

March 31 of the fiscal year to which the 

credit applied. The commenter stated, 

‘‘We understand that negotiations 

sometimes result in the notification to 

an individual state being delayed past 

this date, but think it is important that 

states have the general expectation that 

the information be received by March 

31.’’

Response: We did not make the 

change in the final rule that the 

commenter recommended. We deleted 

the March 31 date that was part of the 

original TANF rule because, after many 

years of experience with the caseload 

reduction credit, we did not find that it 

served a useful purpose. Moreover, 

there is no statutory basis for this or any 

other specific issuance date. 

Nevertheless, we will continue to 

endeavor to issue the credits within the 

fiscal year to which they apply. 

Subpart F—How Do We Ensure the 

Accuracy of Work Participation 

Information? 

The Deficit Reduction Act of 2005 

requires HHS to issue rules that ensure 


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the consistent measurement of work 

participation rates, including 

information with respect to: (1) 

Determining whether the activities of a 

recipient of assistance may be treated as 

a work activity; (2) establishing uniform 

methods for reporting hours of work of 

a recipient of assistance; (3) identifying 

the types of documentation needed by 

the State to verify reported hours of 

work; and (4) specifying the 

circumstances under which a parent 

who resides with a child who is a 

recipient of assistance should be 

included in the work participation rates. 

We received many comments about 

this subpart. Several readers offered 

general comments about the increased 

burden that the interim final rule placed 

on administrators and clients, 

particularly with respect to reporting 

actual hours and documenting 

participation in work activities. Others 

provided specific comments and 

suggestions, which we address below. 

Section 261.60 What hours of 

participation may a State report for a 

work-eligible individual? 

The interim final rule made explicit 

in regulation our long-standing policy of 

counting only actual hours of 

participation and not scheduled hours. 

It required that each State have in place 

a system for determining whether the 

hours it reports for the participation 

rates correspond to hours in which 

work-eligible individuals actually 

participate in work activities. The final 

rule continues this same actual hours 

standard. 

In conjunction with the actual hours 

policy, the interim final rule also 

introduced to the regulations the 

concept of giving States credit for 

excused absences for TANF 

participation in unpaid activities. Under 

the interim final rule, a State could 

define and count reasonable short-term, 

excused absences for days missed due to 

holidays and a maximum of 10 

additional days of excused absences in 

any 12-month period, no more than two 

of which may occur in a month. To 

count an excused absence as actual 

hours of participation, the individual 

must have been scheduled to participate 

in a countable work activity for the 

period of the absence that the State 

reports as participation. 

In the final rule, we have clarified the 

holidays policy, limiting it to 10 days in 

a year. Because we did not specify in 

the interim final rule the number of 

holidays, States proposed counting 

widely varied holidays in their Work 

Verification Plans, some proposing 

impossibly long lists of the days they 

would excuse and count toward the 

participation rates. We realized that we 

had not provided adequate guidance in 

the regulation and that, as written in the 

interim final rule, the holidays policy 

would not meet the spirit of our 

mandate to make work participation rate 

calculations consistent across States. We 

deliberated at length about the 

appropriate number, considering the 

number granted on average by private 

companies, the average number of State 

paid holidays, and the number of 

Federal holidays. Ultimately, we chose 

to limit it to 10 to be consistent with the 

number of Federal holidays. Each State 

must designate the days that it wishes 

to count as holidays for those in unpaid 

activities in its Work Verification Plan. 

It may designate no more than 10 such 

days. The State is free to excuse an 

individual on other days for religious or 

other reasons, but it may not count other 

days for participation rate purposes as 

holidays. It may also exercise the 

additional excused absences policy. 

During our listening tour and in 

written comments many people 

expressed misgivings about the way we 

structured credit for additional excused 

absences. Many urged us to permit a 

State to implement an hourly equivalent 

to the 10 days, since individuals 

sometimes need to be excused for only 

a portion of a day. Others thought that 

the number of additional excused days 

was insufficient and objected to the 

restriction on counting no more than 

two per month. 

In writing the final rule, we struck a 

balance between our responsibility to 

ensure State accountability for the work 

participation rates in the law and giving 

States participation credit for occasional 

absences due to circumstances beyond 

an individual’s control. We were 

persuaded by the comments that 

excused hours makes more sense than 

excused days because some situations 

require an individual to be absent for 

only part of a day. The final rule permits 

a State to count up to 80 hours of 

additional excused absences in a year 

for each work-eligible individual. It may 

not report more than 16 of these hours 

in any month. As in the interim final 

rule, the State must describe its excused 

absence policy (including holidays) in 

its Work Verification Plan. 

Readers should note that we have 

modified the title of this section for 

clarity of comprehension. We think it 

should now be more readily apparent 

that this section addresses the hours 

that can count for participation, while 

§ 261.61 speaks to documentation 

requirements to support hours of 

participation, and § 261.62 specifies 

how States should verify the hours that 

they report and document. 

In keeping with this clarification, this 

section of the final rule incorporates the 

provision permitting a State to report 

projected hours of employment for up to 

six months on the basis of current, 

documented actual hours of work. In the 

interim final rule, this provision 

appeared in § 261.61. We have made no 

change to the text of the provision but 

moved it to this section because it fit 

better under the rubric of reporting 

hours than it did under documenting 

hours. 

This section of the interim final rule 

also specified the hours that a State 

could count for self-employed 

individuals. The final rule does not 

change this provision. 

Finally, the interim final rule limited 

the counting of homework and study 

time for individuals participating in 

vocational educational training or any 

other educational work activity to 

supervised settings. The final rule 

allows a State to count unsupervised 

homework time, subject to certain 

limitations. 

Reporting Hours of Each Activity 

Separately 

Comment: In conjunction with 

comments we received about our effort 

to draft mutually exclusive definitions 

of work activities, a number of 

commenters objected to the requirement 

to report actual hours for each activity 

separately. They maintained that 

separate tracking would discourage 

States from combining work activities 

and would impose an added 

administrative burden. They urged us to 

allow States to combine activities and 

report all participation under one 

activity. For example, one commenter 

suggested that we allow States to count 

an individual’s hours from several 

activities in the activity that 

‘‘constitutes the majority of the hours of 

participation.’’

Response: We strongly support State 

programs that combine activities. 

Having States report hours for each 

work activity in the appropriate 

category will help ensure that the data 

are comparable across States. Reporting 

participation by activity is required by 

section 411 of the Social Security Act 

and does not prevent a State from 

creating integrated programs. Moreover, 

a policy that allows some activities to 

count within others based on standards 

such as what constitutes a ‘‘significant 

majority’’ of hours would still require 

States to track the hours of each activity 

separately to determine which activity 

is the primary activity. Thus, combining 

the activities for purposes of reporting 

hours of participation would not 


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achieve the suggested administrative 

simplification. 

The main effect of these 

recommendations would be to allow 

States to bypass statutory limitations on 

counting participation in certain 

activities, most notably the six-week 

limit on job search and job readiness 

assistance and the lifetime 12-month 

limit on vocational educational training, 

or to count educational activities during 

core hours. 

Actual Hours versus Scheduled Hours 

Comment: Some commenters 

recommended we allow States to report 

scheduled hours. One commenter 

thought that we should allow school 

districts to count scheduled hours with 

excused absences for good cause 

because it would ‘‘benefit the client and 

these districts.’’ Another maintained 

that requiring a State to develop a 

‘‘system for reporting/counting of actual 

hours instead of scheduled hours is an 

unfunded mandate.’’ Another 

commenter wrote that it will ‘‘require a 

significant investment of program 

resources in activities and systems to 

measure the number of actual hours of 

participation.’’

Response: Our current policy simply 

extends the previous policy. Under 

TANF, States have always been required 

to report actual hours and not scheduled 

hours. Although the regulations did not 

explicitly state it, the instructions to the 

TANF Data Report (Form ACF–199, 

transmitted via Program Instruction 

TANF-ACF-PI–99–3, dated October 27, 

1999) state, ‘‘For each work activity in 

which an adult or minor child head-ofhousehold participates, States are to 

collect actual hours of participation for 

each week in the report month. * * *’’

Thus, States should already have had 

systems in place to capture and report 

actual hours of participation. 

Holidays and Additional Excused 

Absences 

Comment: Some commenters thought 

that 10 days per year (a maximum of 

two days per month) of excused 

absences beyond holidays was not 

sufficient to accommodate the needs of 

TANF recipients. One commenter 

thought that our policy was ‘‘not a 

commonly accepted or reasonable 

standard.’’ Commenters asserted that 

low-income, single parents often needed 

extra time to deal with court or agency 

mandated appointments, school 

appointments, meetings with child 

protective caseworkers, and caring for 

sick children, as well as to attend to 

personal needs that arise. Several 

commenters wrote that it is 

‘‘unreasonable to require caregivers to 

ignore emergencies or fail to take 

handicapped children to the doctor 

during work hours when the doctor is 

available so that the State can get credit 

for their participation in a work 

requirement.’’ Some recommended 

specific standards to replace the 

excused absence policy described in the 

interim final rule (e.g., up to 120 hours 

per year, with a maximum of 30 hours 

per month, or 2 days per month but 24 

days per year), while others suggested 

we allow unlimited excused absences as 

long as States can ‘‘verify the reason for 

excused absence’’ and it is in their 

approved Work Verification Plans. 

Some commenters argued that there 

should be exceptions to the excused 

absence policy for specified reasons. 

They recommended that we grant 

extensions for various reasons, such as 

job interviews, meetings required by 

other governmental agencies (e.g., child 

welfare, child support, schools, courts, 

or other assistance programs), and 

illness, either of the participant or the 

participant’s child. They suggested that 

we count these absences toward 

participation without limit and not as 

part of the regular excused absence 

allotment because such appointments 

are beyond the control of the individual 

and, in some cases, it is not possible to 

make up the hours for some activities 

because they do not fit a provider’s 

schedule. A number of commenters 

suggested that we use the providers’’

definition of holidays and other excused 

absences for individuals in education 

and training programs, as long as they 

make satisfactory progress. 

Response: The TANF work 

participation rate has always been based 

on actual hours. Congress did not 

include an excused absence policy, in 

part because the hourly standard has 

always been well below the customary 

40-hour work week; it is 20 hours per 

week for a single-parent family with a 

child under six years of age. As a result, 

most individuals already had a built-in 

excused absence policy of 10 to 20 

hours per week. This gives States the 

flexibility to work around hours that a 

client misses and to allow the 

individual to make them up where 

feasible. Notably, it also means that 

TANF clients have more time to address 

the kinds of issues the commenters 

raised than many non-TANF, lowincome, working parents. 

The interim final rule expanded this 

statutory flexibility by including 

holidays and up to 10 additional days 

per year (no more than two days per 

month) of excused absences to count as 

participation, a first in the history of the 

TANF program. Now, under the final 

rule, we have expanded flexibility 

further to excuse up to 10 holidays and 

up to 80 additional hours of excused 

absences in a year, not more than 16 of 

which can be reported in a month. 

Equally important, we remind readers 

that there is a distinction between the 

allowances a State or service provider 

may choose to make for an individual 

and the participation allowances we are 

granting to States in excused absences. 

The State determines how many hours 

an individual must engage in work and 

what it considers a good cause excuse 

for missing those hours. The law and 

regulations determine what a State gets 

credit for in the work participation rate. 

We established the limits on excused 

absences based on a reasonable standard 

derived from common employment 

practices. Nevertheless, those limits on 

counting for participation do not 

preclude States from excusing 

additional absences without penalty to 

the individual. 

Comment: Some commenters thought 

that our excused absence policy 

conflicted with ‘‘the intent and spirit of 

the Family Violence Option (FVO) by 

punishing individuals who have 

experienced domestic violence.’’

Response: For the first time under 

TANF, we have given States 

participation credit for allowing clients 

to address emergencies. Rather than 

conflicting with the FVO, the excused 

absence policy provides another avenue, 

in addition to granting program waivers, 

for States to respond to needs of victims 

of domestic violence. 

Comment: Many commenters 

recommended that the regulations count 

as excused absences hours missed due 

to the disability of an adult TANF 

recipient or due to caring for a family 

member with a disability. For example 

one commenter stated, ‘‘Disabilities and 

responsibility for caring for a disabled 

person clearly result in an overall 

greater frequency of absences from work 

activities than would otherwise be 

necessary.’’ One commenter noted that 

the standard excused absence policy on 

which the interim final rule is based 

makes exceptions for disability-related 

absences. The commenter explained 

that ‘‘employers are actually required by 

the federal Family Medical Leave Act to 

allow individuals to take up to three 

months of leave if related to the 

employee’s health or the employee’s 

need to care for an ill family member.’’

The commenter recommended that we 

allow States ‘‘to count all excused 

absences related to verified medical 

purposes.’’

Response: We have addressed the 

commenters’’ concerns about the need 

for excused absences due to caring for 

a child with a disability by excluding 


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such individuals from the definition of 

work-eligible individual. Please refer to 

the preamble discussion of § 261.2(n) for 

more detail about the definition of a 

work-eligible individual. 

With respect to the Family and 

Medical Leave Act, States must comply 

with its mandate that ‘‘eligible 

employees’’ are entitled to 12 weeks of 

unpaid leave during any 12 month 

period for reasons of childbirth, 

adoption, in order to care for an ailing 

family member, or a serious health 

condition that impedes the employee 

from performing her job. 29 U.S.C. 

§ 2612(a)(1). The term ‘‘eligible 

employee’’ is defined at 29 U.S.C. 

§ 2611(2). The State’s responsibility to 

comply with the FMLA does not expand 

the hours of excused absence for which 

the State can get credit under the TANF 

work participation rate. We anticipate 

that a State would give a good cause 

exception from any State work 

requirement to an individual who is 

entitled to leave under the FMLA during 

such a period of leave, but the family 

would still be included in the 

calculation of the participation rate. For 

further information regarding how to 

comply with the FMLA, we refer readers 

to the Department of Labor and the 

applicable statutes and regulations. 

Comment: Several commenters stated 

that our excused absence policy would 

‘‘reduce State credit’’ toward meeting 

the work participation rates. Another 

asserted that our policy would ‘‘not only 

hurt States’’ efforts to meet the work 

rates, but will mean that the work 

participation rates themselves give 

policymakers and the public an 

inaccurate picture of the extent to which 

recipients are actively engaged in work 

activities.’’

Response: We would like to stress 

again that allowing States to count 

excused absences in the participation 

rates does not hurt State efforts to meet 

the work participation rates or ‘‘reduce 

State credit’’; it does exactly the 

opposite. This is a policy of expanded 

credit, where prior rules did not count 

excused absences. We appreciate that 

some readers think we should have 

expanded credit even further, but we 

crafted an excused absence policy we 

think is reasonable and derived from 

common employment practices. 

Comment: Many commenters 

recommended changing the standard 

from a daily one to an hourly one. They 

argued that this would more closely 

approximate typical employment 

policies where those who miss work 

typically take off some number of hours 

rather than a full day. They thought that 

a policy of daily excused absences 

would reduce incentives for individuals 

to participate in work activities before 

or after required appointments because 

such participation would not affect their 

countable hours of participation. Most 

commenters recommended converting 

our 10-day excused absence policy for 

purposes of the participation rate to 80 

hours of excused absences in any 12- 

month period, no more than 16 of which 

they could use in a month. One 

commenter emphasized that a day 

should be ‘‘fixed at 8 hours, regardless 

of the number of hours a participant is 

required to participate.’’ Otherwise, a 

single day’s absence could consume 

more than one day’s worth of excused 

absences. 

