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

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEURL

ISSUE DATE

March 1, 1990

RESCISSIONS

None

EXPIRATION DATE

March 31, 1991

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 17-90

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

DONALD J. KULICK
Administrator
for Regional Management

 

SUBJECT

:

The Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239) and the Joint Resolution Increasing the Statutory Limit on the Public Debt (Public Law 101-140) -- provisions Affecting the Federal-State Unemployment Compensation Program

  1. Purpose. To advise State agencies of the provisions of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89), P.L. 101-239, and the Joint Resolution increasing the statutory limit on the public debt (Debt Act) (P.L. 101-140) which affect the Federal-State Unemployment Compensation Program.

  2. References.  Sections 7101, 7102, and 10202(c)(1) of OBRA 89; Sections 202 and 203 of the Debit Act; UIPL 24-89, dated April 4, 1989.

  3. Background.  On December 19, 1989, the President signed into law the Omnibus Budget Reconciliation Act of 1989, P.L. 101-239, which contains several provisions affecting the unemployment compensation (UC) program.  On November 8, 1989, the President signed into law a Joint Resolution increasing the statutory limit on the public debt, P.L. 101-140, which also contained several provisions affecting the UC program.  Following is a summary of the changes made.

    Sections 7101 and 7102 of OBRA 89 amend the Internal Revenue Code IRC of  1986  to restore, with certain changes, exclusions from an employee's gross income for amounts paid by an employer for certain educational assistance and amounts contributed by an employer to a qualified group legal services plan for an employee.  Such amounts excluded from an employee's gross income are excluded from the definition of  "wages" under Sections 3306(b)(12) and 3306(b)(13) of the Federal Unemployment Tax Act (FUTA).

    Section 10202(c)(1) of OBRA 89 excludes from the FUTA definition of "wages" refunds required under Section 421 of the Medicare Catastrophic Coverage Act of 1988 (P.L. 100-360).

    Sections 202 and 203 of the Debt Act rescind Section 89, IRC, and Section 3306 (t), FUTA, which made Section 89 applicable to wages under FUTA.  In addition, Section 203 amends Section 125, IRC, pertaining to cafeteria plans.  Section 3306 (b) (5) (G), FUTA, excludes from the FUTA definition of wages certain amounts paid under such plans.

    Section 204(a) of the Debt Act amends Section 129 (d), IRC, pertaining to dependent care assistance.  Such amounts are excluded from the definition of wages under Section 3306 (b) (13), FUTA.

    Because the IRS has the primary authority for administering the FUTA tax provisions and will be responsible for interpreting and applying the above amendments, this UIPL is issued primarily for informational purposes.

    State agencies should also note that Section 11002 of the OBRA 89 affected sequestration under the Gramm-Rudman-Hollings Act.  This aspect of OBRA 89 is dealt with in a separate issuance.

  4. Action Required. State agencies are requested to notify appropriate staff of these provisions.

  5. Inquiries. Inquiries should be directed to your Regional Office.

  6. Attachments.

    I.  Text, explanation and interpretation of changes to Federal-State UC Programs.

    II.  Full text of Sections 201 through 204 of the Debt Act.