Trade Adjustment Assistance: Changes Needed to Improve States' Ability to Provide Benefits and Services to Trade-Affected Workers
Published: 2007-06-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Trade Adjustment Assistance (TAA) program, administered by the Department of Labor (Labor), is the nation's primary program providing income support, job training, and other benefits to manufacturing workers who lose their jobs as a result of international trade. In fiscal year 2006, Congress appropriated about $900 million for TAA, including about $220 million for training. GAO has conducted a number of studies on the TAA program since the program was last reauthorized in 2002. This testimony draws upon the results of two of those reports, issued in 2006 and 2007, as well as ongoing work, and addresses issues raised and recommendations made regarding (1) Labor's administration of the TAA program, (2) the challenges states face in providing services to trade affected workers, (3) the factors that affect workers' use of the wage insurance and health coverage benefits, and (4) the impact of using industrywide certification approaches on the number of workers potentially eligible for TAA.
section_title: What GAO Found
paragraphs: Labor could improve the way it administers the program in two key areas--the process it uses to allocate training funds and its tracking of program outcomes. Labor's process for allocating training funds presents two significant challenges to states. First, the amount states receive at the beginning of the fiscal year does not adequately reflect the current demand for training services in the state. Second, Labor distributes a significant amount of funds to most states on the last day of the fiscal year, even to states that have spent less than 1 percent of the current fiscal year training allocation. Regarding program outcomes, TAA nationwide performance data are incomplete and may be inaccurate. We recommended that Labor develop procedures to better allocate the training funds and improve data. Labor recently noted that it would examine its processes. States face challenges in providing services to workers, including the lack of flexibility to use training funds to provide trade-affected workers with case management services, such as counseling to help them decide whether they need training and which training would be most appropriate. States receive no TAA program funds for case management and must either use their limited administrative funds or seek resources from other programs, such as those funded by the Workforce Investment Act. States also reported that their efforts to enroll workers in training are sometimes hampered by the training enrollment deadline and that workers find the deadline confusing. We have suggested that Congress consider providing states the flexibility to use training funds for case management and simplifying the training enrollment deadline. Few TAA participants take advantage of the wage insurance and health coverage benefits, and several factors limit participation. For example, several states reported that the requirement that workers must find a job within 26 weeks to receive the wage insurance benefit was the major factor preventing more workers from taking advantage of the benefit. Regarding the health coverage benefit, several states told us that high out-of-pocket costs may discourage workers from using the benefit. Furthermore, states also reported that the health coverage benefit can be complicated and difficult to understand. We have suggested that the Congress may wish to consider increasing the length of time workers have to become eligible for wage insurance. In addition, we also recommended that a centralized resource be developed to assist workers with their questions about health coverage. In response, the agency has developed new simplified materials. Finally, an industry certification approach based on three petitions certified within any 180-day period would likely increase the number of workers eligible for TAA, potentially doubling those eligible. The approach also presents some design and implementation challenges.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the challenges states have faced  in implementing some aspects of the Trade Adjustment Assistance Act  (TAA) program. We have conducted a number of studies on the TAA  program since the program was last reauthorized in 2002, and my  testimony today will focus primarily on the results of that work as well as  from our ongoing work. Today I’ll be talking about issues we identified  and our recommendations for improving the program.
The Trade Adjustment Assistance program, established in 1962 and  administered by the Department of Labor (Labor), is the nation’s primary  program providing income support, job training, and other benefits for  manufacturing workers who lose their jobs as a result of international  trade. In fiscal year 2006, Congress appropriated about $655 million for  income support payments and another $220 million for training for trade- affected workers. In 2002, Congress made a number of key changes  designed to expand benefits and decrease the time it takes to get workers  into services. Among the changes, the act    established a deadline for workers to enroll in training, after they have  been laid off or their petition has been approved, in order to maintain  eligibility for extended income support payments;    created a wage insurance benefit for workers age 50 and older,  subsidizing the difference between the prior and new wages of some  trade-affected workers who find reemployment quickly; and    created a health coverage tax credit to help trade-affected workers pay  for health insurance.
In order for workers to receive TAA benefits and services, Labor must  certify that workers in a particular layoff have been adversely affected by  international trade. The certification process begins when a petition is  filed with Labor on behalf of a group of laid-off workers. Labor then  surveys the firm undergoing the layoff and its customers and also reviews  data on the firm’s industry to determine whether it meets the criteria for  certification. Congress is now considering approaches that would facilitate  certifying entire industries for TAA. One approach being considered would  make an industry eligible to be investigated for possible certification when  Labor certifies three petitions from that industry within 180 days. An  investigation would determine whether the entire industry has been  affected by trade and, therefore, whether workers in any future layoff in  that industry should automatically be eligible for TAA.
