Welfare Reform: Blessing or Burden?

03/05/07

New regulations that require states to place more welfare recipients into jobs and take them off public assistance could increase administrative burdens for employers. The regulations, which require states to be in compliance by October 1, 2006, revise the Temporary Assistance for Needy Families (TANF) program. According to the U.S. Department of Health & Human Services, the revisions are necessary under the Deficit Reduction Act of 2005. The department is encouraging states to minimize requests for documentation from employers of employees’ hours of participation in unsubsidized employment. Whether all states will do that isn’t certain. However, the federal regulations impose new requirements on them that may result in additional state legislation.

Learn how welfare reform affects your company
Welfare statistics are both encouraging and discouraging. Family welfare rolls have plummeted by 57 percent since 1996 when welfare reform became law. But, as caseloads have decreased, so too have work participation requirements in many states. Consequently, nearly 60 percent of adults in the TANF program do not participate in any work or work preparation activities in a typical month.¹ That’s unacceptable under the Deficit Reduction Act of 2005, which has put states on notice that work participation requirements are being strengthened. Here is a closer look at the changes and how they may result in added administrative burdens and other challenges for employers:

Work hours
Each state must have in place a system (verification plan) for determining whether the hours reported toward a work participation rate correspond to the hours eligible individuals actually work. Generally, the average should be at least 30 hours a week for an individual (20 hours for a single custodial parent of a child under age 6, and 35 or 55 hours for two parents — depending on whether they receive federally funded child care).

Suppose a worker averages 32 hours of work a week. So long as there’s no conflicting information, the state may report 32 hours of participation weekly for a maximum of six months. But, at the end of six months, the state must obtain new documentation or reverify the worker’s current, actual average hours. And if the worker requests a welfare grant adjustment due to increased or decreased wages, documentation would be required, and actual hours of participation would be restated. Either way, the employer would have more paperwork.

Pay stubs can be used to document hours of participation in unsubsidized employment and can be provided by either the employee or employer at state-specified periods. Other possibilities include timecards, sign-in and sign-out sheets, and rosters with recorded hours of work. However, reporting "scheduled" hours of participation is inconsistent with the standard and won’t be accepted.

Work activities and the FLSA
States retain the right to assign an individual to a combination of activities — blending school and work or training and work, or job search and community service, for example. But employers need to weigh this flexibility by states against the generally inflexible Fair Labor Standards Act (FLSA). Let’s say a work-eligible individual participates in a work experience or community service program that is subject to the FLSA. That person cannot be required to participate in a work activity for more hours than the welfare grant divided by the minimum wage. For some families, the TANF grant divided by the minimum wage will not result in enough hours to satisfy TANF’s minimum hourly requirements.²

The extent of the burden of welfare reform on employers won’t be entirely understood until after October 1, but you should be prepared nevertheless. President Bush considers these new regulations as a way to complete "the unfinished business of welfare reform." More people will transition from welfare dependence to work and self-sufficiency, and employers are expected to accommodate them.

¹Source: 2004 fiscal year data released by the Department of Health & Human Services, June 28, 2006.
²Source: Federal Register, June 29, 2006, Volume 71, Number 125.