Changes in Unemployment Insurance Legislation in 1996

Article excerpt

New Jersey enacted a temporary emergency unemployment benefits program; most States established a system for withholding of Federal income tax from unemployment benefits

In 1996, Congress enacted the Small Business Job Protection Act of 1996 (P.L. 104-188), which made several changes affecting the unemployment compensation program. The Act reinstated and made permanent the Federal Unemployment Tax Act exemption for wages paid to certain aliens (known as H-2A workers) who are admitted to the United States to perform agricultural labor. Also, the definition of "direct sellers" was expanded to include newspaper carriers and distributors, effectively designating these individuals as independent contractors and thus ineligible for any benefits arising out of status as an employee. Finally, the employment tax status of certain fishery workers was clarified. The law permits exclusion from coverage of services performed by these individuals when certain criteria are met, among them that the average size of the crew on trips made during the preceding four calendar quarters was fewer than 10 individuals. In addition, the exemption applies if the crew member receives certain cash payments. Specifically, the cash payment cannot exceed $ 100 per trip, must be contingent on a minimum catch, and must be paid solely for additional duties (such as serving as mate, engineer, or cook) for which additional cash remuneration is customary.

Also enacted was the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193), which requires each State to establish and operate an automated State Directory of New Hires by October 1, 1997, that will contain information supplied by employers on each newly hired employee. A report must be furnished for each newly hired employee and contain the name, address, and Social Security number of the employee, and the name, address, and assigned identification number of the employer under the Internal Revenue Code of 1986. A State with a new-hire reporting law already in existence has until October 1, 1998, to meet most requirements for the State directory system. The Governor of each State will determine the State entity responsible for collecting and maintaining the new-hire information.

The Act also requires the U.S. Secretary of Health and Human Services to establish and maintain within the Federal Parent Locator Service a National Directory of New Hires by October 1, 1997. The national directory will consist of new-hire information, as well as wage and unemployment compensation information that the State unemployment insurance agency must furnish to the Secretary of Health and Human Services. The national directory is to be used for locating individuals to establish paternity, and to establish, modify, or enforce child support orders.

Thirty-five(1) States amended their unemployment insurance laws to establish a system for withholding Federal income tax from unemployment benefits, so that withholding can occur at the option of a claimant.

Colorado and Maryland amended their laws to exclude from coverage services performed by aliens who are admitted to the United States under a "q" visa.(2)

Alaska, Georgia, New Hampshire, Tennessee, and Virginia increased their maximum weekly benefit amount.

Following is a summary of some significant changes in State unemployment insurance laws during 1996.


Administration. Beginning January 1, 1997, individuals may elect to have Federal income tax withheld from their unemployment benefits.


Financing. An employer's rate of contribution is 80 percent (was 82 percent) of the average benefit cost rate, multiplied by the employer's experience factor plus the fund solvency adjustment. A State Training and Employment Program was created, to last until June 30, 1998. The program will finance and award grants to employment assistance and training entities that will, in turn, use the monies to foster jobs and increase training opportunities within the State. …