In preparation for reauthorizing the program, you asked us to provide  information on some of the key issues identified in our work that should  be addressed in reauthorization. In addition, you asked us to analyze the  impact of an alternative industrywide approach to certifying TAA  petitions. My testimony today will provide information and highlight our  recommendations on (1) Labor’s administration of the TAA program, (2)  the challenges states face in providing services to trade-affected workers,  (3) the factors that affect workers’ use of the wage insurance and health  coverage benefits, and (4) the impact of using industrywide certification  approaches on the number of workers potentially eligible for TAA.
To address the first objective, we drew upon our most recent report and a  2006 report on TAA performance data. Our recent report was based, in  part, on a survey of the 46 states that received an initial allocation of TAA  training funds in federal fiscal year 2006, and a supplemental survey to  collect additional financial information on fiscal year 2006 training  expenditures and obligations. Information on performance data is based  primarily on a survey of 46 states conducted between November 2005 and  January 2006 and on site visits to five states—California, Iowa, Ohio,  Texas, and Virginia. To answer the second and third objectives, we  interviewed Labor and Internal Revenue Service (IRS) officials and visited  state and local officials in four states—California, Massachusetts,  Michigan, and North Carolina. We also analyzed Labor’s quarterly activity  reports and IRS’s data on the health coverage benefit. To address the  fourth objective, we interviewed officials at Labor and the International  Trade Commission and analyzed Labor’s data on TAA petitions from  calendar year 2003 to 2005, the Bureau of Labor Statistics’ Mass Layoff  Statistics data, and the Census Bureau’s data on trade and production, as  well as the International Trade Commission’s data on trade remedies. We  conducted our work in accordance with generally accepted government  auditing standards.
In summary, our work shows that Labor could improve the way it  administers the program in two key areas—the process it uses to allocate  training funds to states and its tracking of program outcomes.  Labor’s  process for allocating training funds does not adequately reflect the  current demand for training services in the state, and Labor distributes  additional funds to states regardless of whether they need them. Regarding  program outcomes, we found that TAA performance data are incomplete  and may be inaccurate. For example, only half the states are including all  participants, as required by Labor. States face challenges in providing  services to workers, including the lack of flexibility to use training funds  to provide trade-affected workers with case management services, such as  counseling to help them decide whether they need training and which  training would be most appropriate. States receive no TAA program funds  for case management and must either use their limited administrative  funds or seek resources from other programs, such as those funded by the  Workforce Investment Act (WIA). States also reported that their efforts to  enroll workers in training are sometimes hampered by the training  enrollment deadline and that workers find the deadline confusing. Few  TAA participants take advantage of the wage insurance and health  coverage benefits, and several factors limit participation. For example,  several states reported that the requirement that workers must find a job  within 26 weeks to receive the wage insurance benefit was the major  factor preventing more workers from taking advantage of the benefit.  Regarding the health coverage benefit, several states told us that high out- of-pocket costs may discourage workers from using the benefit. Finally, an  industry certification approach based on three petitions certified within  any 180-day period would likely increase the number of workers eligible  for TAA— potentially doubling those eligible--but also presents some  design and implementation challenges.  For example, using an  industrywide approach raises the possibility that workers who have not  been affected by trade will be certified.  We made a number of  recommendations to Labor to address the issues we identified, as well as  suggested that Congress make changes during reauthorization to improve  the program.
subsections: section_title: Background
paragraphs: The TAA program was designed to assist workers who have lost their jobs  as a result of international trade. The program provides two primary  benefits to these workers—training and extended income support. In  addition, as a result of the TAA Reform Act of 2002, workers also have  access to wage insurance and health coverage benefits. In order to be  eligible for any of these benefits, Labor must certify that a layoff was trade  affected.
TAA Benefits and Services  Under TAA, workers enrolled in the program have access to a variety of  benefits and services, including the following:  Training. Participants may receive up to 130 weeks of training,  including 104 weeks of vocational training and 26 weeks of  remedial training, such as English as a second language.
Extended income support. Participants may receive a total of 104  weeks of extended income support beyond the 26 weeks of  unemployment insurance (UI) benefits available in most states.
Job search and relocation benefits. Payments are available to help  participants search for a job in a different geographical area and to  relocate to a different area to take a job.
Wage insurance benefit. The wage insurance benefit, known as the  Alternative Trade Adjustment Assistance (ATAA) program, was  created by the TAA Reform Act of 2002 as a demonstration project  for workers age 50 or older and those who find reemployment  within 26 weeks of being laid off that pays less than $50,000 and  less than what they previously earned. Workers who meet these  criteria are eligible to receive 50 percent of the difference between  their new and old wages, up to a maximum of $10,000 over 2 years.  For the fiscal year 2008 budget request, Labor estimated wage  insurance benefits at $23 million.
