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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUMI

ISSUE DATE

April 1, 1986

RESCISSIONS

 

EXPIRATION DATE

April 30, 1987

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 24-86

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

BARBARA ANN FARMER
Acting Administrator
for Regional Management

 

SUBJECT

:

Implementation of the State Income and Eligibility Verification System

 

  1. Purpose. To provide additional guidance to States on implementation of the income and eligibility verification system.

  2. References. Section 2651, P.L. 98-369; UIPL 1-85; Final rules at 20 CFR Part 603, published in the Federal Register on February 28, 1986.

  3. Background. Section 2651 amended Title XI of the Social Security Act to establish an income and eligibility verification system for exchange of information among State agencies administering programs for AFDC, Medicaid, Food Stamps, UI, and any State program under a plan approved under Title I, X, XIV, or XVI of the Social Security Act. The guidance in this UIPL is intended to supplement UIPL 1-85 and the final regulations. The provisions took effect April 1, 1985, with the exception of the requirement for employers to report quarterly wages which is effective not later than September 30, 1988.

  4. Social Securitv Administration (SSA) Benefit Data. Section 603.8 of the Final Rule requires SESAs to obtain information from the Social Security Administration and other requesting agencies as may be needed in verifying eligibility and benefit amounts. States where benefit eligibility and/or amount is affected by receipt of a Social Security or disability retirement pension should enter into an agreement to obtain benefit information from SSA. Such agreements were to be entered into by April 1, 1985 (see paragraph 7 below). We recommend verification in those instances where the claimant cannot produce documentary evidence of entitlement or benefit amount, and in those instances where the individual is retirement age but indicates non-receipt of a pension, or in other cases where there is a question regarding entitlement to a pension or, if needed, to verify the accuracy of a social security number (SSN).

    The SSA administers and maintains records on a wide variety of benefit programs. SSA will supply selected information to State agencies having an agreement with them for the data. SSA has two basic systems for providing this information. The first is Bendex, which permits mass cross-matching of computer files on a periodic (usually monthly) basis. Once an inquiry is made, the periodic cross-matching of an individual(s) will continue until the inquiry is deleted by the State agency. The other method is the Third Party Query System. This is a one time request through a SSA field office involving use of a mark-sensed card for individual cases. Responses are generally available in 24 hours.

    The SSA will enter into a Bendex agreement with only one agency in each State. In all States, this is currently the State welfare agency. Therefore, SESAs electing to use the Bendex system will have to reach an agreement with the State welfare agency for access to the system. Periodically the welfare agency transmits a tape inquiry to SSA containing the name, SSN, date of birth, sex, and other data information. SSA matches for valid SSNs, and if valid will match against two data bases. The first data base is SSA's Title II beneficiaries. It contains primary and secondary social security pension data, as well as Medicaid, railroad retirement, and disability payments. The other data base contains earnings reported by employers on Internal Revenue Service (IRS) forms, primarily, the W-2 and 1099P. This includes regular wages, self-employment and agricultural earnings, and private and governmental pensions.

    If an individual's SSN matches a SSN in one or both data bases, the State welfare agency will receive an initial output record on tape and subsequent records everytime a data base is updated unless the State agency advises SSA to delete the individual(s) from the record. The output record will contain the name, month and year of birth, and sex of the individual assigned the SSN, even if it differs from the inquiry. The record will also contain Title II data including whether an individual is a primary or secondary beneficiary. It will also show the most recent gross yearly earnings reported by employers coded by type of earnings. The output will also list the name, address and Federal Employer Identification Number of the employer reporting the earnings. Since SSA's earnings data base is based on IRS forms submitted, the output is not current. For example, SSA updated the 1983 data file with 1984 data in March, August, and November 1985. This earnings file does not break down whether private or governmental pensions are primary or secondary since they are not reported on the IRS forms in that manner.

    The Third Party Query System, based on an individual request, will yield only Title II information if there is a match of SSNs. The earnings data base and SSN verification is not part of the system. SESAs will have to reach an agreement with a SSA field office in the State for access to this system.

    Although IRS is required to disclose information on unearned income, ETA is not requiring SESAs to sign agreements with IRS for access to this data.  Unearned income is normally not a factor in determining UI eligibility.

  5. Standardized Formats. As required by the Act, SESAs will be furnished standardized formats for tape exchange of data. The Secretary of Health and Human Services is issuing standardized formats for purposes of crossmatching and verification. These formats were developed based on an 18-State pilot project and the results of a task force. ETA will transmit these formats in a UIPL when they are released and request SESA input on any difficulties in utilizing them. Comments received from the SESAs will be forwarded to the Department of Health and Human Services for consideration. It is expected that SESAs will utilize the formats for the interstate exchange of data to requesting agencies and on an intrastate basis to the extent it is necessary to ensure the exchange of data as required in the Act. The formats will not be required for existing border crossmatches between SESAs.