Response: We agree that excusing 

hours rather than days gives greater 

flexibility and more closely 

approximates a work experience. As we 

noted above, we considered several 

approaches for converting days to hours. 

The final rule permits up to 80 hours of 

excused absences for a work-eligible 

individual in a 12-month period, no 

more than 16 of which may be reported 

in a month. 

Comment: Some commenters objected 

to the two-day per month limit on 

counting excused absences. One 

commenter argued that this did not 

reflect employment practices in the real 

world and that States should be allowed 

to count individuals for as many 

excused absences as needed in a given 

month, up to the total allowed for the 

year. 

Response: We realize that some 

employers may permit employees to 

take more than two excused absence 

days (or the hourly equivalent) per 

month. However, most employers also 

require employees to accrue these days 

(or hours). It may take a full year for an 

employee to earn the equivalent of 10 

days of leave, so, as a practical matter, 

the amount of leave many new 

employees are entitled to is restricted as 

well. More important, however, is that 

this policy applies only to what States 

can count, not to what they can allow 

for individual participants as a matter of 

policy. Also, since most TANF 

recipients face participation 

requirements of either 20 or 30 hours 

per week, there is room to make up the 

missed hours, which would not be so 

easy for someone working full-time. 

Comment: Several commenters 

suggested that we extend the excused 

absence policy to individuals 

participating in paid as well as unpaid 

activities. They noted that many lowincome workers do not receive paid 

leave for holidays or other absences. In 

addition, they argued that this holds 

many of those who are working to a 

higher standard than those in unpaid 

activities. 

Response: We considered extending 

the excused absence policy to give 

States credit for individuals in paid 

employment, but ultimately decided to 

retain the policy in our interim final 

rule. As a practical matter, the State 

would already be getting credit for the 

client’s hours of work, including 

excused absences, whether paid or not, 

because a State can project the hours of 

participation for individuals in paid 

employment for up to six months (based 

on documented, actual hours). 

Comment: One commenter asked for 

clarification regarding the activity under 

which it should count excused absences 

it grants to allow an individual to search 

for a job. The commenter asked whether 

such an excused absence should count 

as job search and job readiness 

assistance or as part of the activity from 

which the individual was excused. 

Response: States should report hours 

of excused absences as hours of 

participation in the activity from which 

the individual was excused. For 

example, if an individual were 

participating in a community service 

program but needed to be excused for 

two hours to go to a job interview, the 

State should report those excused hours 

as hours of community service, not as 

hours of job search and job readiness 

assistance. 

Comment: Several commenters 

expressed concern over the fact that 

some excused absences may not be 

verified until after the State submits its 

participation data. They recommended 

allowing States to correct attendance 

records retroactively to reflect excused 

absences up until the date on which the 

data report becomes final. 

Response: Because a State is not liable 

for a reporting penalty until the end of 

the quarter after the end of a fiscal year, 

a State has until December 31 to submit 

its final data for the previous fiscal year. 

Projecting Hours of Employment 

Comment: One commenter 

recommended allowing States to project 

hours in certain non-employment 

activities for up to three months ‘‘based 

on a history of successful participation.’’

The commenter stated that this would 

reduce stigma and the burden of 

attendance sheets. 

Response: We have allowed projected 

reporting of actual hours of 

participation in paid work activities 

because an employer has both a fiscal 

interest and a stewardship 

responsibility to ensure that employees 

work for the hours of pay. A similar 

situation does not exist in the other 


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activities; therefore, we have not 

adopted this suggestion. 

Self-Employment Hours 

Comment: Several commenters 

proposed allowing States to project 

employment hours for up to six months 

for individuals who are self-employed. 

They argued that these approaches 

recognize the inherent challenges of 

verifying the hours of self-employment. 

Response: The option to project hours 

of participation for a maximum of six 

months does apply to self-employment. 

Self-employment is a form of 

unsubsidized employment and therefore 

may be projected for up to six months 

based on prior, documented hours of 

actual employment. 

Comment: Some commenters 

expressed concern because the 

regulations limit the hours a State can 

count for self-employed recipients to the 

number derived by dividing the 

individual’s self-employment income 

(gross income less business expenses) 

by the Federal minimum wage. They 

explained that some types of selfemployment take time before income is 

generated. Another commenter noted 

that some types of self-employment are 

affected by seasonal factors, so that 

income is only generated in some 

months, even though the work is 

ongoing. They recommended various 

approaches that would take into account 

hours needed to prepare for 

employment and sporadic work 

schedules, including criteria based on 

self-attestation, earnings, and 

preparation time. 

Response: We think the best approach 

for calculating hours of self-employment 

is to rely on the net income (gross 

income minus business expenses) of the 

individual. We adopted this method 

because States already calculate net 

income when determining the eligibility 

of the self-employed for TANF benefits 

and thus our approach minimizes the 

administrative burden on States. We do 

not believe it is necessary to modify the 

rule to address these suggestions. The 

regulation allows a State to ‘‘propose an 

alternative method of determining selfemployment in its Work Verification 

Plan.’’ This description should indicate 

how the State plans to monitor and 

supervise this activity to ensure that it 

reports actual hours and that the selfemployment progresses to the point 

where the individual can effectively 

earn more than the minimum wage. We 

will not approve alternative plans that 

provide for an individual’s selfreporting of participation without 

additional verification. We believe the 

rule’s provision for approximating hours 

using the Federal minimum wage is a 

reasonable approach and minimizes 

administrative burdens. 

Comment: One commenter suggested 

that the calculation of hours for selfemployment be based on the higher of 

the applicable Federal or State 

minimum wage. 

Response: The final rule retains the 

calculation based on the Federal 

minimum wage. We consciously chose 

the Federal minimum wage because it 

allows States with higher State 

minimum wages to count more hours of 

employment than if the calculation were 

based on the higher of the two. This also 

provides consistency in the treatment of 

self-employment hours across States. 

Homework Time 

Comment: Several commenters 

suggested that limiting homework or 

study time to supervised settings does 

not reflect the way educational 

programs work. They noted that most 

adult education and training programs 

require significant out-of-class 

homework and study time, but, unlike 

secondary school where supervised 

‘‘study halls’’ are common, many 

postsecondary programs do not have 

supervised study settings. They 

explained that students who do not 

finish their homework cannot make 

satisfactory progress and successfully 

complete their courses of study; thus, 

they maintained, a supervised 

homework policy is not necessary. In 

addition, they thought that requiring 

formal study periods creates 

administrative burdens on educational 

institutions and increases program costs 

related to providing supervision and 

child care for parents who must stay 

longer in study sessions rather than 

completing the work at home. Finally, 

commenters contended that singling 

TANF recipients out for special study 

sessions might increase stigma by 

identifying them as welfare recipients. 

Some commenters did not like the 

implication of the preamble language, 

saying that it suggested that TANF 

participants in educational activities 

cannot be trusted to complete 

homework assignments and to study the 

material as needed to succeed in the 

training or educational program. 

Several commenters emphasized the 

administrative value of having an easy 

way to determine the number of hours 

of participation that can count for 

homework. They noted that most 

educational programs have a ‘‘rule of 

thumb’’ for the number of homework 

hours associated with each class hour 

and suggested that State education 

agencies can assist TANF programs in 

assessing the appropriate number of 

homework or study hours. Commenters 

proposed a wide range of ratios of class 

time to homework time, generally 

ranging from a half hour to two hours 

of homework time for every hour of 

class time. 

Some commenters expressed concern 

that the daily supervision requirement 

for unpaid work activities would mean 

that program administrators or some 

other responsible third-party would 

have to monitor homework on a daily 

basis. 

Response: We agree with many of 

these comments. In § 261.60(e) of the 

final rule, we have expanded State 

flexibility in counting homework time. 

The rule now permits a State to count 

supervised homework time and up to 

one hour of unsupervised homework 

time for each hour of class time. Total 

homework time counted for 

participation cannot exceed the hours 

required or advised by a particular 

educational program. It was never our 

intent in the interim final rule to have 

an individual participate in more hours 

of supervised homework than the 

program actually requires, but the rule 

was not explicit on this point. Where 

the State opts to count homework time, 

it must document what the homework 

or study expectations of the program are 

to ensure it does not exceed those hours. 

Section 261.61 How must a State 

document a work-eligible individual’s 

hours of participation? 

This section of the interim final rule 

described the documentation standards 

that a State must meet for its work 

participation data. In particular, it 

included an explicit requirement that a 

State verify through documentation in 

the case file all hours of participation 

that it reports. It also specified the types 

of documentation we expected a State to 

require for each activity. The preamble 

to the interim final rule stated that a 

State may not report data to us on the 

basis of ‘‘exception reporting’’ where it 

assumes that clients participate in all 

scheduled hours unless it receives a 

report to the contrary from a service 

provider. 

The interim final rule also permitted 

States to report projected actual hours of 

unsubsidized or subsidized employment 

or OJT for up to six months at a time 

on the basis of prior, documented actual 

hours of work. Although this section did 

not address the frequency of 

documentation for other activities, the 

preamble to § 261.62 of this subpart 

explained that we expected a State’s 

Work Verification Plan to describe the 

documentation it uses to monitor 

participation and ensure that it reports 

actual hours of participation. We 

explained that we were establishing a 


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range of documentation guidelines that 

vary by type of activity. We expected job 

search and job readiness assistance to be 

documented daily and other unpaid 

work activities to be documented no 

less than every two weeks. 

In the final rule we have reiterated 

our position that all hours of 

participation must be reported 

affirmatively and supported by 

documentation in the case file, but we 

no longer require daily documentation 

of job search and job readiness 

assistance or biweekly documentation of 

other unpaid work activities. All paid 

activities must include written 

documentation of hours of employment. 

Wage stubs and other employerproduced documents are the best 

sources of verifiable documentation of 

paid hours. All unpaid activities should 

rely on written, signed documents to 

support hours of participation. 

Generally, documents verifying actual 

hours of participation should include: 

the participant’s name; actual hours of 

participation; the name of the work site 

supervisor, educational provider, or 

other service provider; and the name 

and phone number of the person 

verifying hours. 

We also moved the provision 

permitting projection of hours that was 

formerly at § 261.61(c) to § 261.60(c) 

because it fit better under the rubric of 

reporting hours than it did under 

documenting hours. However, we have 

incorporated in this section a provision 

specifying the documentation standards 

when a State projects hours of 

employment. We have also explained 

that the documentation for homework 

must include a statement about the 

amount of homework or study time 

advised by the particular educational 

program. Finally, we reorganized the 

section for clarity. 

Documenting All Hours of Participation 

Comment: Several commenters 

objected to the interim final rule’s 

prohibition on the use of ‘‘exception 

reporting.’’ They explained that this is 

not the same as reporting scheduled 

hours and noted that many States have 

contracts with providers that include 

exception reporting and that such 

reporting ‘‘reduces the administrative 

burden of reporting while maintaining 

accountability.’’

Response: We continue to believe that 

a State should affirmatively determine 

that an individual participates in an 

activity in order to count such 

participation toward the work 

participation rates. Exception reporting 

systems may operate effectively in 

automated or well-documented 

reporting situations; however, we 

prohibited their use on the basis of 

concerns raised by single audits. 

Without an adequate system of 

recordkeeping or documentation, it is 

impossible to determine whether reports 

are appropriately filed when a client 

fails to show up or meet the day’s 

participation requirements. 

Documenting Paid Employment 

Comment: Most commenters 

supported the interim final rule’s 

provision allowing States to project 

actual hours of employment for up to 

six months based on current, 

documented actual hours of 

unsubsidized employment, subsidized 

employment, and OJT. Most 

commenters appreciated that this 

significantly reduced the burden on 

employers and recipients and was less 

stigmatizing for recipients. One 

commenter noted that the description of 

this provision at § 261.61(b) seemed to 

limit this policy to ‘‘unsubsidized 

employment,’’ rather than all forms of 

paid employment. 

Response: We have retained this 

provision in the final rule and clarified 

that the documentation requirements 

described apply to all forms of paid 

employment, whether unsubsidized or 

not. 

Documenting Unpaid Activities 

Comment: Some commenters said that 

the rules impose rigid monitoring and 

burdensome reporting requirements for 

individuals in unpaid activities. One 

commenter asserted, ‘‘Frequent 

demands for proof of participation 

subject families to loss of assistance.’’

Another commenter explained, ‘‘The 

goal of these requirements is to ensure 

that the data reported about work 

participation is accurate, not to create 

administrative burdens on recipients 

that create barriers to participation and 

aid receipt for families.’’

Response: We believe the final rule 

provides a reasonable balance between 

the need for accurate information and 

the burden inherent in documenting 

hours of participation. For example, 

under the final rule, we allow States to 

count an hour of unsupervised 

homework time for each hour of class 

time, thereby reducing the reporting and 

monitoring requirements for those 

individuals in various educational 

activities. Moreover, while the rule does 

require States to document participation 

through methods beyond client selfreporting, these have been requirements 

all along. We appreciate that such 

procedures may pose challenges in 

some situations, but they serve to 

substantiate actual hours of 

participation and protect the State in the 

event of an audit. 

Comment: Many commenters opposed 

the daily and two-week documentation 

requirements. They noted that the 

statute requires States to report 

information on a monthly basis and 

recommended that documentation 

requirements conform to the same 

monthly time frame. They suggested 

that the standards of documenting 

participation ‘‘daily’’ and ‘‘every two 

weeks’’ in the interim final rule were 

‘‘too prescriptive and will be onerous 

for activity providers and local TANF 

program administrators.’’ They 

observed, ‘‘Increasing reporting 

requirements will force providers to 

dedicate additional resources to data 

tracking, often at the risk of depleting 

resources from another program 

function such as case management. The 

more time staff must spend compiling 

data, the less time they have to assist 

clients.’’ In addition, several 

commenters asked for clarification 

regarding the specifics of what must be 

in the case file, including whether each 

file must include a hard copy of all 

individual attendance records. The 

commenters recommended allowing 

States to ‘‘create a central or electronic 

file that would meet the purpose of 

documenting attendance.’’

Response: We agree with the 

commenters and have changed our 

policy accordingly. The documentation 

must be available in the case file to 

support all the actual hours of 

participation it claims in the monthly 

work participation data it reports. A 

State should describe in its Work 

Verification Plan the documentation it 

uses to monitor participation and ensure 

that it reports actual hours of 

participation. This may include 

electronic records. 

Comment: One commenter asked us 

to ‘‘clarify that, while job search and job 

readiness participation must be 

supervised and recorded daily, the 

documentation of participation does not 

need to be submitted to the State agency 

more frequently than monthly.’’

Response: We agree with this 

comment. While supervision of 

participation must occur on a daily 

basis, States report monthly 

participation data for job search and job 

readiness assistance with all other 

participation data and the 

documentation in the case file must 

support what the State reports. 

Comment: Several commenters asked 

us to clarify the types of documentation 

needed to substantiate homework time. 