Health coverage benefit. The health coverage benefit, known as the  Health Coverage Tax Credit (HCTC) and also created by the TAA  Reform Act, helps workers pay for health care insurance through a  tax credit. Workers can choose to receive the benefit in one of two  ways—as an advance option that covers 65 percent of their  monthly premiums, allowing them to lower the amount they have  to pay out of pocket for health coverage, or as an end-of-year tax  credit that is claimed on their income taxes. To be eligible for the  health coverage benefit, workers must either be (1) receiving  extended income support payments or eligible for extended  income support but still receiving UI payments, or (2) receiving the  wage insurance benefit. IRS administers the health coverage tax  credit program. There are three health plan options that are  automatically eligible: COBRA continuation plans, coverage  through the worker’s spouse, and individual market plans  purchased by the worker. In addition, the TAA Reform Act also  allows states to designate other coverage alternatives—called  state-qualified options.
subsections: section_title: TAA Certification Process and Eligibility Requirements
paragraphs: Currently, Labor certifies workers for TAA on a layoff-by-layoff basis.  Petitions may be filed by the employer experiencing the layoff, a group of  at least three affected workers, a union, or the state or local workforce  agency. Labor investigates whether a petition meets the requirements for  TAA certification and is required to either certify or deny the petition  within 40 days of receiving it.
The TAA statute lays out certain basic requirements for petitions to be  certified, including that a significant proportion of workers employed by a  company be laid off or threatened with layoff and that affected workers  must have been employed by a company that produces articles. In  addition, a petition must demonstrate that the layoff is related to  international trade in one of several ways, including the following:  Increased imports—imports of articles that are similar to or directly  compete with articles produced by the firm have increased, the sales or  production of the firm has decreased, and the increase in imports has  contributed importantly to the decline in sales or production and the  layoff or threatened layoff of workers.
Shift of production—the firm has shifted production of an article to  another country, and either  the country is party to a free trade agreement with the United States  or  the country is a beneficiary under the Andean Trade Preference Act,  the African Growth and Opportunity Act, or the Caribbean Basin  Economic Recovery Act or  there has been or is likely to be an increase in imports of articles  that are similar to or directly compete with articles produced by the  firm.
Labor investigates whether each petition meets the requirements for TAA  certification by taking steps such as surveying officials at the petitioning  firm, surveying its customers, and examining aggregate industry data.  When Labor has certified a petition, it notifies the relevant state, which has  responsibility for contacting the workers covered by the petition,  informing them of the benefits available to them, and telling them when  and where to apply for benefits.
section_title: Training Funds
paragraphs: Approximately $220 million is available annually for training, and states  have 3 years to spend these funds. Thus fiscal year 2006 funds must be  used by the end of fiscal year 2008. Each year Labor allocates 75 percent  of the training funds to states according to a formula that takes into  consideration several factors, including the average amount of training  funds allocated to states, reported accrued training expenditures, and the  average number of training participants over the previous 2½ years. In  addition, to minimize year-to-year fluctuations in state funding, Labor uses  a hold harmless policy that ensures that each state’s initial allocation is at  least 85 percent of the initial allocation received in the previous year. In  fiscal year 2006, Labor initially allocated $165 million of training funds to  46 states. To cover administrative costs, Labor allocates to each state an  additional 15 percent of its training allocation. Labor holds the remaining  25 percent in reserve to distribute to states throughout the year according  to need as they experience unexpected large layoffs.
section_title: TAA Performance Reporting System
paragraphs: Labor is responsible for monitoring the performance of the TAA program.  States are required to submit information on exiting participants through  the Trade Act Participant Report (TAPR) each quarter. The TAPR data  submitted by states are used to calculate national and state outcomes on  the TAA performance measures for each fiscal year, which include  reemployment rate, retention rate, and wage replacement rate. Unlike  other training programs, like WIA, TAA has no individual state  performance goals, and states do not receive incentives or sanctions based  on their performance levels, nor are they otherwise held accountable for  their performance. In addition to submitting TAPR data, states also submit  data to Labor on TAA services and expenditures each quarter.
section_title: Labor Could Improve Its TAA Program Administration
paragraphs: Labor could improve the way it administers the program in two key  areas—the process it uses to allocate training funds and its tracking of  program outcomes. Labor’s process for allocating training funds presents  two significant challenges to states. First, the amount states receive at the  beginning of the fiscal year does not adequately reflect states’ spending the  year before or the current demand for training services in the state.  Second, Labor distributes a significant amount of funds to most states on  the last day of the fiscal year, even to states that have spent virtually none  of their current year’s allocation. In addition the performance information  that Labor makes available on the TAA program does not provide a  complete and credible picture of the program’s performance. For example,  only half the states are including all participants, as required, in the  performance data they submit to Labor.
subsections: section_title: Labor’s Policies for Allocating Training Funds Present Challenges to States in Managing Their Funds
paragraphs: Labor’s process for allocating training funds does not adequately recognize  the episodic nature of layoffs or the extent to which states have used their  previous year’s allocations. Labor allocates 75 percent of TAA training  funds based upon a formula that takes into account expenditures and  participation over the previous 2½ years. The year-to-year fluctuation in  layoffs within a state may result in states receiving more or less funds than  they actually need. For example, the estimated number of trade-affected  workers being laid off declined dramatically in Kansas from fiscal years  2004 to 2005 and increased somewhat in 2006. Overall the estimated  number of trade-affected workers in Kansas laid off in fiscal year 2006  represented about an 80 percent decrease from 2004. On the other hand,  Missouri experienced an 80 percent increase in the number of trade- affected workers being laid off between fiscal years 2004 and 2006 (see   fig. 1). Kansas used hardly any of its fiscal year 2006 training fund  allocation, while Missouri used virtually all of its. Despite these trends,  both states received about 15 percent less in fiscal year 2007 than they  received in 2006.
