refer to UPLC
U. S. DEPARTMENT OF LABOR
Bureau of Employment Security
Washington 25, D. C.
Program Letter No. 661
June 7, 1962
TO: ALL STATE EMPLOYMENT SECURITY AGENCIES
SUBJECT: The Escheat of Uncashed Checks Drawn Against the Unemployment Compensation Benefit or Administration Fund Accounts to the General Fund of the State
It has come to our attention that, in some States, when checks drawn on the State's benefit account or the administrative fund account remain uncashed beyond the period within which they must be cashed, the funds represented by such checks revert to the general fund of the State. Such a procedure, depending upon the interpretations of the provisions of its employment security law by the State, raises a queetion of either conformity or compliance with Federal requirements.
1. CHECKS DRAWN AGAINST THE UNEMPLOMENT COMPENSATION BENEFIT ACCOUNT.
Section 303(a)(5) of the Social Security Act and section 3304(a)(4) of the Federal Unemployment Tax Act require that for approval a State law must contain provision for:
"Expenditure of all money withdrawn from an unemployment fund of such State, in payment of unemployment compensation...and for refunds of sums erroneously paid and refunds paid in accordance with the provisions of 3305(b) of the Federal Unemployment Tax Act..."
The term "compensation" is defined in section 3306(h) of the Federal Unemployment Tax Act as follows:
"For the purpose of this chapter, the term 'compensation' means cash benefits payable to individuals with respect to their unemployment."
Since section 303(a)(5) and 3304(a)(4) have been construed to mean that money can be withdrawn from a State's unemployment fund only to pay cash benefits to unemployed individuals, or to refund sums erroneously collected, money cannot be withdrawn from such fund to be deposited in the State's general fund.
All State employment security laws contain the provision required by section 303(a)(5) and 3304(a)(4). If a State interprets that prmision of its law to permit checks for benefits or for refund of erroneous contributions which remain uncashed to be escheated to the State's general fund, a question of conformity with the Federal statutes is raised. If the State, on the other hand, interprets the provision of its law as prohibiting such transactions but money in the amount of uncashed checks for benefit or refunds is, in fact, transferred from the unemployment fund to the general fund, a question of compliance under section 303(b)(2) of the Social Security Act and section 3304(c) of the Federal Unemployment Tax Act is raised.
2. CHECKS DRAWN AGAINST THE ADMINISTRATION FUND ACCOUNT.
Section 303(a)(8) of the Social Security Act provides:
"The Secretary of Labor shall make no certification for payment to any State unless he finds that the law of such State, approved by him under the Federal Unemployment Tax Act, includes provision for---
"(8) the expenditure of all moneys received pursuant to section 302 of this title solely for the purposes and in the amounts found necessary by the Secretary of Labor for the proper and efficient administration of such State law;"
All State employment security laws contain the provision required by section 303(a)(8).
The Secretary of Labor has determined that withdrawal of money in the amount of uncashed checks drawn on the administrative fund account for transfer to the general fund is not an expenditure necessary for the proper and efficient administration of the State's employment security law. Again, whether such withdrawal of funds raises a conformity or compliance question depends upon the State's interpretation of its law. If the law is interpreted to permit the withdrawal and transfer of such amounts, a question of conformity is raised. If the law is interpreted as prohibiting such withdrawals and transfers, but such withdrawals and transfers are made, then a question of compliance is raised.
If the practice of escheating such uncashed checks to the State's general fund has been followed, the State should discontinue the practice immediately and take the necessary steps to restore to the benefit account or the administration fund account, as the case may be, any amounts which have been transferred from such account to the general fund.
/s/ ROBERT C. GOODWIN
Robert C. Goodwin