Response: The final rule allows a 

State to count up to one hour of 

unsupervised homework for each hour 


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of class time, if the educational program 

calls for such homework time. The only 

documentation that is required for 

unsupervised homework time is a 

statement from the educational program 

indicating the amount of homework 

required. For supervised homework, we 

require this same documentation along 

with a time sheet or record of 

attendance signed by the individual 

supervising the activity. 

Comment: One commenter urged us 

to use the same verification standards 

for self-employment as we allow for 

other forms of employment. Another 

commenter noted that States have 

developed a variety of mechanisms for 

monitoring self-employment and that 

‘‘all or nearly all of these mechanisms 

rely on various types of self-reporting by 

the participant.’’ The commenter 

asserted that ‘‘the issue is not selfreporting, but rather the type of selfreporting documentation and level of 

detailed required,’’ expressing concern 

that additional verification requirements 

would impose a significant 

administrative burden on States. 

Response: We believe a different 

standard is warranted because selfemployment is not analogous to other 

forms of employment. With selfemployment, there is no pay stub, no 

supervisor, and no employer whose 

interests are distinct from the employee. 

It is because self-employment differs so 

dramatically from other forms of 

employment that we required States to 

explain in their Work Verification Plans 

how they will document hours of work 

and preclude the use of self-reporting. 

Section 261.62 What must a State do 

to verify the accuracy of its work 

participation information? 

The interim final rule described the 

requirements for a Work Verification 

Plan. Although some commenters 

expressed concern about the burden 

associated with meeting these 

requirements and the timeframe for 

doing so, we did not change the final 

rule. We explained that States should 

already have verification, 

documentation, and internal control 

procedures in place to support the work 

participation data they report and that 

the new requirements should not pose 

a significant administrative burden. 

Comment: We received several 

comments concerning the burden the 

Work Verification Plan and the 

underlying documentation and 

verification requirements placed on 

States. 

Response: States should already have 

verification, documentation, and 

internal control procedures in place to 

support the work participation data they 

report. The Work Verification Plan 

requirements reflect the Congressional 

mandate in the DRA that States report 

to us in a Work Verification Plan what 

those procedures are. This should not 

represent an undue burden for States. 

Comment: One commenter 

recommended that we avoid recreating 

a quality control system as we ensure 

State compliance with the work 

verification requirements of the DRA. 

The commenter expressed concern that 

such a system could focus State efforts 

more on reducing documentation errors 

than on helping recipients enter the 

workforce. 

Response: One goal of TANF is to 

enable recipients to prepare for and 

enter employment leading to selfsufficiency. Documentation and 

verification requirements should never 

detract from that goal. However, 

accurate documentation is key to 

determining whether States are meeting 

this goal. We think we have structured 

a rule that minimizes the burden of 

documentation while meeting our 

responsibility to be good stewards of 

Federal funds and programs. 

Comment: One commenter urged us 

to correct regulatory language that 

requires States to describe how they 

determine the number of countable 

hours of self-employment under each 

countable work activity. The commenter 

noted that this appeared to be a drafting 

error, since self-employment cannot 

count under all the activities. 

Response: The commenter is correct 

and we have modified the rule 

accordingly. States must only describe 

how they determine self-employment 

hours under unsubsidized employment. 

Nevertheless, the Work Verification 

Plan must describe how the State 

determines countable hours for each 

activity. 

Comment: One commenter noted 

there was ‘‘Insufficient time for states to 

retool and meet new requirements by 

October 1, 2006. New documentation, 

monitoring, and reporting requirements 

place heavy burdens on caseworkers, 

providers, and our state’s computer 

tracking system. States were informed of 

the interim rules and new requirements 

on June 29, 2006.’’

Response: For many States, the Work 

Verification Plan that was due on 

October 1, 2006, was a description of 

longstanding documentation, 

verification, and internal control 

systems and did not require new 

procedures. We do not have the 

authority to modify the statutory 

deadline for States to submit the Work 

Verification Plan; however, we have 

delayed imposition of a penalty for 

failure to maintain adequate 

documentation, verification, or internal 

controls until FY 2008. 

Comment: Several commenters 

suggested that States use information 

contained in the National Directory of 

New Hires (NDNH) not only for the 

purpose of tracking work participation 

rates, but also for additional purposes. 

For example, one commenter suggested 

that we require States to use NDNH 

information to identify circumstances in 

which actual hours of work change. 

Another commenter recommended that 

we make each State’s NDNH match 

results available to all States for 

comparison purposes. 

Response: While we appreciate these 

recommendations, the uses of the 

NDNH are restricted by law. The law 

prohibits the use or disclosure of 

information in the NDNH, as well as 

information resulting from NDNH 

comparisons, except as expressly 

provided. The use of NDNH information 

for verification of work participation 

purposes is a permissible use, as it is a 

program responsibility of the State 

TANF agency. Matches for this purpose 

may occur only to the extent and with 

the frequency that the Secretary of HHS 

determines to be effective in assisting 

States to carry out their responsibilities 

under the TANF program. Access to 

confidential information in the NDNH is 

restricted to authorized persons and the 

use of such information is limited to 

authorized purposes. Any misuse of 

NDNH information is subject to penalty. 

Comment: One commenter questioned 

the benefit of using NDNH data to 

calculate work participation rates. The 

commenter stated that a pilot in two 

urban counties of one State indicated 

that NDNH data were not useful for the 

intended purpose, because not all 

employers provided NDNH data and the 

data pertain to new employees only, not 

ongoing employment. The commenter 

urged us to acknowledge that the NDNH 

is not a panacea. 

Response: We agree that the NDNH 

has limitations in contributing to work 

participation data, particularly because 

it does not collect the number of hours 

of employment. However, we would 

like to note that the NDNH does contain 

quarterly wage data about individuals 

engaged in ongoing employment, as 

well as information about newly hired 

employees, which the State may not be 

able to obtain as quickly and efficiently 

from any other source. The Federal 

Office of Child Support Enforcement, 

which manages the NDNH, is 

committed to working closely with State 

TANF agencies to help agencies 

understand the NDNH and how the data 

may be used for optimal results. To 

conduct a data match between its data 


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and NDNH data, for purposes of 

verifying work participation, a State 

TANF agency must enter into a written 

Memorandum of Understanding (MOU) 

with the Federal Office of Child Support 

Enforcement. The MOU addresses the 

terms and conditions governing the data 

match and the security measures 

required for safeguarding NDNH match 

results. NDNH data may only be used 

for certain narrowly defined purposes, 

including assisting States in carrying 

out their responsibility under the 

federally-funded TANF program to 

establish and maintain work 

participation procedures. NDNH data 

may not be used to determine eligibility 

in State MOE or solely State-funded 

programs. 

Section 261.63 When is the State’s 

work verification plan due? 

In accordance with the Deficit 

Reduction Act of 2005, our interim final 

rule required each State to submit an 

interim Work Verification Plan that 

included procedures for validating 

reported work activities to the Secretary 

no later than September 30, 2006. A 

State must submit revisions requested 

by the Department within 60 days of 

receipt of our request, and must submit 

and operate under an approved Work 

Verification Plan no later than 

September 30, 2007. If a State modifies 

its verification procedures for TANF or 

SSP–MOE work activities or internal 

controls for ensuring a consistent 

measurement of the work participation 

rate, then the State must submit for 

approval an amended Work Verification 

Plan by the end of the quarter in which 

the State modifies the procedures or 

internal controls. We have retained 

these provisions in the final rule. 

We received no comments on this 

section, so we have not made any 

substantive changes to the provision. 

Section 261.64 How will we determine 

whether a State’s work verification 

procedures ensure an accurate work 

participation measurement? 

The DRA added a new penalty to 

section 409(a)(15) of the Social Security 

Act for a State that fails to establish or 

maintain adequate work participation 

verification procedures. The interim 

final rule outlined the two-part penalty. 

First, a State will be liable for a penalty 

if it fails to submit an interim Work 

Verification Plan by September 30, 

2006, and a plan that we have approved 

by September 30, 2007. Second, 

effective October 1, 2007, States must 

maintain adequate internal controls and 

verification procedures to ensure that 

reported work participation data is 

accurate. 

We will use the single audit under 

OMB Circular A–133 in conjunction 

with other reviews, audits, and data to 

determine whether the State’s controls 

and procedures result in accurate data. 

A State must maintain case 

documentation and pertinent findings of 

its verification process for use by the 

single audit or other reviews. 

Readers should note that we revised 

the title of this section and of § 261.65 

of this part to be more concise. 

Comment: We received a couple of 

comments that expressed concern over 

the burden imposed by maintaining case 

file documentation and findings until a 

single audit is resolved. 

Response: The DRA and our interim 

final rule did not change the record 

retention and record access rules that 

apply to TANF. These separate rules are 

in 45 CFR 92.42. These requirements 

apply to all financial and programmatic 

records, supporting documents, 

statistical records, and other records of 

grantees or sub-grantees. Records must 

be retained for three years, or longer, if 

any litigation, claim, negotiation, audit, 

or other action involving the records has 

been started before the expiration of the 

three-year period. If extended, records 

must be retained until all issues have 

been resolved. We issued Program 

Instruction TANF–ACF–PI–2003–1, 

dated January 28, 2003, to clarify the 

start date of the three-year record 

retention period for Federal TANF 

funds and State MOE expenditures. For 

Federal TANF awards, the record 

retention period starts on the day the 

grantee submits its final expenditure 

report showing that all the funds 

awarded in the particular Federal fiscal 

year have been expended. For State 

MOE expenditures, the record retention 

period starts on the day the State 

submits its final expenditure report for 

a Federal fiscal year. 

Comment: One commenter asked 

whether HHS or the single audits will 

use a threshold or a specified percentage 

to determine whether the State had 

inadequate controls and procedures for 

accurate work participation data. 

Response: As under the original rule, 

we will not impose a penalty based on 

isolated failures to document and verify 

work participation information reported 

to HHS. We will impose a penalty if the 

audit or review identifies a systemic 

problem or weakness. To ensure that 

our conclusion is not based on incorrect 

information, it is critically important for 

States to dispute ‘‘questioned’’ audit 

findings and refute the allegation with 

appropriate documentation. States also 

have the opportunity to dispute our 

penalty finding, to claim reasonable 

cause, and to submit a corrective 

compliance plan to correct the 

deficiency. 

Comment: One commenter expressed 

concern that a State that submits 

participation data for the universe of 

cases would be at a disadvantage in an 

audit or review compared to a State that 

submits sample data. The commenter 

suggested that ‘‘States reporting on all 

participants be allowed to pull their 

own samples for audit based on general 

ACF guidelines.’’

Response: Auditors must follow 

prescribed procedures for conducting 

audits regardless of whether the State 

submits universe or sample data. They 

use the sample standards of the 

American Institute of Certified Public 

Accountants (AICPA) and the GAO 

auditing standards. In addition, we 

provide them with a compliance 

supplement to guide their review of our 

programs. 

Section 261.65 Under what 

circumstances will we impose a work 

verification penalty? 

Under our interim final rule, the 

penalty amount is based on the State’s 

degree of noncompliance and is equal to 

an amount of not less than one percent 

and not more than five percent of the 

State’s adjusted SFAG. We will impose 

the maximum penalty of five percent if 

a State fails to submit its interim Work 

Verification Plan by the due date of 

September 30, 2006, or if it fails to 

revise its procedures based on Federal 

guidance and submit the complete plan 

by September 30, 2007. This is because 

the State will not have complied with 

the fundamental requirement to 

establish a Work Verification Plan. But, 

States must also implement the 

procedures. If we determine that a State 

fails to maintain adequate 

documentation, verification, and 

internal control procedures, we will 

impose a penalty based on the number 

of years of noncompliance, i.e., one 

percent of the adjusted SFAG for the 

first year, two percent for the second 

year, three percent for the third year 

until a maximum of five percent is 

reached. If, after any failure, a State 

demonstrates effective work verification 

procedures for two consecutive years, 

then we will consider any future failure 

to be the first occurrence. 

Readers should note that we revised 

the title of this section and of § 261.64 

of this part to be more concise. 

We only received a few comments on 

this section of the interim final rule. The 

comments mainly concerned the 

distinction between this penalty and the 

penalty for failing the work 

participation rate(s) and the criteria that 

a State must meet to comply with the 


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work verification requirements for any 

given year. 

Comment: One commenter asked 

whether the work verification penalty 

applies if a State operates its work 

participation verification system poorly. 

Response: If we determine that any of 

the State’s procedures is inadequate, a 

penalty could result. Once a State has 

an approved Work Verification Plan, the 

penalty is based on whether the internal 

controls and verification procedures 

ensure consistent and accurate work 

participation rates. A State’s system of 

internal controls and verification 

procedures includes a whole array of 

activities, such as: ensuring that it 

counts only work activities that are 

consistent with the Federal definitions; 

verifying and monitoring actual hours of 

participation; identifying work-eligible 

individuals; and validating the accuracy 

of the data reported. All of these factors 

contribute to an effective internal 

control system. 

Comment: Some commenters asked us 

to clarify the distinction between the 

penalty for failure to meet the work 

participation rate and the work 

verification penalty. 

Response: These are two completely 

separate penalties established by the 

statute. A State could meet its required 

work participation rates and still risk 

imposition of the work verification 

penalty as a result of inadequate work 

verification procedures and/or internal 

control procedures. Similarly, a State 

could fail a work participation rate but 

meet the work verification 

requirements. We expect States to 

review and monitor their processes and 

procedures regularly to ensure the 

accuracy of the data used in calculating 

the work participation rates. 

Comment: Several commenters asked 

about the criteria that a State must meet 

to be found in compliance with the 

work verification requirements for any 

given year. For example, one commenter 

inquired whether a State must be errorfree or, alternatively, required to stay 

below a specific threshold. The 

commenter also asked whether a State 

that responded to errors appropriately 

and timely in an agreed-upon manner 

would be considered to be in 

compliance. 

Response: States must maintain 

adequate documentation, verification, 

and internal control procedures to 

ensure the accuracy of the data used in 

calculating the work participation rates. 

We will determine through audits or 

other reviews whether the State has 

adequate controls. Our penalty 

determinations will be made only after 

fully considering the auditor’s findings, 

the State’s reply, if any, to the auditor’s 

findings, and any other reports, audits, 

and data sources, as appropriate. We 

will also consider the controls the State 

has in place and actions the State takes 

to review and to address any problems 

so that the State’s work verification 

procedures and internal controls are 

working properly. We will not impose a 

penalty based on non-systemic errors. 

Comment: Some commenters 

suggested alternative penalty structures, 

finding the structure in the interim final 

rule to be too severe. For example, one 

commenter suggested that ‘‘ACF apply a 

2nd or subsequent year penalty only for 

the repetition of an error penalized in 

the 1st year. In other words, if ACF 

determined that a state’s internal control 

procedures were inadequate and 

imposed a 1% penalty in the 1st year, 

and then found that the state did not 

maintain adequate documentation in the 

2nd year, the 2nd year penalty would 

again be 1% since it involved a separate 

error. Any penalty should be lifted after 

the state has complied with the work 

verification procedures for one full year, 

not two.’’