While the 46 states responding to our survey reported using (spending or  obligating), on average, about 62 percent of their fiscal year 2006 training  funds during the fiscal year, the percentage of funds states expended and  obligated varied widely. Thirteen of the states reported using less than 1  percent of their fiscal year 2006 funds for training, while 9 states reported  using more than 95 percent of their fiscal year 2006 training funds(see fig.  2). The amount individual states reported using ranged from 0 percent in  several states to about 230 percent in 1 state.
A particular problem with Labor’s allocation process is the hold harmless  policy, which guarantees that each state receives no less than 85 percent  of what it received in the previous year. While this policy is intended to  minimize significant fluctuations in state funding from prior years, it  awards states comparable training funds without recognition of the  previous year’s expenditures or obligations. For example, the 13 states  that used less than 1 percent of the fiscal year 2006 funds received nearly  $41 million in fiscal year 2007—an amount slightly less than they received  in fiscal year 2006. Moreover, 5 of the 13 states received a larger allocation  in fiscal year 2007 than they received in 2006.
Labor distributes a significant amount of funds to most states on the last  day of the fiscal year, regardless of whether states need these additional  funds. Labor distributed end-of-year funds to 48 states, including about $5  million to states that had spent or obligated less than 1 percent of their  initial fiscal year 2006 allocation. Labor distributes these funds to each  state based upon a calculation that takes into account the amount of  training funds each state received from its initial allocation plus any  additional amount it received during the year. According to Labor  officials, all states will receive an end-of-year allocation unless a state  specifically informs Labor it does not want any additional funds or if it had  not received any funds at all during the year. Waiting until the last day of  the fiscal year to distribute training funds to states does not reflect good  planning or management of program funds. Labor officials agreed that the  distribution of reserve training funds could be improved so that more  funds are disbursed throughout the year rather than on the last day.  Officials also acknowledged that states that have not spent or obligated  any of their initial allocation probably should not receive additional  training funds at the end of the year.
In our recent report, we recommended that the Secretary of Labor develop  procedures to better allocate training funds and ensure that any reserve  funds are given to only those states that have spent or obligated a  substantial portion of the current fiscal year allocation. In its comments,  Labor agreed with our findings and recommendations and noted that it  would examine the process for allocating training funds to states.
section_title: TAA Data Do Not Provide a Complete and Credible Picture of the Program’s Performance
paragraphs: TAA performance data are incomplete and may be inaccurate. States  report that they are not including all TAA participants in their performance  data, despite Labor’s requirement that all participants be included after  they exit the program. We found that only 23 of the 46 states we surveyed  reported that they are including all exiting participants in their  submissions to Labor. In general, states have information on those in  training, but may not systematically track those who receive other  assistance, but not training. Furthermore, Labor does not have a process  in place to ensure that states are including all exiting TAA participants in  their reporting submissions. Despite the importance of accurately  identifying exiters, the exit dates themselves may not be accurate because  some states do not consistently obtain proper documentation to verify the  dates. Accurate exit dates are critical to TAA performance data for two  reasons. First, whether a participant exits determines if the individual  should be included in the state's report to Labor.  Second, the actual exit  date determines when a participant's employment outcome will be  assessed.
Some states are not using all available data sources to determine TAA  participants’ employment outcomes. Labor requires states to use UI wage  records to determine the employment outcomes of participants reported  to Labor. However, each state’s wage record database includes only wage  data on workers within the state and does not have data on participants  who found employment in another state.
In our 2006 report, we made several recommendations to Labor to help  ensure that TAA participant data reported by states are consistent,  complete, and accurate, including issuing clarifying guidance. Labor has  taken some steps to share information with states and to improve data  quality. In fiscal year 2006, Labor distributed $250,000 to each state to help  them improve their TAA performance data systems, but it is too soon to  know whether their efforts will improve the quality of the data.
section_title: States Face Challenges in Providing Services to Workers
paragraphs: States report being challenged by the lack of flexibility to use training  funds to provide trade-affected workers with case management services,  such as counseling to help them decide whether they need training and  what type of training would be most appropriate. In addition, efforts to  enroll workers in training are sometimes hampered by the confusing TAA  training enrollment deadline that requires workers be enrolled in training  within 8 weeks of certification or 16 weeks of layoff to qualify for  extended income support.
