Background: Under existing law, the Unemployment Compensation (UC) program provides up to 26 weeks of benefits. Unemployment benefits may be extended for an additional 13 or 20 weeks under the permanent Extended Benefits (EB) program for states with higher rates of unemployment. Originally enacted in 2008, the Emergency Unemployment Compensation (EUC) program supplemented these existing programs with a temporary program to provide additional benefits. Since enactment, the EUC program has been extended 11 times, with the most recent modifications enacted in February 2012. These program changes included: changes to the number of weeks available in each EUC benefit tier; the state unemployment rates required to activate a tier in each state; and a requirement that states provide reemployment and eligibility assessments to most EUC claimants. Originally, the EUC program was federally financed from the extended compensation account in the Unemployment Trust Fund. Since the passage of the 2009 stimulus, the program has been financed from general funds of the U.S. Treasury, which states do not need to repay.
Floor Situation: The Senate is now considering H.R. 3979, the Volunteer Emergency Responders bill, the legislative vehicle for the Unemployment Insurance Extension. On Monday, Senator Reid filed cloture on Reid substitute amendment #2874 and on H.R. 3979. Reid #2874 mirrors S. 2149. The amendment tree is filled.
Executive Summary: The Reid amendment matches S. 2149, legislation sponsored by Senators Reed, Heller, Merkley, Collins, Booker, Portman, Brown, Murkowski, Durbin, and Kirk. The legislation would extend unemployment benefits for five months, retroactive to the start of 2014; eliminate federal unemployment payments to millionaires and billionaires; extend funding for reemployment and eligibility reassessment activities to those receiving EUC benefits; and require a study on the use of work suitability requirements to ensure unemployment benefits are provided to people actively looking for work. The legislation is offset with pension smoothing, an extension of the customer user fee, and the prepayment of flat-rate premiums to the Pension Benefit Guaranty Corporation.
The National Association of State Workforce Agencies recently sent a letter raising “significant concerns” with implementation of similar legislation. These concerns include:
- Administrative issues and costs associated with the legislation might cause some states not to participate. Issues include: a large number of EUC overpayments created by retroactively paying claims; states not having sufficient time to update their laws to conform with the changes in the bill as many state legislatures have completed their session for the year; and calculating proper EUC tiers.
- Backdating EUC claims would “make it nearly impossible” to verify claimants were actively seeking work during the specific week, a key factor in determining eligibility.
- The bill’s “millionaire provision” would be difficult to administer since the UI system is not means-tested, so no data are collected on adjusted gross incomes.
The Reid amendment would adjust some technical tax rules for business contributions to employee pensions. It would be a five-year delay in certain rules, two years of which are retroactive, to pay for five months of extended unemployment benefits.
Under current law, businesses reduce volatility in the amount they have to contribute to pensions through a technique in the tax code known as “interest rate smoothing.” The rate used for pension funding must be adjusted each year so that it falls within a specified percentage range above or below the 25-year historic average of interest rates. The range is currently 80-120 percent of the 25-year average and is scheduled to increase after 2015 to 70-130 percent. Under the Reid amendment, the range would be 90-110 percent until 2018, when it would gradually increase at the previous pace.
Extends for five month the Emergency Unemployment Compensation program, which expired on December 31, 2013, to June 1, 2014. The extension would be retroactive to the end of 2013.
Extends for five months the emergency changes made to the permanent Extended Benefits program to provide 100 percent federal funding, compared to the 50-50 cost sharing between states and the federal government under permanent law.
Extends funding for reemployment services and for reemployment and eligibility assessment activities. The bill stipulates times when these services should be provided to recipients.
Permits states to renegotiate a new agreement with the Department of Labor regarding benefit amounts going forward. Currently, as a precondition of participating in EUC, states are prohibited from reducing their weekly benefit amounts.
Prohibits EUC benefits to any person whose adjusted gross income in the preceding year was $1 million or more. People with incomes above $1 million could continue to receive regular unemployment compensation benefits.
Requires the Comptroller General of the United States to conduct a study on the use of work suitability requirements to ensure that benefits are being provided to people who are actively looking for work and truly looking for employment. Within 90 days of enactment, the Comptroller General is to brief Congress on the status of the study, and provide preliminary recommendations for legislation and administrative action determined appropriate. A “suitable work” requirement currently exists in the regular UC program in every state and in the EB program, but not in the EUC program.
Extends for an additional five years interest rate smoothing for pension contributions at the 10 percent collar, thus allowing businesses the option to lessen their pension contribution.
Allows single-employer pension plans to prepay up to five years of their flat-rate premiums to the Pension Benefit Guaranty Corporation.
Extends the user fees collected by U.S. Customs and Border Protection through fiscal year 2024. Under the Bipartisan Budget Act enacted in December 2013, certain fees end on September 30, 2023.
Amends the Internal Revenue Code of 1986 to exclude certain emergency services and other bona fide volunteers’ worker hours from being counted when determining if a governmental or tax-exempt employer is subject to the health care law’s employer mandate. This section codifies an IRS regulation issued by the Treasury Department on February 10, 2014.
The administration strongly supports Senate passage of the Senate amendment to H.R. 3979, the Emergency Unemployment Compensation Extension Act of 2014.
According to the Congressional Budget Office, the Reid amendment would increase the deficit in 2014 by $8.155 billion, but reduce it by $9.389 billion over five years, and by $88 million over 10 years.
According to the Senate Budget Committee Republican staff, the Joint Committee on Taxation has indicated that the pension smoothing provision in the bill would reduce total revenues (and increase the deficit) by $10.7 billion over the fiscal year 2024-2034 period.
Regarding Section 12 of the Reid amendment, CBO and the staff of the JCT estimate that it would have no significant budgetary effect because the Treasury Department has issued final regulations that provide the same treatment for those groups. Enactment would not affect direct spending or revenues, so pay-as-you-go procedures do not apply.
The amendment situation remains unclear at this time.