Response: While we understand the 

commenter’s concern, the work 

verification requirements were imposed 

by Congress to ensure that States 

implement procedures to ensure 

accurate and consistent work 

participation data. We also note that the 

requirement to document and verify 

work participation information is not 

new. States were always required to 

comport with the accurate and complete 

data standard at § 265.7 under the 

existing regulations. Our penalty 

structure represents a reasonable, 

graduated approach, increasing only by 

the number of years of failure (degree of 

noncompliance). We do not believe it 

would be appropriate to treat a 

subsequent year of failure for another 

reason as if the prior failure had not 

occurred. Therefore, we have not 

accepted this recommendation. 

V. Part 262—Accountability 

Provisions—General 

The DRA added an additional penalty 

at section 409(a)(15) of the Social 

Security Act for States that fail to 

establish or comply with work 

participation verification procedures. 

The interim final rule clarified that if a 

State failed to comply, we would reduce 

the adjusted SFAG payable for the 

immediately succeeding fiscal year by 

not less than one percent and not more 

than five percent. A State that fails to 

meet the work verification requirements 

may claim reasonable cause or submit a 

corrective compliance plan under the 

procedures described in §§ 262.4–262.7 

of this chapter. If we impose the 

penalty, we will reduce the SFAG 

payable for the immediately succeeding 

fiscal year. 

Section 262.1 What penalties apply to 

States? 

We received no comments on this 

section, so we have made no changes to 

the provision. 

Section 262.2 When do the TANF 

penalty provisions apply? 

The penalty for failing to establish 

and submit a Work Verification Plan 

takes effect on October 1, 2006. The 

penalty for failing the ongoing 

requirement to maintain adequate work 

verification procedures takes effect on 

October 1, 2007. 

Comment: Several commenters noted 

that many States will not have time to 

legislate the changes needed to comply 

with the new rules by October 1, 2006, 

and urged ACF to withhold penalties 

until States have a reasonable amount of 

time to pass legislation. For example, 

one commenter noted that, in order for 

the State to comply fully with the 

requirements may take both legislative 

and automation changes. Since that 

State’s legislature does not meet until 

January 2007, the commenter 

encouraged ACF to take these factors 

into consideration. 

Response: We are sensitive to the fact 

that some States must make both 

legislative and automation changes to 

implement the new DRA requirements. 

There are several recourses available to 

States to avoid or mitigate financial 

penalties. Under this rule, we have 

delayed the imposition of a penalty for 

inadequate work verification procedures 

until FY 2008 as one way to address this 

concern. Under prior, continuing law 

and regulations, there are a number of 

remedies available to a State that is 

potentially liable for a penalty. If we 

issue a penalty notice to a State, the 

State may submit a reasonable cause 

argument outlining the specific 

legislative provisions that it needed and 

the impact of the delay in getting such 

provisions through the legislative 

process. We will consider granting a 

reasonable cause exception if a State can 

demonstrate that it was impossible to 

meet the requirements absent such 

legislation. Also, the State may submit 

a corrective compliance plan to meet the 

requirements at a future time. This will 

allow States additional implementation 

time. We look forward to working 

cooperatively with States to help them 

operate effective programs, ensuring 

that they can submit timely, accurate 

data and avoid financial penalties. 


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Section 262.3 How will we determine if 

a State is subject to a penalty? 

In the interim final rule, we explained 

that we would use the single audit 

under OMB Circular A–133 in 

conjunction with other reviews, audits, 

and data sources to assess whether the 

State maintained adequate controls and 

procedures to ensure accurate data are 

reported to calculate work participation 

rates. 

We received no comments on this 

section, so we have made no changes to 

the provision. 

Section 262.6 What happens if a State 

does not demonstrate reasonable cause? 

Comment: A significant number of 

commenters proposed that we grant 

reasonable cause exemptions to States 

that have not completed a legislative 

session since the publication of the 

interim final TANF regulations on June 

29, 2006, both for failure to meet the 

work participation rates and failure to 

maintain adequate work verification 

procedures. One commenter contended 

that elements of the Work Verification 

Plan will require more staff, resources, 

and additional system support than are 

currently funded within the State’s 

existing budget. Others suggested that 

the rule should provide ‘‘phase-in time’’

to comply with the new requirements or 

to respond to delays in adjusting the 

participation requirements or adding 

parents to the requirements. 

Response: We do not have the 

authority to adjust or modify the 

statutory participation requirements or 

rates. While we recognize that this rule 

may impose new requirements on 

States, few of them require actual 

legislative action. With respect to work 

verification requirements, our rule 

permits the Work Verification Plan to be 

phased-in over time and to be revised in 

future months. But, to give meaning to 

the participation rate requirements, the 

State must have adequate procedures 

and internal controls in place by 

October 1, 2007. The State may amend 

its Work Verification Plan at any time 

during the course of the fiscal year in 

accordance with § 261.63(c) of this 

chapter. While we have not created an 

automatic reasonable cause exemption, 

any State that fails the work 

participation requirements or work 

verification requirements may avail 

itself of the penalty resolution process 

described in §§ 262.4–262.7 of this 

chapter. This allows a State to outline 

the basis of its request for a reasonable 

cause exception for failing to meet a 

requirement, including the argument 

that lack of timely State legislation 

caused it to fail to meet the requirement. 

VI. Part 263—Expenditures of State and 

Federal TANF Funds 

Subpart A—What Rules Apply to a 

State’s Maintenance of Effort? 

Section 263.2 What kinds of State 

expenditures count toward meeting a 

State’s basic MOE expenditure 

requirement? 

The Deficit Reduction Act of 2005 

retained the same MOE spending levels 

required in PRWORA; however, it also 

added a new provision, ‘‘Counting of 

Spending on Certain Pro-Family 

Activities’’ at section 409(a)(7)(B)(I)(V) 

of the Social Security Act. We included 

this provision in § 263.2(a)(4) of the 

interim final rule to allow States to 

count non-assistance expenditures on 

pro-family activities if the expenditure 

is reasonably calculated to prevent and 

reduce the incidence of out-of-wedlock 

pregnancies (TANF purpose three), or to 

encourage the formation and 

maintenance of two-parent families 

(TANF purpose four). Under this 

provision, non-assistance, pro-family 

expenditures for benefits and services 

were not limited to ‘‘eligible’’ families 

(as defined in § 263.2(b)), which under 

prior rules, was a limitation on all MOE 

spending. Instead, States could claim 

qualified pro-family expenditures for 

non-assistance benefits and services 

provided to or on behalf of an 

individual or family, regardless of 

financial need or family composition. 

In developing the final rule, based on 

comments we received, we reconsidered 

the scope of the pro-family claiming 

provision. We have concluded that 

‘‘Counting of Spending on Certain ProFamily Activities’’ within TANF 

purposes three or four means counting 

of non-assistance expenditures on only 

the activities enumerated in the healthy 

marriage promotion and responsible 

fatherhood section of the DRA (sections 

403(a)(2)(A)(iii) and 403(a)(2)(C)(ii) of 

the Act)—unless a limitation, restriction 

or prohibition under this subpart 

applies. For other allowable 

expenditures within TANF purposes 

three or four, States may only claim 

toward their MOE requirement the 

portion expended for or on behalf of 

eligible families. We have amended the 

pro-family claiming provision at 

§ 263.2(a)(4) to specify which nonassistance, pro-family expenditures 

within TANF purposes 3 or 4 are not 

limited to eligible families. 

With the exception of the pro-family 

claiming provision discussed above, 

States must continue to limit the 

provision of all other MOE-funded 

assistance and non-assistance benefits to 

eligible families as defined at § 263.2(b), 

regardless of the TANF purpose. We 

remind readers that Federal TANF 

assistance is also limited to eligible 

families, regardless of the TANF 

purpose. 

Congress also created new TANF 

discretionary funding streams (Grants 

for Healthy Marriage Promotion and 

Responsible Fatherhood) in the DRA. 

These funds are in Title IV–A, sections 

403(a)(2)(A)(iii) and 403(a)(2)(C)(ii) of 

the Social Security Act. Under MOE, 

States may count qualified expenditures 

that are made as a condition of receiving 

Federal funds under Title IV–A toward 

their MOE requirement. For FY 2006, 

Healthy Marriage Promotion and 

Responsible Fatherhood grantees had to 

contribute a matching share of the total 

approved costs of a project as a 

condition of receiving any of the Federal 

discretionary funds. Thus, a State may 

count these State expenditures, when 

made on allowable activities under the 

Healthy Marriage Promotion and 

Promoting Responsible Fatherhood 

programs, toward its MOE requirement, 

unless a limitation, restriction, or 

prohibition under this subpart applies. 

This provision is outlined in § 263.2(g). 

The regulations at 45 CFR part 92 on 

matching or cost-sharing requirements 

permit States to count toward their MOE 

requirement qualified, non-Federal, 

cash or in-kind expenditures by a third 

party. For example, this may include 

Healthy Marriage and Responsible 

Fatherhood providers in a State. As set 

forth in the policy announcement, 

TANF–ACF–PA–2004–01, dated 

December 1, 2004, and repeated in the 

interim final rule at § 263.2(e), we 

require an agreement in writing between 

the State and any third party allowing 

the State to count such expenditures 

toward its MOE requirement. This 

policy was initially explained in a 

policy announcement, TANF–ACF–PA–

2004–01, dated December 1, 2004 and 

repeated the policy in the interim final 

rule at § 263.2(e). 

Comment: We received several 

comments of concurrence and 

appreciation for clarifying these 

provisions. One commenter asked us to 

clarify whether ‘‘pro-family’’

expenditures are limited to TANF 

eligible families, or whether it is broader 

and may include other low-income 

families. Other commenters wondered 

whether countable expenditures for 

activities like pre-K or after-school 

programs fall under the new pro-family 

claiming provision. 

Response: When Congress created the 

expanded pro-family spending 

provision, it limited the provision to 

‘‘certain pro-family activities.’’

Moreover, it created this new provision 


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as part of the section of the DRA titled 

‘‘Grants for Healthy Marriage Promotion 

and Responsible Fatherhood.’’ In 

reevaluating our rule to respond to these 

comments, we have concluded that this 

placement signaled Congressional intent 

that ‘‘certain’’ pro-family activities 

means the healthy marriage promotion 

and responsible fatherhood activities it 

described in this section of the DRA. 

Thus, the final rule limits pro-family 

activities for the purposes of this new 

provision to the healthy marriage 

activities listed in section 

403(a)(2)(A)(iii) of the Act and the 

responsible fatherhood activities listed 

in section 403(a)(2)(C)(ii) of the Act, 

unless a limitation, restriction, or 

prohibition under this subpart applies 

to any such activity. These are the only 

expenditures within TANF purposes 

three or four that are not limited to 

eligible families. 

We recognize that this additional 

claiming provision became effective on 

October 1, 2005 (FY 2006). We further 

recognize that, since publication of the 

interim final rule, States may have been 

claiming toward their MOE requirement 

a whole array of non-assistance 

expenditures—e.g., after-school 

programs, pre-K programs, college 

scholarship programs—as a result of this 

new provision. This is because we 

presented this new claiming provision 

in the interim final rule in a general 

way. As a result, we have advised States 

that, until we publish the final rule, 

they may draw their own reasonable 

conclusions as to the sort of pro-family 

expenditure within TANF purpose three 

or four to claim under this new 

provision. Therefore, this amended 

provision will be effective with the 

effective date of this final rule. 

In summary, with the exception of the 

pro-family, non-assistance expenditures 

described above, States may only claim 

toward their MOE requirement 

expenditures for or on behalf of eligible 

families. We remind readers that an 

eligible family is a financially needy 

family that consists of, at a minimum, 

a child living with a caretaker relative 

or consists of a pregnant woman. Please 

see § 263.2(b) for further information on 

eligible families. 

Section 263.5 When do expenditures 

in State-funded programs count? 

Due to an oversight on our part, we 

did not include this section in the 

interim final rule. It addresses the MOE 

‘‘new spending’’ limitation in section 

409(a)(7)(B)(i)(II) of the Social Security 

Act, which continues to apply. States 

may only count, for MOE purposes, 

expenditures in pre-existing State or 

local programs that exceed the amount 

expended in such programs during FY 

1995. The original TANF rule provides 

that the new spending amount is 

determined by comparing total FY 1995 

expenditures in the pre-existing 

program with total qualified 

expenditures for or on behalf of eligible 

families during the current fiscal year. 

The State may claim the excess, if any, 

toward its MOE requirement. This new 

spending limitation does not apply to 

expenditures under State or local 

programs that had been previously 

authorized and allowable under the 

State’s former title IV–A programs in 

effect as of August 21, 1996. 

Comment: A commenter noted an 

inconsistency between § 263.2 of the 

interim final regulations and this ‘‘new 

spending’’ section. One allows States to 

claim as MOE, expenditures for profamily activities, regardless of whether a 

family is financially ‘‘eligible’’ or not, 

but, the ‘‘new spending’’ test still refers 

only to ‘‘eligible’’ families. The 

commenter suggested that the new 

spending calculation needed to be 

changed to count qualified, pro-family, 

non-assistance expenditures within 

TANF purposes three or four. 

Response: We agree with the 

commenter. This was an oversight. We 

have amended the new spending 

provision at § 263.5(b). The amount of 

expenditures that may be claimed for 

MOE purposes is limited to the amount 

by which total current fiscal year 

expenditures for certain non-assistance, 

pro-family activities within TANF 

purposes three or four exceed total State 

expenditures in the program during FY 

1995. Readers should refer to the 

discussion of § 263.2 for more detail on 

counting these pro-family expenditures. 

Section 263.6 What kinds of 

expenditures do not count? 

As we stated in the preamble of the 

interim final regulations, the Deficit 

Reduction Act of 2005 did not change 

the prohibition at section 

409(a)(7)(B)(iv)(IV) of the Social 

Security Act. This provision prohibits 

States from counting expenditures made 

‘‘as a condition of receiving Federal 

funds ‘‘other than under this part’’

toward its TANF MOE requirement. 

Because paragraph (c) of our original 

rule did not accurately reflect this 

prohibition, we corrected it to say that 

the prohibition only applies to 

expenditures that a State makes as a 

condition of receiving Federal funds 

under another program that is not in 

Part IV–A of the Act. States may count 

the non-Federal share of expenditures 

on allowable activities under the 

healthy marriage promotion or 

promoting responsible fatherhood 

programs in sections 403(a)(2)(A)(iii) or 

403(a)(2)(C)(ii) of the Act, unless a 

limitation, restriction or prohibition 

under this subpart applies. 

We received no comments on this 

section; thus, it has been retained 

without change in the final rule. 

VII. Part 265—Data Collection and 

Reporting Requirements 

Section 411(a) of the Social Security 

Act imposes specific data reporting 

requirements on States to provide 

information about program effectiveness 

and to assure State accountability for 

key requirements, including work 

participation. Section 411(a)(7) permits 

the Secretary to prescribe such 

regulations as may be necessary to 

define the data elements required in the 

reports mandated by section 411(a). The 

Deficit Reduction Act of 2005 added 

these same data collection requirements 

for cases receiving assistance in separate 

State programs. 

Section 265.1 What does this part 

cover? 

We received no comments on this 

section and made no changes to it in the 

final rule. 

Section 265.2 What definitions apply 

to this part? 

We received no comments on this 

section and made no changes to it in the 

final rule. 