subsections: section_title: Limited Flexibility in Use of Training Funds Hinders Case Management Services
paragraphs: States also cited the lack of flexibility to use training funds to provide  trade-affected workers with case management services as a challenge.  Workers often need help making decisions about training—what type of  training to take or whether to enroll in training at all. Difficulty funding  case management services for trade-affected workers was a concern  among officials in the states we visited. For example, state officials in one  state said providing proper assessment, career counseling, and other case  management services was a real challenge and noted that additional funds  from other sources are limited. States do not receive TAA program funds  for case management and, by law, cannot use training funds for this  service. As a result, states must either use their limited TAA administrative  funds or use funds from other programs to pay for case management, but  there are limitations with these funding sources.
According to Labor officials, states are encouraged to co-enroll  participants in the Workforce Investment Act (WIA) program, and in  Labor’s view states have sufficient WIA funds to pay for case management  for TAA participants. About three-fourths of the states reported in our  survey that they were able to utilize WIA funds to help pay for case  management services. Yet nearly half of the states also reported that  coordination with WIA was a challenge. For example, WIA funding may  not always be available for TAA workers, especially during a large layoff.  Furthermore, local officials in a state we visited said that while 85 percent  of TAA participants do co-enroll in WIA, a large layoff can strain funding  and makes it difficult for WIA to completely fund case management for  trade-affected workers.
States also reported limitations to using administrative funds to provide  case management. More than half of the states responding to our survey  reported the shortage of administrative funds as a challenge. One state  noted that its administrative funds are usually exhausted by the end of the  first quarter because of the amount of case management that is required  for the program. A local official in one state we visited said that it uses  Wagner-Peyser funds to pay for case management because not enough  TAA administrative funds are received and TAA training funds cannot be  used. As a result, only one case manager could be funded, and this one  person had to cover three counties and serve approximately 1,000  workers. Moreover, officials in some of the states we visited cautioned  that administrative funds should not be used for case management  because case management is a program activity—any increase in the  administrative limit to pay for this service could lead to the misconception  that the program has too much overhead. These state officials noted that  having the flexibility to use TAA training funds for case management  would alleviate this concern.
In our recent report, we suggested that Congress may wish to consider  allowing a portion of TAA training funds to be used for case management  services to allow states greater flexibility in how they may use their TAA  funds to provide services to workers. Labor, however, contended that the  WIA,  rather than TAA, should finance case management. We agree with  Labor that co-enrollment with WIA should be encouraged, but as our  report points out, WIA funds are not always available to provide this  service, especially during large layoffs. We believe that states would  benefit from having the option to use a portion of their training funds to  defray the costs of providing case management services to trade-affected  workers.
section_title: Training Deadline Can be Challenging and Confusing
paragraphs: Efforts to enroll workers in training are sometimes hampered by the “8-16”  training enrollment deadline—that is, the requirement that workers be  enrolled in training within 8 weeks of certification or 16 weeks of layoff,  whichever is later, to qualify for extended income support. Nearly three- quarters of the states responding to our survey reported that enrolling  workers in training by the 8-16 deadline was a challenge. For example, one  state noted that trying to enroll participants in training by the 8-16  deadline is particularly challenging when dealing with large layoffs  because it is difficult to handle all the logistics, such as notifying workers  and setting up appointments, for a large number of workers within the  deadline. Moreover, officials in the four states we visited also indicated  that the deadline is very confusing to workers. They told us that workers  become confused about which point in time the 8 weeks or 16 weeks apply  to and, as a result, are not sure when the clock starts and stops. We  previously reported that about three-fourths of states responded that  workers, at least occasionally, inadvertently miss the deadline and  consequently lose their eligibility for extended income support. In that  report, we recommended that Labor track the ability of workers to meet  the 8-16 deadline. As of April 2007, Labor had not yet begun gathering  information on the impact of the deadline. In our recent report, we  suggested that in order to make it easier for workers to comply with the  training enrollment deadline, Congress may wish to consider simplifying  the deadline by specifying a single time period that commences when  workers are laid off or petitions are certified, whichever is later.
section_title: Several Factors Limit Participation in the Wage Insurance and Health Coverage Benefits
paragraphs: Several factors, including a short deadline for getting a job and the cost of  buying health coverage, may limit participation in two new benefits  resulting from the TAA Reform Act of 2002. In our site visits, states  reported that the requirement that workers must find a job within 26  weeks to receive the wage insurance benefit was the major factor  preventing more workers from taking advantage of the benefit. An  additional factor that may limit participation in wage insurance by some  older workers is the requirement that for a group of workers to be  certified as eligible, the petitioning workers must have been laid off from a  firm where the affected workers lacked easily transferable skills and a  significant portion of those workers were aged 50 or over. While cost is  one of the most significant factors limiting participation in the health  coverage benefit, some states also reported that the health coverage tax  credit program can be complicated and difficult to understand for both  workers and local case managers.