  6. Agreements between SESAs and Requesting Agencies. Effective April 1, 1985, agencies covered by the income and eligibility verification system must exchange information that is needed and productive in verifying eligibility and benefit amounts. In order to exchange information, SESAs must sign agreements with agencies providing information as well as those requesting information. When the SESA is the provider, rather than the user of wage and/or benefit data, the using agency should initiate the agreement process. This applies to AFDC, Food Stamps, Medicaid, Title XVI (SSI), and Child Support.

    The law also refers to State programs under Title I (Old Age Assistance), Title X (Aid to the Blind), Title XIV (Permanently and Totally Disabled) and Title XVI (Aid to the Aged, Blind or Disabled). These programs are operative only in Guam, Puerto Rico, and the Virgin Islands. The SESA must be able to enter into an agreement, which includes having statutory authority to release data, and preparing in advance the procedural arrangements, such as forms and timing, necessary to complete an agreement by April 1, 1985 (See paragraph 7 below). In addition, SESAs are responsible for ensuring that agreements adequately provide for users' safeguarding these data and users' reimbursement of SESA costs for providing the information.

    Agreements already in place (i.e., with AFDC, Child Support Enforcement, and Food Stamp agencies) may be adequate or may require modification. Note that under the rules, SESAs may enter into agreements with a single agency which can redisclose information to other agencies, so long as such redisclosure is provided for in the agreement.

  7. Waiver of April 1, 1985, Deadline for Agreements. As pointed out in paragraph 4, the statute provides that SESAs were to enter into agreements with SSA by April 1, 1985. The Secretary of Labor may, by waiver, grant a delay in this effective date if the State submits a plan describing a good faith effort to comply. The waiver may not extend beyond September 30, 1986.

    Any State which could not meet the April 1, 1985, deadline is to request a waiver from the Secretary of Labor via the appropriate regional office within 90 days of the date of final publication of the rules in the Federal Register. Section 603.9 of the Final Rule provides for this deferral in requesting a waiver of the effective date. The request should include in detail what the State did to conclude the agreements on time, why agreements were not reached, plans for completing and signing agreements, and firm target dates for completion.

    Requests for waiver should be signed by the Governor or his formally appointed designee.

    Copies of signed agreements are to be furnished to the appropriate regional office.

  8. Quarterly Wage Reporting. Those request reporting States which enact legislation to adopt quarterly wage reporting for UI purposes are eligible for funding from Title III grants for start-up and continuing costs. However, funds are not available for planning activities prior to the enactment of legislation.

    States which elect to operate a wage-record system apart from the UI program administration, but which will provide crossmatch capabilities with benefit payments, will not receive advance planning or developmental funds from Title III Grants. However, Title III administrative grant funds (from the State's existing benefit payment control allocation) may be utilized for the SESA's share of ongoing use of the system in accordance with cost principles and cost allocation methodologies set forth in OMB Circular A-87, as codified at 41 CFR 1-15.7. SESAs are encouraged to participate in the development of any such cost allocation plan and/or carefully review it to ensure costs reflect use of the wage-record system for crossmatch purposes only.

    ETA has considered and has consulted with the other Federal agencies administering the needs-based programs as to possible alternatives to quarterly wage reporting. Any such alternative system must meet program needs to verify eligibility and benefits of applicants and recipients for AFDC, Medicaid, Food Stamps, Child Support, and UI, as well as any State program under a plan approved under Title I, X, XIV, or XVI of the Social Security Act.

    After considering possible alternatives, the ETA and the other agencies believe there is no alternative system to quarterly wage reporting which is as timely, comprehensive and cost effective for verifying eligibility and benefits for all programs. Accordingly, by September 30, 1988 (Quarter beginning July 1, 1988) all States electing to have a wage record system should have an approved system in place for employers to report quarterly wages at least to the extent required to be reported under the State Employment Security Law to an agency (which may be the unemployment compensation agency).

    Any State seeking waiver of this requirement should file an application with the Secretary of Labor. The application must include a full analysis of the alternative system being as timely, comprehensive, and cost effective in comparison with quarterly wage reporting.

  9. Other Actions That Were Necessary by April 1, 1985.  The law also requires that SESAs obtain social security numbers (SSN) from claimants and use the numbers (as identifiers) in maintaining records.

    Another requirement is that claimants be advised of the potential disclosure of their data to other agencies. Under Section 1137(a)(6) of the Social Security Act, the SESAs are required to notify claimants at the time of filing an initial claim and periodically thereafter that information available through the system will be requested and utilized. Provision of a printed notice on or attached to any subsequent additional claims will satisfy the requirement for periodic notice thereafter as required by in Section 603.4 of the Final Rule.

    In addition, if not already provided for on the initial claim form, SESAs should consider adding a statement advising claimants that the information they provide is confidential and that this confidentiality will be protected.

  10. OMB Approval. These reporting requirements are approved under OMB No. 1205-0238. OMB expiration is December 31, 1988.

  11. Action Required. SESAs are requested to take steps to implement the amendments as explained above.

  12. Inquiries. Direct inquiries to appropriate regional office.