Section 265.3 What reports must the 

State file on a quarterly basis? 

Section 265.3(b) TANF Data Report 

We have made some changes to the 

TANF Data Report—Section one. In 

order to implement the policy on 

deeming core hours for the overall work 

participation rate and the two-parent 

work participation rate, we are adding 

two data elements to the TANF Data 

Report—Section one. The new data 

elements are: (1) ‘‘Number of Deemed 

Core Hours for the Overall Rate’’; and 

(2) ‘‘Number of Deemed Core Hours for 

the Two-Parent Rate.’’ Tennessee is the 

only State with an ongoing 1115 welfare 

reform waiver and the waiver ends on 

June 30, 2007. Thus, we are removing 

two data elements from the TANF Data 

Report—Section One that we no longer 

need. The data elements are: (1) 

‘‘Additional Work Activities Permitted 

Under Waiver Demonstration’’; and (2) 

‘‘Required Hours of Work Under Waiver 

Demonstration.’’

Comment: One commenter stated that 

we require extensive and detailed 

disaggregated data in the TANF Data 

Report—Section One, including 

individual social security numbers, and 

commented that collecting social 


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security numbers does not serve any 

useful research purpose. The 

commenter expressed concern for the 

privacy of individuals and further 

suggested that we should be collecting 

data on the well-being of children. 

Response: Collecting social security 

numbers is an existing requirement. We 

have been collecting the social security 

numbers for TANF family members 

since October 1999. This information is 

protected by the safeguards under the 

Privacy Act. The TANF recipient social 

security numbers are encrypted during 

data transmission, maintained in a 

secure location and use and access to 

them is limited. We have found them 

very useful in our research, especially as 

it relates to the use of the National 

Directory of New Hires database to 

assess the impact of welfare reform on 

TANF recipients using such measures as 

job entry, job retention, and earnings 

gain. We do not have statutory authority 

to collect additional data on the wellbeing of children; the statute limits the 

data that the Department can collect. 

Comment: One commenter requested 

that we make the new data file layouts 

and caseload reduction forms available 

as quickly as possible due to the 

reprogramming needs of our State 

reporting. The commenter further 

requested that, following the sorting of 

participation reports, we give States a 

spreadsheet showing which participants 

did not meet the participation rates so 

that they can better manage 

participation and address particular 

areas of need. 

Response: We already have made the 

data file layouts and caseload reduction 

credit forms, based on the interim final 

rule, available to the States in a timely 

manner. We will also make available to 

States any changes to these forms based 

on the final rule as quickly as possible. 

We have in the past made available and 

will continue to make available in the 

future a file showing on a case-by-case 

basis which families are counted as 

participating and which ones are not, 

upon request from a State. 

Comment: One commenter noted that 

the adult work participation activities 

fields in Section 1 of the TANF Data 

Report did not have enough significant 

digits to determine whether someone 

meets the work participation 

requirements. The commenter wrote, ‘‘If 

a person participates for 1 or 2 hours a 

month in an activity, the field for that 

activity will contain average weekly 

hours of 0. Those 1 or 2 monthly hours, 

in combination with other countable 

activities may result in successful 

participation. For example, 2 monthly 

hours in Work Experience plus 83 

monthly hours in Unsubsidized 

Employment result in 85 monthly 

hours, or 19.6 total average weekly 

hours. That rounds to 20 average weekly 

hours. That is successful participation 

for a single parent with a child less than 

age 6. This case should be in the 

numerator and denominator of the 

overall work participation rate. 

However, under current reporting 

protocol, this case is not included in the 

numerator because the sum of the 

individual activities is only 19.’’

Response: If we use more significant 

digits to collect the data, there would be 

no need to round the final result to the 

nearest whole number. The commenter 

is using the 4.33 weeks per month. The 

2 hours converts to 0.4618 hours per 

week and the 83 hours converts to 

19.1686 hours per week. If we had 

collected the data with two digits after 

the decimal place, the State would have 

reported 0.46 and 19.17 hours per week. 

The sum would be 19.63 hours per 

week, which is less than the 20 hours 

per week required. Requiring States to 

report the average hours per week of 

participation with more digits would 

increase reporting burden and not 

provide us with an additional benefit. 

Section 265.3(d) SSP–MOE Data 

Report 

We received no comments on this 

subsection of the regulation. 

Section 265.4 When are quarterly 

reports due? 

We received no comments on this 

section, so we have made no changes to 

the provision in the final rule. 

Section 265.7 How will we determine if 

the State is meeting the quarterly 

reporting requirements? 

Although the interim final rule did 

not include this section of the TANF 

regulations, we have added it to this 

final rule in order to respond to requests 

we received as part of the comment 

period to clarify the period of time 

during which States may revise work 

participation and caseload data. 

The original TANF regulations at 

§ 265.7(b) defined the ‘‘complete and 

accurate’’ standard for reporting 

disaggregated data for the TANF Data 

Report. In describing this standard in 

the preamble to that April 12, 1999 final 

rule, we recognized the necessity for 

States to revise their quarterly data 

submissions occasionally. In practice, a 

number of States submit revised data 

after each quarterly submittal up to the 

due date for the final data submittal for 

the fourth quarter data for a fiscal year, 

i.e., December 31. We have decided to 

amend these final DRA regulations to 

recognize this practice. We are taking 

this action for two reasons. First, we 

want States to provide us with complete 

and accurate data and we recognize that 

States often receive data from a variety 

of sources that require correction of 

submitted quarterly data. Second, we 

define a ‘‘work-eligible individual’’

under rule at § 261.2(n)(iii) to exclude at 

State option a recipient of Supplemental 

Security Income (SSI) or Social Security 

Disability Insurance (SSDI). States have 

informed us that the SSI/SSDI 

application approval process is lengthy. 

We have advised States that they can 

remove retroactively work-eligible 

individuals that they included in the 

quarterly data submittal for a fiscal year 

who subsequently are approved for SSI 

or SSDI, so long as the data correction 

occurs by the end of the reporting for 

the fiscal year, i.e., December 31. 

Section 265.8 Under what 

circumstances will we take action to 

impose a reporting penalty for failure to 

submit quarterly and annual reports? 

We received no comments on this 

section, so we have made no changes to 

the provision in the final rule. 

VIII. Paperwork Reduction Act of 1995 

This final rule contains information 

collection requirements that have been 

submitted to the Office of Management 

and Budget (OMB) under the Paperwork 

Reduction Act of 1995. Under this Act, 

no persons are required to respond to a 

collection of information unless it 

displays a valid OMB control number. If 

you have any comments on these 

information collection requirements, 

please submit them to OMB within 30 

days. The address is: Office of 

Management and Budget, Paperwork 

Reduction Project, 725 17th Street, NW., 

Washington, DC 20503, Attn: ACF/HHS 

Desk officer. 

This final rule incorporates our 

response to comments regarding the 

reporting burden that we received in 

response to the interim final rule and 

Paperwork Notice we published on June 

29, 2006. The rule requires States to 

submit a TANF Data Report, SSP–MOE 

Data Report, Work Verification Plan, 

and, if a State wants to request a 

caseload reduction credit, a Caseload 

Reduction Report. In addition, States 

must provide documentation in support 

of the caseload reduction credit, work 

verification, and the reasonable cause/ 

corrective compliance documentation 

processes. 

We considered comments by the 

public on these collections of 

information in: 

• Evaluating whether the collections 

are necessary for the proper 

performance of our functions, including 


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whether the information will have 

practical utility; 

• Evaluating the accuracy of our 

estimate of the burden of the collections 

of information, including the validity of 

methodology and assumptions used, 

and the frequency of collection; 

• Enhancing the quality, usefulness, 

and clarity of the information to be 

collected; and 

• Minimizing the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technology, e.g., the electronic 

submission of responses. 

We received only two comments from 

one individual specifically addressing 

the hour burden stated in the interim 

final rule. The commenter believed that 

we understated the burden associated 

with these new data reporting 

requirements, especially with respect to 

work verification requirements. In 

calculating the additional burden 

associated with the preparation and 

submission of State data verification 

procedures, we considered that States 

already had procedures in place to 

comport with the complete and accurate 

requirements under § 265.7 of the 

regulations. 

The commenter also thought that we 

were requiring an unnecessary paper 

burden when electronic reporting would 

suffice. The commenter stated that 

§ 261.61(a) of the interim final rule 

would, for example, require for 50 job 

search participants the copying and 

filing of 50 separate daily attendance 

sheets into individual case files, while 

a central or electronic file would meet 

the purpose of documenting attendance. 

We did not intend to preclude the use 

of a central or electronic file. States may 

use these kinds of files as long as they 

are available for the single audit and 

other reviews. Our burden estimates in 

the interim final rule took this into 

consideration. 

In addition to considering the 

comments, we also made some changes 

to the TANF Data Report based on the 

need to implement the deeming of core 

hours in the final rule. As discussed in 

§ 265.3, we are adding only two new 

data elements. Some burden hours will 

be required for programming of the State 

systems, but actual additional reporting 

burden hours should be minimal. In 

addition, total burden will be slightly 

offset by elimination of two data 

elements related to waivers. We 

estimate that the net additional burden 

averaged out over a period of a year will 

result in a net increase of eight hour per 

quarter per respondent for each of the 

two data reports. We show the 

adjustment in the following table. 

The estimated burden hours for these 

information collections are: 

Instrument or requirement Number of 

respondents 

Yearly 

submittals 

Average 

burden hours 

per response 

Final rule total 

annual burden 

hours 

Interim rule 

total annual 

burden hours 

Preparation and Submission of Data Verification Procedures—§§ 261.60—261.63 ............................................... 54 1 640 34,560 34,560 

Caseload Reduction Documentation Process, ACF–202— 

§§ 262.4, 262.6, & 262.7; § 261.51 .................................. 54 1 120 6,480 6,480 

Reasonable Cause/Corrective Compliance Documentation 

Process—§§ 262.4, 262.6, & 262.7; § 261.51 .................. 54 2 240 25,920 25,920 

TANF Data Report—Part 265 .............................................. 54 4 2,201 475,416 473,688 

SSP–MOE Data Report—Part 265 ...................................... 29 4 714 82,824 82,824 

Estimated total burden hours: 

625,200. 

Copies of an information collection 

may be obtained by e-mailing the ACF 

Reports Clearance Officer at 

robert.sargis@acf.hhs.gov or by writing 

to the Administration for Children and 

Families, Office of Administration, 

Office of Information Services, 370 

L’Enfant Promenade, SW., Washington, 

DC 20447, Attn: ACF Reports Clearance 

Officer. All requests should be 

identified by the title of the information 

collection. 

IX. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (5 

U.S.C. 605(b)) requires the Federal 

government to anticipate and reduce the 

impact of rules and paperwork 

requirements on small businesses and 

other small entities. Small entities are 

defined in the Act to include small 

businesses, small non-profit 

organizations, and small governmental 

entities. This rule will affect primarily 

the 50 States, the District of Columbia, 

and certain Territories. Therefore, the 

Secretary certifies that this final rule 

will not have a significant impact on 

small entities. 

X. Regulatory Impact Analysis 

Executive Order 12866 requires that 

regulations be reviewed to ensure that 

they are consistent with the priorities 

and principles set forth in the Executive 

Order. The Department has determined 

that this final rule is consistent with 

these priorities and principles. These 

regulations primarily implement 

statutory changes to TANF included in 

the Deficit Reduction Act of 2005. 

XI. Unfunded Mandates Reform Act of 

1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that a covered agency prepare a 

budgetary impact statement before 

promulgating a rule that includes any 

Federal mandate that may result in the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year. 

If an agency must prepare a budgetary 

impact statement, section 205 requires 

that it select the most cost-effective and 

least burdensome alternative that 

achieves the objectives of the rule 

consistent with the statutory 

requirements. Section 203 requires a 

plan for informing and advising any 

small government that may be 

significantly or uniquely impacted. 

The Department has determined that 

this final rule, in implementing the new 

statutory requirements, would not 

impose a mandate that will result in the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector, of more than $100 

million in any one year. The DRA 

maintains the basic funding structure 

and flexibility of the TANF program. 

For the next five years, the TANF block 

grant provides States with $16.5 billion 

in Federal funds and requires States to 

expend around $11 billion a year in 

State Maintenance of Effort (MOE) 

funds. Along with available, 

unobligated TANF balances, we believe 

States have adequate resources to 

achieve the DRA requirements. Fixed 

funding for States is based on welfare 

spending at the time of historic high 

caseloads, which have been reduced by 

half. States retain wide latitude to 

design their programs, to establish 


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eligibility criteria, benefit levels and the 

type of services and benefits to provide 

to TANF clients. 

The Department estimates that 

between FYs 2008 and 2012, States will 

incur penalties of $62 million due to 

failure to meet work requirements. Our 

estimate assumes that most States will 

meet the work participation rates 

through a renewed focus on work and 

internal control systems. We do not 

anticipate assessing penalties under 

new requirements until FY 2009. States 

may also claim reasonable cause or 

enter into a corrective compliance 

process to eliminate or reduce the 

penalty amount. We estimate issuing 

penalties amounting to $0 in FY 2008, 

$20 million in FY 2009, $19 million in 

FY 2010, $19 million in FY 2011, and 

$4 million in FY 2012. Accordingly, we 

have not prepared a budgetary impact 

statement or prepared a plan for 

informing impacted small governments. 

XII. Congressional Review 

This regulation is not a major rule as 

defined in 5 U.S.C. Chapter 8. 

XIII. Assessment of Federal Regulations 

and Policies on Families 

Section 654 of the Treasury and 

General Government Appropriations 

Act of 1999 requires Federal agencies to 

determine whether a proposed policy or 

regulation may negatively affect family 

well being. The Department has 

conducted this assessment and 

concluded that these final rules will not 

have a negative impact on family well 

being. This final rule promotes activities 

leading to work and self-sufficiency for 

low-income families and will thus have 

a positive impact on family well being. 

XIV. Executive Order 13132 

Executive Order 13132, Federalism, 

requires that Federal agencies consult 

with State and local government 

officials in the development of 

regulatory policies with federalism 

implications. Consistent with Executive 

Order 13132, we specifically solicited 

comment from State and local 

government officials in the interim final 

rule. In addition, in concert with the 

National Governors Association (NGA), 

the American Public Human Services 

Association (APHSA), the National 

Conference of State Legislators (NCSL), 

and the National Association of 

Counties (NACo), we held five 

‘‘listening sessions’’ across the country 

to which State and local executive and 

legislative officials were invited. During 

the ‘‘listening sessions,’’ ACF outlined 

the statutory and regulatory provisions 

associated with the DRA and offered the 

opportunity for attendees to ask 

questions and to submit comments 

which were recorded and considered in 

the final rule. 

We seriously considered all 

comments in developing the final rule. 

We considered and carefully assessed 

each of the options and suggestions of 

commenters. In the end, we adopted 

those suggestions that we believe 

promote effective programs leading to 

self-sufficiency, while also reducing 

inconsistency in work measures. At the 

same time, the policies reflected in the 

final rule provide enough flexibility to 

States to address the varying needs and 

characteristics of TANF clients, 

including those with disabilities. To 

count and verify allowable work 

activities, States are offered guidelines 

that permit different types of 

documentation based on the type of 

work activity. 