subsections: section_title: Deadline to Find Employment and Other Requirements Limit Participation in the Wage Insurance Benefit
paragraphs: Few TAA participants take advantage of the wage insurance benefit.   According to Labor officials, in calendar year 2006, 6,316 workers received  the wage insurance benefit. The universe of workers eligible for wage  insurance cannot be estimated because data are not available on the  number of workers certified for TAA who are 50 years old or older and  meet the other eligibility requirements. However, two-thirds of the states  we surveyed reported that 5 percent or less of TAA participants received  wage insurance in fiscal year 2006.  We previously reported in a study of  five layoffs that less than 20 percent of the workers potentially eligible for  the wage insurance benefit received it. In this study, we found that  workers’ awareness of the wage insurance benefit varied greatly—many  workers who were 50 years old and older were simply unaware of the  benefit.  While state or local officials told us they discussed the ATAA  benefit at rapid response meetings or TAA information meetings, workers  were often overwhelmed by the volume of information received after the  layoff, and didn’t necessarily recall some of the specifics.
Although officials in the states we visited for our most recent study believe  the wage insurance benefit is beneficial to older workers close to  retirement, two key factors limit participation. Officials said that one of  the greatest obstacles to participation was the requirement for workers to  find a new job within 26 weeks after being laid off. For example, according  to officials in one state, 80 percent of participants who were seeking wage  insurance but were unable to obtain it because they failed to find a job  within the 26-week period. The challenges of finding a job within this time  frame may be compounded by the fact that workers may actually have less  than 26 weeks to secure a job if they are laid off prior to becoming  certified for TAA. For example, a local case worker in one state we visited  said that the 26 weeks had passed completely before a worker was  certified for the benefit.
Another factor that may limit participation by some older workers is the  requirement that, under the TAA Reform Act, for a group of workers to be  certified, they must have been laid off from a firm where the affected  workers lacked easily transferable skills and a significant portion were  aged 50 or over. Labor interprets a “significant portion” as the lesser of 5  percent of the affected workforce or 50 workers at a firm with 50 or more  workers, or at least 3 workers in a firm with fewer than 50 affected  workers. Labor investigates each petition to see if the firm meets the  requirements, and in fiscal year 2006, nearly 90 percent of TAA-certified  petitions were also certified for the wage insurance benefit. Labor officials  said that eliminating this step of the TAA certification process—that is,  allowing any TAA-certified workers who meet the individual eligibility  criteria for the wage insurance benefit to participate—would decrease the  agency’s investigation workload somewhat and may increase participation  in the wage insurance benefit.
Labor officials told us they are taking steps to overcome the lack of  awareness of wage insurance and promote the benefit by informally  encouraging states to ensure case workers talk about wage insurance  during one-on-one case management sessions. Furthermore, in our most  recent report, we suggested that in order to enable more workers to take  advantage of the wage insurance benefit, Congress may wish to consider  increasing the length of time workers have to become reemployed and  eliminating the requirement that to be certified as eligible for wage  insurance, the petitioning workers must have been laid off from a firm  where the affected workers lacked easily transferable skills and a  significant portion of those workers were aged 50 or over.
section_title: Cost Is a Key Factor Limiting Participation in the Health Coverage Benefit
paragraphs: The high cost of the health coverage benefit to participants is the greatest  barrier to higher participation. State officials said that many laid-off  workers cannot afford to pay 35 percent of their health care premiums  while their primary income is unemployment insurance benefits. IRS  officials reported that the workers’ 35 percent share is among the primary  barriers to participation in the benefit. For example, in the four states we  visited, the average monthly premium for COBRA policies covering two or  more individuals was about $800. The workers’ out-of-pocket cost for  COBRA coverage in these states would be nearly one-fourth of their  monthly UI payment (see table 1).
State-qualified plans are similarly expensive and are often more expensive  than COBRA coverage. Currently, 43 states have such plans, which, among  other requirements, must provide for preexisting conditions. For example,  in one state we visited, the premium for the state-qualified plan for a  family was about $940 per month, while the average COBRA premium was  about $740 per month. The worker’s share of the state-qualified premium  was about $330—-or about 30 percent of the UI benefit—compared to  about $260 for COBRA coverage.
In addition, there is currently a period of up to about 3 months where  workers must cover the full cost of their health premiums before  beginning to receive the advance credit, and these costs are not  reimbursable. IRS officials reported that inability to pay the out-of-pocket  costs between layoff and application for the advance credit is one of the  reasons workers lose eligibility and may be denied the benefit.
While cost is one of the most significant factors limiting participation in  the health coverage benefit, some states also reported that the health  coverage tax credit program can be complicated and difficult to  understand for both workers and local case managers. In our survey,  nearly two-thirds of the states reported that limited IRS guidance on the  benefit was still a challenge. Furthermore, during our site visits, some  state and local officials said that they are not experts on the health  coverage benefit and do not know enough details of the benefit to get  information out to workers and to assist them with the enrollment  process. In some local areas, case managers we interviewed said that they  provide minimal information about the benefit and primarily refer workers  to pamphlets or the IRS call center for details. We previously reported on  the complexity of the health coverage benefit, noting that the process for  workers to become eligible and enroll for the benefit was fragmented and  difficult to navigate. In that report, we recommended to several agencies,  including Labor and IRS, that a centralized resource be made available at  the time individuals must make decisions about purchasing qualifying  health coverage and meeting other eligibility requirements. In February  2007, IRS began distributing to all workers covered by a petition a more  simplified program kit for the health coverage benefit.
section_title: Certification Applied Industrywide May Increase Number Eligible, but Implementation Challenges Exist
paragraphs: Two alternatives are being considered that would expand the current firm  by firm petition certification approach. One approach being considered  would make an industry eligible to be investigated for possible  certification when Labor certifies three petitions from that industry within  180 days. Another approach would require certification of an industry  once a trade remedy had been applied. An industry certification approach  based on three petitions certified within 180 days would likely increase the  number of workers eligible for TAA, but the extent of the increase  depends upon the specific criteria that are used. Using trade remedies for  industrywide certification could also result in expanded worker eligibility  for TAA in a number of industries, but the extent is uncertain. As we  identify in our forthcoming report, either approach presents some design  and implementation challenges.
subsections: section_title: Extent of Increase in Eligible Workers Depends on How Additional Criteria Are Set
paragraphs: From 2003 to 2005, 222 industries had three petitions certified within 180  days and therefore would have triggered an investigation to determine  whether an entire industry should be certified, if such an approach had  been in place at that time. These industries represented over 40 percent of  the 515 industries with at least one TAA certification in those 3 years and  included 71 percent of the workers estimated to be certified for TAA from  2003 to 2005. The 222 are a diverse set of industries, including textiles,  apparel, wooden household furniture, motor vehicle parts and accessories,  certain plastic products, and printed circuit boards.
The proposals for this approach would require that, once an industry  meets the three-petition criterion, Labor investigate to determine whether  there is evidence of industrywide trade effects. Not all 222 industries  would likely be certified industrywide. In its investigation, Labor would  use additional criteria and likely consider such factors as the extent to  which an industry has been affected by imports, changes in production  levels in the industry, or changes in employment levels.
The number of workers that would become eligible for TAA through an  industry certification approach depends on what additional criteria are  established. We used information from the 69 industries for which we had  comprehensive data on petitions, unemployment, trade and production to  estimate the potential increases in eligible workers programwide.  We  found that, if there were no additional criteria beyond three petitions  certified in 180 days, the overall number of workers eligible for TAA might  have nearly doubled, from about 118,000 to about 233,000 in 2005.  If the  trade threshold were set at a 10 percent increase in the import share of the  domestic market, the number of eligible workers might have increased by  approximately 49 percent from 118,000 to about 175,000.  If certification  were limited to industries with a 15 percent increase in any 1 year, the  number of workers eligible for TAA might have increased by  approximately 27 percent to about 150,000.  Finally, if the criterion was a  20 percent increase in the import share in any 1 year, the number of  workers might have increased by about 22 percent, to 144,000.  More  stringent criteria would result in a smaller increase in the number of  workers eligible for TAA.
section_title: Certifying Industries Subject to Trade Remedies Could Increase Eligible Population, but the Extent Is Uncertain
paragraphs: Using trade remedies for industrywide certification could result in  expanded worker eligibility for TAA in a number of industries. The  number of workers eligible for TAA might increase under this approach in  areas in which there have been few or no TAA petitions. For example,  even though ITC found that domestic producers of certain kinds of orange  juice had been injured by imports, there appear to be no TAA petitions for  workers producing orange juice.
However, the number of workers eligible for TAA may not increase  substantially in some areas, in part because of overlap between trade  remedies and TAA petitions. For example, over half of outstanding  antidumping and countervailing duty orders are for iron and steel  products, for which hundreds of TAA petitions have been certified. In  addition, industries with trade remedies may not necessarily have  experienced many trade-related job losses because the International Trade  Commission (ITC) does not focus on employment when determining  whether an industry has been injured, according to an ITC official.  Furthermore, trade remedies are intended to mitigate the trade-related  factors that caused the injury to the industry, so employment conditions in  an industry could improve after the trade remedy is in place.
It is difficult to estimate the extent that industry certification based on  trade remedies would increase the number of workers eligible for TAA  because trade remedies are imposed on specific products coming from  specific U.S. trade partners, and data are not available on job losses at  such a detailed level. The product classifications for a given trade remedy  can be very narrow, such as a dye known as “carbazole violet pigment 23”  or “welded ASTM A-312 stainless steel pipe.”
section_title: Potential Design and Implementation Challenges Exist
paragraphs: Although industry certification based on three petitions certified in 180  days is likely to increase the number of workers eligible for TAA, it also  presents several potential challenges.