List of Subjects in 45 CFR Parts 261, 

262, 263, and 265 

Administrative practice and 

procedure, Day care, Employment, 

Grant programs—social programs, Loan 

programs—social programs, Penalties, 

Public assistance programs, Reporting 

and recordkeeping requirements, 

Vocational education. 

Dated: January 29, 2008. 

Daniel C. Schneider, 

Acting Assistant Secretary for Children and 

Families. 

Approved: January 29, 2008. 

Michael O. Leavitt, 

Secretary of Health and Human Services. 

■ For the reasons stated in the preamble, 

the interim final rule amending 45 CFR 

chapter II published on June 29, 2006, 

(71 FR 37454) is confirmed as final with 

the following changes: 

PART 261—ENSURING THAT 

RECIPIENTS WORK 

■ 1. The authority citation for part 261 

continues to read as follows: 

Authority: 42 U.S.C. 601, 602, 607 and 609. 

■ 2. Revise § 261.2 to read as follows: 

§ 261.2 What definitions apply to this part? 

(a) The general TANF definitions at 

§§ 260.30 through 260.33 of this chapter 

apply to this part. 

(b) Unsubsidized employment means 

full-or part-time employment in the 

public or private sector that is not 

subsidized by TANF or any other public 

program. 

(c) Subsidized private sector 

employment means employment in the 

private sector for which the employer 

receives a subsidy from TANF or other 

public funds to offset some or all of the 

wages and costs of employing an 

individual. 

(d) Subsidized public sector 

employment means employment in the 

public sector for which the employer 

receives a subsidy from TANF or other 

public funds to offset some or all of the 

wages and costs of employing an 

individual. 

(e) Work experience (including work 

associated with the refurbishing of 

publicly assisted housing) if sufficient 

private sector employment is not 

available means a work activity, 

performed in return for welfare, that 

provides an individual with an 

opportunity to acquire the general skills, 

knowledge, and work habits necessary 

to obtain employment. The purpose of 

work experience is to improve the 

employability of those who cannot find 

unsubsidized full-time employment. 

This activity must be supervised by an 

employer, work site sponsor, or other 

responsible party on an ongoing basis 

no less frequently than once in each day 

in which the individual is scheduled to 

participate. 

(f) On-the-job training means training 

in the public or private sector that is 

given to a paid employee while he or 

she is engaged in productive work and 

that provides knowledge and skills 

essential to the full and adequate 

performance of the job. 

(g) Job search and job readiness 

assistance means the act of seeking or 

obtaining employment, preparation to 

seek or obtain employment, including 

life skills training, and substance abuse 

treatment, mental health treatment, or 

rehabilitation activities. Such treatment 

or therapy must be determined to be 

necessary and documented by a 

qualified medical, substance abuse, or 

mental health professional. Job search 

and job readiness assistance activities 

must be supervised by the TANF agency 

or other responsible party on an ongoing 

basis no less frequently than once each 

day in which the individual is 

scheduled to participate. 

(h) Community service programs 

mean structured programs and 

embedded activities in which 

individuals perform work for the direct 

benefit of the community under the 

auspices of public or nonprofit 

organizations. Community service 

programs must be limited to projects 

that serve a useful community purpose 

in fields such as health, social service, 

environmental protection, education, 

urban and rural redevelopment, welfare, 

recreation, public facilities, public 

safety, and child care. Community 

service programs are designed to 

improve the employability of 

individuals not otherwise able to obtain 


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unsubsidized full-time employment, 

and must be supervised on an ongoing 

basis no less frequently than once each 

day in which the individual is 

scheduled to participate. A State agency 

shall take into account, to the extent 

possible, the prior training, experience, 

and skills of a recipient in making 

appropriate community service 

assignments. 

(i) Vocational educational training 

(not to exceed 12 months with respect 

to any individual) means organized 

educational programs that are directly 

related to the preparation of individuals 

for employment in current or emerging 

occupations. Vocational educational 

training must be supervised on an 

ongoing basis no less frequently than 

once each day in which the individual 

is scheduled to participate. 

(j) Job skills training directly related to 

employment means training or 

education for job skills required by an 

employer to provide an individual with 

the ability to obtain employment or to 

advance or adapt to the changing 

demands of the workplace. Job skills 

training directly related to employment 

must be supervised on an ongoing basis 

no less frequently than once each day in 

which the individual is scheduled to 

participate. 

(k) Education directly related to 

employment, in the case of a recipient 

who has not received a high school 

diploma or a certificate of high school 

equivalency means education related to 

a specific occupation, job, or job offer. 

Education directly related to 

employment must be supervised on an 

ongoing basis no less frequently than 

once each day in which the workeligible individual is scheduled to 

participate. 

(l) Satisfactory attendance at 

secondary school or in a course of study 

leading to a certificate of general 

equivalence, in the case of a recipient 

who has not completed secondary 

school or received such a certificate 

means regular attendance, in accordance 

with the requirements of the secondary 

school or course of study, at a secondary 

school or in a course of study leading 

to a certificate of general equivalence, in 

the case of a work-eligible individual 

who has not completed secondary 

school or received such a certificate. 

This activity must be supervised on an 

ongoing basis no less frequently than 

once each day in which the individual 

is scheduled to participate. 

(m) Providing child care services to an 

individual who is participating in a 

community service program means 

providing child care to enable another 

TANF or SSP recipient to participate in 

a community service program. This is 

an unpaid activity and must be a 

structured program designed to improve 

the employability of individuals who 

participate in this activity. This activity 

must be supervised on an ongoing basis 

no less frequently than once each day in 

which the individual is scheduled to 

participate. 

(n)(1) Work-eligible individual means 

an adult (or minor child head-ofhousehold) receiving assistance under 

TANF or a separate State program or a 

non-recipient parent living with a child 

receiving such assistance unless the 

parent is: 

(i) A minor parent and not the headof-household; 

(ii) A non-citizen who is ineligible to 

receive assistance due to his or her 

immigration status; or 

(iii) At State option on a case-by-case 

basis, a recipient of Supplemental 

Security Income (SSI) benefits or Aid to 

the Aged, Blind or Disabled in the 

Territories. 

(2) The term also excludes: 

(i) A parent providing care for a 

disabled family member living in the 

home, provided that there is medical 

documentation to support the need for 

the parent to remain in the home to care 

for the disabled family member; 

(ii) At State option on a case-by-case 

basis, a parent who is a recipient of 

Social Security Disability Insurance 

(SSDI) benefits; and 

(iii) An individual in a family 

receiving MOE-funded assistance under 

an approved Tribal TANF program, 

unless the State includes the Tribal 

family in calculating work participation 

rates, as permitted under § 261.25. 

■ 3. Revise subpart B to part 261 to read 

as follows: 

Subpart B—What Are the Provisions 

Addressing State Accountability? 

Sec. 

261.20 How will we hold a State 

accountable for achieving the work 

objectives of TANF? 

261.21 What overall work rate must a State 

meet? 

261.22 How will we determine a State’s 

overall work rate? 

261.23 What two-parent work rate must a 

State meet? 

261.24 How will we determine a State’s 

two-parent work rate? 

261.25 Does a State include Tribal families 

in calculating the work participation 

rate? 

§ 261.20 How will we hold a State 

accountable for achieving the work 

objectives of TANF? 

(a) Each State must meet two separate 

work participation rates in FY 2006 and 

thereafter, one—the two-parent rate 

based on how well it succeeds in 

helping work-eligible individuals in 

two-parent families find work activities 

described at § 261.30, the other—the 

overall rate based on how well it 

succeeds in finding those activities for 

work-eligible individuals in all the 

families that it serves. 

(b) Each State must submit data, as 

specified at § 265.3 of this chapter, that 

allows us to measure its success in 

requiring work-eligible individuals to 

participate in work activities. 

(c) If the data show that a State met 

both participation rates in a fiscal year, 

then the percentage of historic State 

expenditures that it must expend under 

TANF, pursuant to § 263.1 of this 

chapter, decreases from 80 percent to 75 

percent for that fiscal year. This is also 

known as the State’s TANF 

‘‘maintenance-of-effort’’ (MOE) 

requirement. 

(d) If the data show that a State did 

not meet a minimum work participation 

rate for a fiscal year, a State could be 

subject to a financial penalty. 

(e) Before we impose a penalty, a 

State will have the opportunity to claim 

reasonable cause or enter into a 

corrective compliance plan, pursuant to 

§§ 262.5 and 262.6 of this chapter. 

§ 261.21 What overall work rate must a 

State meet? 

Each State must achieve a 50 percent 

minimum overall participation rate in 

FY 2006 and thereafter, minus any 

caseload reduction credit to which it is 

entitled as provided in subpart D of this 

part. 

§ 261.22 How will we determine a State’s 

overall work rate? 

(a)(1) The overall participation rate for 

a fiscal year is the average of the State’s 

overall participation rates for each 

month in the fiscal year. 

(2) The rate applies to families with 

a work-eligible individual. 

(b) We determine a State’s overall 

participation rate for a month as 

follows: 

(1) The number of TANF and SSPMOE families that include a workeligible individual who meets the 

requirements set forth in § 261.31 for the 

month (i.e., the numerator), divided by, 

(2) The number of TANF and SSP–

MOE families that include a workeligible individual, minus the number of 

such families that are subject to a 

penalty for refusing to work in that 

month (i.e., the denominator). However, 

if a family with a work-eligible 

individual has been penalized for 

refusal to participate in work activities 

for more than three of the last 12 

months, we will not exclude it from the 

participation rate calculation. 


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(3) At State option, we will include in 

the participation rate calculation 

families with a work-eligible individual 

that have been penalized for refusing to 

work no more than three of the last 12 

months. 

(c)(1) A State has the option of not 

requiring a single custodial parent 

caring for a child under age one to 

engage in work. 

(2) At State option, we will disregard 

a family with such a parent from the 

participation rate calculation for a 

maximum of 12 months. 

(d)(1) If a family receives assistance 

for only part of a month, we will count 

it as a month of participation if a workeligible individual is engaged in work 

for the minimum average number of 

hours in each full week that the family 

receives assistance in that month. 

(2) If a State pays benefits 

retroactively (i.e., for the period 

between application and approval of 

benefits), it has the option to consider 

the family to be receiving assistance 

during the period of retroactivity. 

§ 261.23 What two-parent work rate must a 

State meet? 

Each State must achieve a 90 percent 

minimum two-parent participation rate 

in FY 2006 and thereafter, minus any 

caseload reduction credit to which it is 

entitled as provided in subpart D of this 

part. 

§ 261.24 How will we determine a State’s 

two-parent work rate? 

(a)(1) The two-parent participation 

rate for a fiscal year is the average of the 

State’s two-parent participation rates for 

each month in the fiscal year. 

(2) The rate applies to two-parent 

families with two work-eligible 

individuals. However, if one of the 

parents is a work-eligible individual 

with a disability, we will not consider 

the family to be a two-parent family; i.e., 

we will not include such a family in 

either the numerator or denominator of 

the two-parent rate. 

(b) We determine a State’s two-parent 

participation rate for the month as 

follows: 

(1) The number of two-parent TANF 

and SSP–MOE families in which both 

parents are work-eligible individuals 

and together they meet the requirements 

set forth in § 261.32 for the month (i.e., 

the numerator), divided by, 

(2) The number of two-parent TANF 

and SSP–MOE families in which both 

parents are work-eligible individuals 

during the month, minus the number of 

such two-parent families that are subject 

to a penalty for refusing to work in that 

month (the denominator). However, if a 

family with a work-eligible individual 

has been penalized for more than three 

months of the last 12 months, we will 

not exclude it from the participation 

rate calculation. 

(3) At State option, we will include in 

the participation rate calculation 

families with a work-eligible individual 

that have been penalized for refusing to 

work no more than three of the last 12 

months. 

(c) For purposes of the calculation in 

paragraph (b) of this section, a twoparent family includes, at a minimum, 

all families with two natural or adoptive 

parents (of the same minor child) who 

are work-eligible individuals and living 

in the home, unless both are minors and 

neither is a head-of-household. 

(d)(1) If the family receives assistance 

for only part of a month, we will count 

it as a month of participation if a workeligible individual in the family (or both 

work-eligible individuals, if they are 

both required to work) is engaged in 

work for the minimum average number 

of hours in each full week that the 

family receives assistance in that month. 

(2) If a State pays benefits 

retroactively (i.e., for the period 

between application and approval of 

benefits), it has the option to consider 

the family to be receiving assistance 

during the period of retroactivity. 

§ 261.25 Do we count Tribal families in 

calculating the work participation rate? 

At State option, we will include 

families with a work-eligible individual 

that are receiving assistance under an 

approved Tribal family assistance plan 

or under a Tribal work program in 

calculating the State’s participation 

rates under §§ 261.22 and 261.24. 

■ 4. Revise § 261.31 to read as follows: 

§ 261.31 How many hours must a workeligible individual participate for the family 

to count in the numerator of the overall 

rate? 

(a) Subject to paragraph (d) of this 

section, a family with a work-eligible 

individual counts as engaged in work 

for a month for the overall rate if: 

(1) He or she participates in work 

activities during the month for at least 

a minimum average of 30 hours per 

week; and 

(2) At least 20 of the above hours per 

week come from participation in the 

activities listed in paragraph (b) of this 

section. 

(b) The following nine activities count 

toward the first 20 hours of 

participation: unsubsidized 

employment; subsidized private-sector 

employment; subsidized public-sector 

employment; work experience; on-thejob training; job search and job 

readiness assistance; community service 

programs; vocational educational 

training; and providing child care 

services to an individual who is 

participating in a community service 

program. 

(c) Above 20 hours per week, the 

following three activities may also count 

as participation: job skills training 

directly related to employment; 

education directly related to 

employment; and satisfactory 

attendance at secondary school or in a 

course of study leading to a certificate 

of general equivalence. 

(d)(1) We will deem a work-eligible 

individual who participates in a work 

experience or community service 

program for the maximum number of 

hours per month that a State may 

require by dividing the combined 

monthly TANF or SSP–MOE grant and 

food stamp allotment by the higher of 

the Federal or State minimum wage to 

have participated for an average of 20 

hours per week for the month in that 

activity. 

(2) This policy is limited to States that 

have adopted a Simplified Food Stamp 

Program option that permits a State to 

count the value of food stamps in 

determining the maximum core hours of 

participation permitted by the FLSA. 

(3) In order for Puerto Rico, which 

does not have a traditional Food Stamp 

Program, to deem core hours, it must 

include the value of food assistance 

benefits provided through the Nutrition 

Assistance Program in the same manner 

as a State must include food stamp 

benefits under subsection (d)(1). 

■ 5. Revise § 261.32 to read as follows: 

§ 261.32 How many hours must workeligible individuals participate for the family 

to count in the numerator of the two-parent 

rate? 

(a) Subject to paragraph (d) of this 

section, a family with two work-eligible 

parents counts as engaged in work for 

the month for the two-parent rate if: 

(1) Work-eligible parents in the family 

are participating in work activities for a 

combined average of at least 35 hours 

per week during the month, and 

(2) At least 30 of the 35 hours per 

week come from participation in the 

activities listed in paragraph (b) of this 

section. 

(b) The following nine activities count 

for the first 30 hours of participation: 

unsubsidized employment; subsidized 

private-sector employment; subsidized 

public-sector employment; work 

experience; on-the-job training; job 

search and job readiness assistance; 

community service programs; vocational 

educational training; and providing 

child care services to an individual who 


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is participating in a community service 

program. 

(c) Above 30 hours per week, the 

following three activities may also count 

for participation: job skills training 

directly related to employment; 

education directly related to 

employment; and satisfactory 

attendance at secondary school or in a 

course of study leading to a certificate 

of general equivalence. 

(d)(1) We will deem a family with two 

work-eligible parents in which one or 

both participates in a work experience 

or community service program for the 

maximum number of hours per month 

that a State may require by dividing the 

combined monthly TANF or SSP–MOE 

grant and food stamp allotment by the 

higher of the Federal or State minimum 

wage to have participated for an average 

of 30 hours per week for the month in 

that activity. 

(2) This policy is limited to States that 

have adopted a Simplified Food Stamp 

Program option that permits a State to 

count the value of food stamps in 

determining the maximum core hours of 

participation permitted by the FLSA. 

(3) In order for Puerto Rico, which 

does not have a traditional Food Stamp 

Program, to deem core hours, it must 

include the value of food assistance 

benefits provided through the Nutrition 

Assistance Program in the same manner 

as a State must include food stamp 

benefits under paragraph (d)(1) of this 

section. 

(e)(1) Subject to paragraph (f) of this 

section, if the family receives federally 

funded child care assistance and an 

adult in the family does not have a 

disability or is not caring for a child 

with a disability, then the work-eligible 

individuals must be participating in 

work activities for an average of at least 

55 hours per week to count as a twoparent family engaged in work for the 

month. 

(2) At least 50 of the 55 hours per 

week must come from participation in 

the activities listed in paragraph (b) of 

this section. 

(3) Above 50 hours per week, the 

three activities listed in paragraph (c) of 

this section may also count as 

participation. 

(f)(1) We will deem a family with two 

work-eligible parents in which one or 

both participates in a work experience 

or community service program for the 

maximum number of hours per month 

that a State may require by dividing the 

combined monthly TANF or SSP–MOE 

grant and food stamp allotment by the 

higher of the Federal or State minimum 

wage to have participated for an average 

of 50 hours per week for the month in 

that activity. 

(2) This policy is limited to States that 

have adopted a Simplified Food Stamp 

Program option that permits a State to 

count the value of food stamps in 

determining the maximum core hours of 

participation permitted by the FLSA. 

(3) In order for Puerto Rico, which 

does not have a traditional Food Stamp 

Program, to deem core hours, it must 

include the value of food assistance 

benefits provided through the Nutrition 

Assistance Program in the same manner 

as a State must include food stamp 

benefits under paragraph (d)(1) of this 

section. 

■ 6. Revise § 261.34 to read as follows: 

§ 261.34 Are there any limitations in 

counting job search and job readiness 

assistance toward the participation rates? 

Yes. There are four limitations 

concerning job search and job readiness 

assistance. 

(a) Except as provided in paragraph 

(b) of this section, an individual’s 

participation in job search and job 

readiness assistance counts for a 

maximum of six weeks in the preceding 

12-month period. 

(b) If the State’s total unemployment 

rate is at least 50 percent greater than 

the United States’ total unemployment 

rate or if the State meets the definition 

of a ‘‘needy State’’, specified at § 260.30 

of this chapter, then an individual’s 

participation in job search and job 

readiness assistance counts for a 

maximum of 12 weeks in that 12-month 

period. 

(c) For purposes of paragraphs (a) and 

(b) of this section, a week equals 20 

hours for a work-eligible individual who 

is a single custodial parent with a child 

under six years of age and equals 30 

hours for all other work-eligible 

individuals. 

(d) An individual’s participation in 

job search and job readiness assistance 

does not count for a week that 

immediately follows four consecutive 

weeks in which the State reports any 

hours of such participation in the 

preceding 12-month period. For 

purposes of this paragraph a week 

means seven consecutive days. 

(e) Not more than once for any 

individual in the preceding 12-month 

period, a State may count three or four 

days of job search and job readiness 

assistance during a week as a full week 

of participation. We calculate a full 

week of participation based on the 

average daily hours of participation for 

three or four days and will prorate 

participation at that level for the 

remaining one or two days to determine 

the total hours for a five-day week. Any 

prorated hours of participation must be 

included in the calculation of total 

hours permitted under the limitation in 

this section. 

■ 7. Revise subpart D to part 261 to read 

as follows: 

Subpart D—How Will We Determine 

Caseload Reduction Credit for 

Minimum Participation Rates? 

Sec. 

261.40 Is there a way for a State to reduce 

the work participation rates? 

261.41 How will we determine the caseload 

reduction credit? 

261.42 Which reductions count in 

determining the caseload reduction 

credit? 

261.43 What is the definition of a ‘‘case 

receiving assistance’’ in calculating the 

caseload reduction credit? 

261.44 When must a State report the 

required data on the caseload reduction 

credit? 

§ 261.40 Is there a way for a State to 

reduce the work participation rates? 

(a)(1) If the average monthly number 

of cases receiving assistance, including 

assistance under a separate State 

program (as provided at § 261.42(b)), in 

a State in the preceding fiscal year was 

lower than the average monthly number 

of cases that received assistance, 

including assistance under a separate 

State program in that State in FY 2005, 

the minimum overall participation rate 

the State must meet for the fiscal year 

(as provided at § 261.21) decreases by 

the number of percentage points the 

prior-year caseload fell in comparison to 

the FY 2005 caseload. 

(2) The minimum two-parent 

participation rate the State must meet 

for the fiscal year (as provided at 

§ 261.23) decreases, at State option, by 

either: 

(i) The number of percentage points 

the prior-year two-parent caseload, 

including two-parent cases receiving 

assistance under a separate State 

program (as provided at § 261.42(b)), fell 

in comparison to the FY 2005 twoparent caseload, including two-parent 

cases receiving assistance under a 

separate State program; or 

(ii) The number of percentage points 

the prior-year overall caseload, 

including assistance under a separate 

State program (as provided at 

§ 261.42(b)), fell in comparison to the 

FY 2005 overall caseload, including 

cases receiving assistance under a 

separate State program. 

(3) For the credit calculation, we will 

refer to the fiscal year that precedes the 

fiscal year to which the credit applies as 

the ‘‘comparison year.’’

(b)(1) The calculations in paragraph 

(a) of this section must disregard 

caseload reductions due to requirements 

of Federal law and to changes that a 


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State has made in its eligibility criteria 

in comparison to its criteria in effect in 

FY 2005. 

(2) At State option, the calculation 

may offset the disregard of caseload 

reductions in paragraph (b)(1) of this 

section by changes in eligibility criteria 

that increase caseloads. 

(c)(1) To establish the caseload base 

for FY 2005 and to determine the 

comparison-year caseload, we will use 

the combined TANF and Separate State 

Program caseload figures reported on 

the Form ACF–199, TANF Data Report, 

and Form ACF–209, SSP–MOE Data 

Report, respectively. 

(2) To qualify for a caseload 

reduction, a State must have reported 

monthly caseload information, 

including cases in separate State 

programs, for FY 2005 and the 

comparison year for cases receiving 

assistance as defined at § 261.43. 

(d)(1) A State may correct erroneous 

data or submit accurate data to adjust 

program data or to include unduplicated 

cases within the fiscal year. 

(2) We will adjust both the FY 2005 

baseline and the comparison-year 

caseload information, as appropriate, 

based on these State submissions. 

(e) We refer to the number of 

percentage points by which a caseload 

falls, disregarding the cases described in 

paragraph (b) of this section, as a 

caseload reduction credit. 

§ 261.41 How will we determine the 

caseload reduction credit? 

(a)(1) We will determine the overall 

and two-parent caseload reduction 

credits that apply to each State based on 

the information and estimates reported 

to us by the State on eligibility policy 

changes using application denials, case 

closures, or other administrative data 

sources and analyses. 

(2) We will accept the information 

and estimates provided by a State, 

unless they are implausible based on the 

criteria listed in paragraph (d) of this 

section. 

(3) We may conduct on-site reviews 

and inspect administrative records on 

applications, case closures, or other 

administrative data sources to validate 

the accuracy of the State estimates. 

(b) In order to receive a caseload 

reduction credit, a State must submit a 

Caseload Reduction Report to us 

containing the following information: 

(1) A listing of, and implementation 

dates for, all State and Federal eligibility 

changes, as defined at § 261.42, made by 

the State since the beginning of FY 

2006; 

(2) A numerical estimate of the 

positive or negative average monthly 

impact on the comparison-year caseload 

of each eligibility change (based, as 

appropriate, on application denials, case 

closures or other analyses); 

(3) An overall estimate of the total net 

positive or negative impact on the 

applicable caseload as a result of all 

such eligibility changes; 

(4) An estimate of the State’s caseload 

reduction credit; 

(5) A description of the methodology 

and the supporting data that a State 

used to calculate its caseload reduction 

estimates; and 

(6) A certification that it has provided 

the public an appropriate opportunity to 

comment on the estimates and 

methodology, considered their 

comments, and incorporated all net 

reductions resulting from Federal and 

State eligibility changes. 

(c)(1) A State requesting a caseload 

reduction credit for the overall 

participation rate must base its 

estimates of the impact of eligibility 

changes on decreases in its comparisonyear overall caseload compared to the 

FY 2005 overall caseload baseline 

established in accordance with 

§ 261.40(d). 

(2) A State requesting a caseload 

reduction credit for its two-parent rate 

must base its estimates of the impact of 

eligibility changes on decreases in 

either: 

(i) Its two-parent caseload compared 

to the FY 2005 base-year two-parent 

caseload baseline established in 

accordance with § 261.40(d); or 

(ii) Its overall caseload compared to 

the FY 2005 base-year overall caseload 

baseline established in accordance with 

§ 261.40(d). 

(d)(1) For each State, we will assess 

the adequacy of information and 

estimates using the following criteria: Its 

methodology; Its estimates of impact 

compared to other States; the quality of 

its data; and the completeness and 

adequacy of its documentation. 

(2) If we request additional 

information to develop or validate 

estimates, the State may negotiate an 

appropriate deadline or provide the 

information within 30 days of the date 

of our request. 

(3) The State must provide sufficient 

data to document the information 

submitted under paragraph (b) of this 

section. 

(e) We will not calculate a caseload 

reduction credit unless the State reports 

case-record data on individuals and 

families served by any separate State 

program, as required under § 265.3(d) of 

this chapter. 

(f) A State may only apply to the 

participation rate a caseload reduction 

credit that we have calculated. If a State 

disagrees with the caseload reduction 

credit, it may appeal the decision as an 

adverse action in accordance with 

§ 262.7 of this chapter. 

§ 261.42 Which reductions count in 

determining the caseload reduction credit? 

(a)(1) A State’s caseload reduction 

credit must not include caseload 

decreases due to Federal requirements 

or State changes in eligibility rules since 

FY 2005 that directly affect a family’s 

eligibility for assistance. These include, 

but are not limited to, more stringent 

income and resource limitations, time 

limits, full family sanctions, and other 

new requirements that deny families 

assistance when an individual does not 

comply with work requirements, 

cooperate with child support, or fulfill 

other behavioral requirements. 

(2) At State option, a State’s caseload 

reduction credit may include caseload 

increases due to Federal requirements or 

State changes in eligibility rules since 

FY 2005 if used to offset caseload 

decreases in paragraph (a)(1) of this 

section. 

(3) A State may not receive a caseload 

reduction credit that exceeds the actual 

caseload decline between FY 2005 and 

the comparison year. 

(4) A State may count the reductions 

attributable to enforcement mechanisms 

or procedural requirements that are 

used to enforce existing eligibility 

criteria (e.g., fingerprinting or other 

verification techniques) to the extent 

that such mechanisms or requirements 

identify or deter families otherwise 

ineligible under existing rules. 

(b) A State must include cases 

receiving assistance in separate State 

programs as part of its FY 2005 caseload 

and comparison-year caseload. 

However, if a State provides 

documentation that separate State 

program cases overlap with or duplicate 

cases in the TANF caseload, we will 

exclude them from the caseload count. 

§ 261.43 What is the definition of a ‘‘case 

receiving assistance’’ in calculating the 

caseload reduction credit? 

(a) The caseload reduction credit is 

based on decreases in caseloads 

receiving TANF- or SSP-MOE-funded 

assistance (other than those excluded 

pursuant to § 261.42). 

(b)(1) A State that is investing State 

MOE funds in excess of the required 80 

percent or 75 percent basic MOE 

amount need only include the pro rata 

share of caseloads receiving assistance 

that is required to meet basic MOE 

requirements. 

(2) For purposes of paragraph (b)(1) of 

this section, a State may exclude from 

the overall caseload reduction credit 

calculation the number of cases funded 


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with excess MOE. This number is 

calculated by dividing annual excess 

MOE expenditures on assistance by the 

average monthly expenditures on 

assistance per case for the fiscal year, 

(i) Where annual excess MOE 

expenditures on assistance equal total 

annual MOE expenditures minus the 

percentage of historic State 

expenditures specified in paragraph (v) 

of this section, multiplied by the 

percentage that annual expenditures on 

assistance (both Federal and State) 

represent of all annual expenditures, 

and 

(ii) Where the average monthly 

assistance expenditures per case for the 

fiscal year equal the sum of annual 

TANF and SSP–MOE assistance 

expenditures (both Federal and State) 

divided by the average monthly sum of 

TANF and SSP–MOE caseloads for the 

fiscal year. 

(iii) If the excess MOE calculation is 

for a separate two-parent caseload 

reduction credit, we multiply the 

number of cases funded with excess 

MOE by the average monthly percentage 

of two-parent cases in the State’s total 

(TANF plus SSP–MOE) average monthly 

caseload. 

(iv) All financial data must agree with 

data reported on the TANF Financial 

Report (form ACF–196) and all caseload 

data must agree with data reported on 

the TANF Data and SSP–MOE Data 

Reports (forms ACF–199 and ACF–209). 

(v) The State must use 80 percent of 

historic expenditures when calculating 

excess MOE; however if it has met the 

work participation requirements for the 

year, it may use 75 percent of historic 

expenditures. 

§ 261.44 When must a State report the 

required data on the caseload reduction 

credit? 

A State must report the necessary 

documentation on caseload reductions 

for the preceding fiscal year by 

December 31. 

■ 8. Revise subpart F to part 261 to read 

as follows: 

Subpart F—How Do We Ensure the 

Accuracy of Work Participation 

Information? 

Sec. 

261.60 What hours of participation may a 

State report for a work-eligible 

individual? 

261.61 How must a State document a workeligible individual’s hours of 

participation? 

261.62 What must a State do to verify the 

accuracy of its work participation 

information? 

261.63 When is the State’s Work 

Verification Plan due? 

261.64 How will we determine whether a 

State’s work verification procedures 

ensure an accurate work participation 

measurement? 

261.65 Under what circumstances will we 

impose a work verification penalty? 

§ 261.60 What hours of participation may a 

State report for a work-eligible individual? 

(a) A State must report the actual 

hours that an individual participates in 

an activity, subject to the qualifications 

in paragraphs (b) and (c) of this section 

and § 261.61(c). It is not sufficient to 

report the hours an individual is 

scheduled to participate in an activity. 