Designing additional criteria for certification. Any industrywide  approach raises the possibility of certifying workers who were not  adversely affected by trade. Even in industries that are heavily affected  by trade, workers could lose their jobs for other reasons, such as the  work being relocated domestically. In addition, using the same  thresholds for all industries would not take into account industry- specific patterns in trade and other economic factors.
Determining appropriate duration of certification. Determining the  length of time that an industry would be certified may also present  challenges. If the length of time is too short, Labor may bear the  administrative burden of frequently re-investigating industries that  continue to experience trade-related layoffs after the initial  certification expires. However, if the time period is too long, workers  may continue to be eligible for TAA even if conditions change and an  industry is no longer adversely affected by trade.
Defining the industries. How the industries are defined would  significantly affect the number of workers who would become eligible  for TAA through an industry certification approach. Our analysis  defined industries according to industry classification systems used by  government statistical agencies. However, some of these industry  categories are broad and may encompass products that are not  adversely affected by trade.
Notifying workers and initiating the delivery of services. Notifying  workers of their eligibility for TAA has been a challenge and would  continue to be under industry certification. Under the current  certification process, workers are linked to services through the  petition process. The specific firm is identified on the petition  application, and state and local workforce agencies work through the  firm to reach workers in layoffs of all sizes. For industry certification,  however, there are no such procedures in place to notify all potentially  eligible workers in certified industries. For large layoffs in a certified  industry, agencies could make use of the existing Worker Adjustment  and Retraining Notification (WARN) notices to connect with workers.  However, in smaller layoffs in certified industries, or when firms do not  provide advance notice, workforce agencies may not know that the  layoff has occurred.
Verifying worker eligibility. Verifying that a worker was laid off from  a job in a certified industry to ensure that only workers eligible for TAA  receive TAA benefits may be more of a challenge under industry  certification than under the current system. For example, it may be  difficult to identify the specific workers who made a product in the  certified industry if their employer also makes products that are not  covered under industrywide certification. In addition, determining who  should conduct this verification may also present challenges. A  centralized process conducted by Labor would likely be unwieldy,  while verification by state or local workforce agencies could take less  time, but ensuring consistency across states might prove challenging.
An approach using trade remedies presents some of the same challenges  as an industry certification approach based on three petitions certified in  180 days.
section_title: Concluding Observations
paragraphs: Through our work on the Trade Adjustment Assistance Program since  passage of the Reform Act in 2002 we have identified a number of areas  where Labor and the Congress should take action.  Taking steps to limit  confusion, ease restrictions, and provide support for case management  would facilitate workers’ access to services and benefits.  States’ ability to  assist these workers would be enhanced by an improved process for  allocating training funds.
Mr. Chairman, this concludes my prepared statement. I will be happy to  respond to any questions you or other members of the committee may  have at this time.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For information regarding this testimony, please contact Sigurd R. Nilsen,  Director, Education, Workforce, and Income Security Issues, at (202) 512- 7215. Individuals who made key contributions to this testimony include  Dianne Blank, Wayne Sylvia, Yunsian Tai, Michael Hoffman, and Rhiannon  Patterson.
section_title: Related GAO Products
paragraphs: Trade Adjustment Assistance: Changes to Funding Allocation and  Eligibility Requirements Could Enhance States’ Ability to Provide  Benefits and Services. GAO-07-701, GAO-07-702. (Washington, D.C.: May  31, 2007).
Trade Adjustment Assistance: New Program for Farmers Provides Some  Assistance, but Has Had Limited Participation and Low Program  Expenditures. GAO-07-201. (Washington, D.C.: December 18, 2006).
National Emergency Grants: Labor Has Improved Its Grant Award  Timeliness and Data Collection, but Further Steps Can Improve Process.  GAO-06-870. (Washington, D.C.: September 5, 2006).
Trade Adjustment Assistance: Labor Should Take Action to Ensure  Performance Data Are Complete, Accurate, and Accessible. GAO-06-496.  (Washington, D.C.: April, 25, 2006).
Trade Adjustment Assistance: Most Workers in Five Layoffs Received  Services, but Better Outreach Needed on New Benefits. GAO-06-43.  Washington, D.C.: January 31, 2006.
Workforce Investment Act: Substantial Funds Are Used for Training, but  Little Is Known Nationally about Training Outcomes. GAO-05-650.  Washington, D.C.: June 29, 2005.
Trade Adjustment Assistance: Reforms Have Accelerated Training  Enrollment, but Implementation Challenges Remain. GAO-04-1012.  Washington, D.C.: September 22, 2004.
Workforce Investment Act: Better Guidance and Revised Funding  Formula Would Enhance Dislocated Worker Program. GAO-02-274.  Washington, D.C.: February 11, 2002.
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