(b) For the purposes of calculating the 

work participation rates for a month, 

actual hours may include the hours for 

which an individual was paid, 

including paid holidays and sick leave. 

For participation in unpaid work 

activities, it may include excused 

absences for hours missed due to a 

maximum of 10 holidays in the 

preceding 12-month period and up to 80 

hours of additional excused absences in 

the preceding 12-month period, no more 

than 16 of which may occur in a month, 

for each work-eligible individual. Each 

State must designate the days that it 

wishes to count as holidays for those in 

unpaid activities in its Work 

Verification Plan. It may designate no 

more than 10 such days. In order to 

count an excused absence as actual 

hours of participation, the individual 

must have been scheduled to participate 

in a countable work activity for the 

period of the absence that the State 

reports as participation. A State must 

describe its excused absence policies 

and definitions as part of its Work 

Verification Plan, specified at § 261.62. 

(c) For unsubsidized employment, 

subsidized employment, and OJT, a 

State may report projected actual hours 

of employment participation for up to 

six months based on current, 

documented actual hours of work. Any 

time a State receives information that 

the client’s actual hours of work have 

changed, or no later than the end of any 

six-month period, the State must reverify the client’s current actual average 

hours of work, and may report these 

projected actual hours of participation 

for another six-month period. 

(d) A State may not count more hours 

toward the participation rate for a selfemployed individual than the number 

derived by dividing the individual’s 

self-employment income (gross income 

less business expenses) by the Federal 

minimum wage. A State may propose an 

alternative method of determining selfemployment hours as part of its Work 

Verification Plan. 

(e) A State may count supervised 

homework time and up to one hour of 

unsupervised homework time for each 

hour of class time. Total homework time 

counted for participation cannot exceed 

the hours required or advised by a 

particular educational program. 

§ 261.61 How must a State document a 

work-eligible individual’s hours of 

participation? 

(a) A State must support each 

individual’s hours of participation 

through documentation in the case file. 

In accordance with § 261.62, a State 

must describe in its Work Verification 

Plan the documentation it uses to verify 

hours of participation in each activity. 

(b) For an employed individual, the 

documentation may consist of, but is 

not limited to pay stubs, employer 

reports, or time and attendance records 

substantiating hours of participation. A 

State may presume that an employed 

individual participated for the total 

number of hours for which that 

individual was paid. 

(c) The State must document all hours 

of participation in an activity; however, 

if a State is reporting projected hours of 

actual employment in accordance with 

§ 261.60(c), it need only document the 

hours on which it bases the projection. 

(d) For an individual who is selfemployed, the documentation must 

comport with standards set forth in the 

State’s approved Work Verification 

Plan. Self-reporting by a participant 

without additional verification is not 

sufficient documentation. 

(e) For an individual who is not 

employed, the documentation for 

substantiating hours of participation 

may consist of, but is not limited to, 

time sheets, service provider attendance 

records, or school attendance records. 

For homework time, the State must also 

document the homework or study 

expectations of the educational 

program. 

§ 261.62 What must a State do to verify the 

accuracy of its work participation 

information? 

(a) To ensure accuracy in the 

reporting of work activities by workeligible individuals on the TANF Data 

Report and, if applicable, the SSP–MOE 

Data Report, each State must: 

(1) Establish and employ procedures 

for determining whether its work 

activities may count for participation 

rate purposes; 

(2) Establish and employ procedures 

for determining how to count and verify 

reported hours of work; 

(3) Establish and employ procedures 

for identifying who is a work-eligible 

individual; 

(4) Establish and employ internal 

controls to ensure compliance with the 

procedures; and 


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(5) Submit to the Secretary for 

approval the State’s Work Verification 

Plan in accordance with paragraph (b) of 

this section. 

(b) A State’s Work Verification Plan 

must include the following: 

(1) For each countable work activity: 

(i) A description demonstrating how 

the activity meets the relevant definition 

at § 261.2; 

(ii) A description of how the State 

determines the number of countable 

hours of participation; and 

(iii) A description of the 

documentation it uses to monitor 

participation and ensure that the actual 

hours of participation are reported; 

(2) A description of the State’s 

procedures for identifying all workeligible individuals, as defined at 

§ 261.2; 

(3) A description of how the State 

ensures that, for each work-eligible 

individual, it: 

(i) Accurately inputs data into the 

State’s automated data processing 

system; 

(ii) Properly tracks the hours though 

the automated data processing system; 

and 

(iii) Accurately reports the hours to 

the Department; 

(4) A description of the procedures for 

ensuring it does not transmit to the 

Department a work-eligible individual’s 

hours of participation in an activity that 

does not meet a Federal definition of a 

countable work activity; and 

(5) A description of the internal 

controls that the State has implemented 

to ensure a consistent measurement of 

the work participation rates, including 

the quality assurance processes and 

sampling specifications it uses to 

monitor adherence to the established 

work verification procedures by State 

staff, local staff, and contractors. 

(c) We will review a State’s Work 

Verification Plan for completeness and 

approve it if we believe that it will 

result in accurate reporting of work 

participation information. 

§ 261.63 When is a State’s Work 

Verification Plan Due? 

(a) Each State must submit its interim 

Work Verification Plan for validating 

work activities reported in the TANF 

Data Report and, if applicable, the SSP–

MOE Data Report no later than 

September 30, 2006. 

(b) If HHS requires changes, a State 

must submit them within 60 days of 

receipt of our notice and include all 

necessary changes as part of a final 

approved Work Verification Plan no 

later than September 30, 2007. 

(c) If a State modifies its verification 

procedures for TANF or SSP–MOE work 

activities or its internal controls for 

ensuring a consistent measurement of 

the work participation rate, the State 

must submit for approval an amended 

Work Verification Plan by the end of the 

quarter in which the State modifies the 

procedures or internal controls. 

§ 261.64 How will we determine whether a 

State’s work verification procedures ensure 

an accurate work participation 

measurement? 

(a) We will determine that a State has 

met the requirement to establish work 

verification procedures if it submitted 

an interim Work Verification Plan by 

September 30, 2006 and a complete 

Work Verification Plan that we 

approved by September 30, 2007. 

(b) A ‘‘complete’’ Work Verification 

Plan means that: 

(1) The plan includes all the 

information required by § 261.62(b); and 

(2) The State certifies that the plan 

includes all the information required by 

§ 261.62(b) and that it accurately reflects 

the procedures under which the State is 

operating. 

(c) For conduct occurring after 

October 1, 2007, we will use the single 

audit under OMB Circular A–133 in 

conjunction with other reviews, audits, 

and data sources, as appropriate, to 

assess the accuracy of the data filed by 

States for use in calculating the work 

participation rates. 

§ 261.65 Under what circumstances will we 

impose a work verification penalty? 

(a) We will take action to impose a 

penalty under § 262.1(a)(15) of this 

chapter if: 

(1) The requirements under 

§§ 261.64(a) and (b) have not been met; 

or 

(2) We determine that the State has 

not maintained adequate 

documentation, verification, or internal 

control procedures to ensure the 

accuracy of the data used in calculating 

the work participation rates. 

(b) If a State fails to submit an interim 

or complete Work Verification Plan by 

the due dates in § 261.64(a), we will 

reduce the SFAG payable for the 

immediately succeeding fiscal year by 

five percent of the adjusted SFAG. 

(c) If a State fails to maintain adequate 

internal controls to ensure a consistent 

measurement of work participation, we 

will reduce the adjusted SFAG by the 

following percentages for a fiscal year: 

(1) One percent for the first year; 

(2) Two percent for second year; 

(3) Three percent for the third year; 

(4) Four percent for the fourth year; 

and, 

(5) Five percent for the fifth and 

subsequent years. 

(d) If a State complies with the 

requirements in this subpart for two 

consecutive years, then any penalty 

imposed for subsequent failures will 

begin anew, as described in paragraph 

(c) of this section. 

(e) If we take action to impose a 

penalty under §§ 261.64(b) or (c), we 

will reduce the SFAG payable for the 

immediately succeeding fiscal year. 

PART 263—EXPENDITURES OF STATE 

AND FEDERAL TANF FUNDS 

■ 9. The authority citation for part 263 

continues to read as follows: 

Authority: 42 U.S.C. 604, 607, 609, and 

862a. 

■ 10. Revise § 263.2 to read as follows: 

§ 263.2 What kinds of State expenditures 

count toward meeting a State’s basic MOE 

expenditure requirement? 

(a) Expenditures of State funds in 

TANF or separate State programs may 

count if they are made for the following 

types of benefits or services: 

(1) Cash assistance, including the 

State’s share of the assigned child 

support collection that is distributed to 

the family, and disregarded in 

determining eligibility for, and amount 

of the TANF assistance payment; 

(2) Child care assistance (see § 263.3); 

(3) Education activities designed to 

increase self-sufficiency, job training, 

and work (see § 263.4); 

(4) Any other use of funds allowable 

under section 404(a)(1) of the Act 

including: 

(i) Nonmedical treatment services for 

alcohol and drug abuse and some 

medical treatment services (provided 

that the State has not commingled its 

MOE funds with Federal TANF funds to 

pay for the services), if consistent with 

the goals at § 260.20 of this chapter; and 

(ii) Pro-family healthy marriage and 

responsible fatherhood activities 

enumerated in part IV–A of the Act, 

sections 403(a)(2)(A)(iii) and 

403(a)(2)(C)(ii) that are consistent with 

the goals at §§ 260.20(c) or (d) of this 

chapter, but do not constitute 

‘‘assistance’’ as defined in § 260.31(a) of 

this chapter; and 

(5)(i) Administrative costs for 

activities listed in paragraphs (a)(1) 

through (a)(4) of this section, not to 

exceed 15 percent of the total amount of 

countable expenditures for the fiscal 

year. 

(ii) Costs for information technology 

and computerization needed for 

tracking or monitoring required by or 

under part IV–A of the Act do not count 

towards the limit in paragraph (5)(i) of 

this section, even if they fall within the 

definition of ‘‘administrative costs.’’


rmajette on PROD1PC64 with RULES2
6828 Federal Register / Vol. 73, No. 24 / Tuesday, February 5, 2008 / Rules and Regulations 

(A) This exclusion covers the costs for 

salaries and benefits of staff who 

develop, maintain, support, or operate 

the portions of information technology 

or computer systems used for tracking 

and monitoring. 

(B) It also covers the costs of contracts 

for the development, maintenance, 

support, or operation of those portions 

of information technology or computer 

systems used for tracking or monitoring. 

(b) With the exception of paragraph 

(a)(4)(ii) of this section, the benefits or 

services listed under paragraph (a) of 

this section count only if they have been 

provided to or on behalf of eligible 

families. An ‘‘eligible family’’ as defined 

by the State, must: 

(1) Be comprised of citizens or noncitizens who: 

(i) Are eligible for TANF assistance; 

(ii) Would be eligible for TANF 

assistance, but for the time limit on the 

receipt of federally funded assistance; or 

(iii) Are lawfully present in the 

United States and would be eligible for 

assistance, but for the application of 

title IV of PRWORA; 

(2) Include a child living with a 

custodial parent or other adult caretaker 

relative (or consist of a pregnant 

individual); and 

(3) Be financially eligible according to 

the appropriate income and resource 

(when applicable) standards established 

by the State and contained in its TANF 

plan. 

(c) Benefits or services listed under 

paragraph (a) of this section provided to 

a family that meets the criteria under 

paragraphs (b)(1) through (b)(3) of this 

section, but who became ineligible 

solely due to the time limitation given 

under § 264.1 of this chapter, may also 

count. 

(d) Expenditures for the benefits or 

services listed under paragraph (a) of 

this section count whether or not the 

benefit or service meets the definition of 

assistance under § 260.31 of this 

chapter. Further, families that meet the 

criteria in paragraphs (b)(2) and (b)(3) of 

this section are considered to be eligible 

for TANF assistance for the purposes of 

paragraph (b)(1)(i) of this section. 

(e) Expenditures for benefits or 

services listed under paragraph (a) of 

this section may include allowable costs 

borne by others in the State (e.g., local 

government), including cash donations 

from non-Federal third parties (e.g., a 

non-profit organization) and the value of 

third party in-kind contributions if: 

(1) The expenditure is verifiable and 

meets all applicable requirements in 45 

CFR 92.3 and 92.24; 

(2) There is an agreement between the 

State and the other party allowing the 

State to count the expenditure toward 

its MOE requirement; and, 

(3) The State counts a cash donation 

only when it is actually spent. 

(f)(1) The expenditures for benefits or 

services in State-funded programs listed 

under paragraph (a) of this section count 

only if they also meet the requirements 

of § 263.5. 

(2) Expenditures that fall within the 

prohibitions in § 263.6 do not count. 

(g) State funds used to meet the 

Healthy Marriage Promotion and 

Responsible Fatherhood Grant match 

requirement may count to meet the 

MOE requirement in § 263.1, provided 

the expenditure also meets all the other 

MOE requirements in this subpart. 

■ 11. Amend § 263.5 by revising 

paragraph (b) to read as follows: 

§ 263.5 When do expenditures in Statefunded programs count? 

* * * * * 

(b) If a current State or local program 

also operated in FY 1995, and 

expenditures in this program would not 

have been previously authorized and 

allowable under the former AFDC, 

JOBS, Emergency Assistance, Child Care 

for AFDC recipients, At-Risk Child Care, 

or Transitional Child care programs, 

then countable expenditures are limited 

to: 

(1) The amount by which total current 

fiscal year expenditures for or on behalf 

of eligible families, as defined in 

§ 263.2(b), exceed total State 

expenditures in this program during FY 

1995; or, if applicable, 

(2) The amount by which total current 

fiscal year expenditures for pro-family 

activities under § 263.2(a)(4)(ii) exceed 

total State expenditures in this program 

during FY 1995. 

PART 265—DATA COLLECTION AND 

REPORTING REQUIREMENTS 

■ 12. The authority citation for part 265 

continues to read as follows: 

Authority: 42 U.S.C. 603, 605, 607, 609, 

611, and 613. 

■ 13. Amend § 265.7 by revising 

paragraph (b) to read as follows: 

§ 265.7 How will we determine if the State 

is meeting the quarterly reporting 

requirements? 

* * * * * 

(b) For a disaggregated data report, ‘‘a 

complete and accurate report’’ means 

that: 

(1) The reported data accurately 

reflect information available to the State 

in case records, financial records, and 

automated data systems, and include 

correction of the quarterly data by the 

end of the fiscal year reporting period; 

(2) The data are free from 

computational errors and are internally 

consistent (e.g., items that should add to 

totals do so); 

(3) The State reports data for all 

required elements (i.e., no data are 

missing); 

(4)(i) The State provides data on all 

families; or 

(ii) If the State opts to use sampling, 

the State reports data on all families 

selected in a sample that meets the 

specification and procedures in the 

TANF Sampling Manual (except for 

families listed in error); and 

(5) Where estimates are necessary 

(e.g., some types of assistance may 

require cost estimates), the State uses 

reasonable methods to develop these 

estimates. 

* * * * * 

[FR Doc. 08–455 Filed 1–29–08; 4:40 pm] 

BILLING CODE 4184–01–P 


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