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Testimony before the Committee on Ways and Means, House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 10:00 a.m. EDT: 

Thursday, June 14, 2007: 

Trade Adjustment Assistance: 

Changes Needed to Improve States' Ability to Provide Benefits and 
Services to Trade-Affected Workers: 

Statement of Sigurd R. Nilsen, Director: 
Education, Workforce, and Income Security Issues: 

GAO-07-995T: 

GAO Highlights: 

Highlights of GAO-07-995T, a testimony before the Committee on Ways and 
Means, House of Representatives 

Why GAO Did This Study: 

The Trade Adjustment Assistance (TAA) program, administered by the 
Department of Labor (Labor), is the nation’s primary program providing 
income support, job training, and other benefits to manufacturing 
workers who lose their jobs as a result of international trade. In 
fiscal year 2006, Congress appropriated about $900 million for TAA, 
including about $220 million for training. GAO has conducted a number 
of studies on the TAA program since the program was last reauthorized 
in 2002. This testimony draws upon the results of two of those reports, 
issued in 2006 and 2007, as well as ongoing work, and addresses issues 
raised and recommendations made regarding (1) Labor’s administration of 
the TAA program, (2) the challenges states face in providing services 
to trade affected workers, (3) the factors that affect workers’ use of 
the wage insurance and health coverage benefits, and (4) the impact of 
using industrywide certification approaches on the number of workers 
potentially eligible for TAA. 

What GAO Found: 

Labor could improve the way it administers the program in two key 
areas—the process it uses to allocate training funds and its tracking 
of program outcomes. Labor’s process for allocating training funds 
presents two significant challenges to states. First, the amount states 
receive at the beginning of the fiscal year does not adequately reflect 
the current demand for training services in the state. Second, Labor 
distributes a significant amount of funds to most states on the last 
day of the fiscal year, even to states that have spent less than 1 
percent of the current fiscal year training allocation. Regarding 
program outcomes, TAA nationwide performance data are incomplete and 
may be inaccurate. We recommended that Labor develop procedures to 
better allocate the training funds and improve data. Labor recently 
noted that it would examine its processes. 

States face challenges in providing services to workers, including the 
lack of flexibility to use training funds to provide trade-affected 
workers with case management services, such as counseling to help them 
decide whether they need training and which training would be most 
appropriate. States receive no TAA program funds for case management 
and must either use their limited administrative funds or seek 
resources from other programs, such as those funded by the Workforce 
Investment Act. States also reported that their efforts to enroll 
workers in training are sometimes hampered by the training enrollment 
deadline and that workers find the deadline confusing. We have 
suggested that Congress consider providing states the flexibility to 
use training funds for case management and simplifying the training 
enrollment deadline. 

Few TAA participants take advantage of the wage insurance and health 
coverage benefits, and several factors limit participation. For 
example, several states reported that the requirement that workers must 
find a job within 26 weeks to receive the wage insurance benefit was 
the major factor preventing more workers from taking advantage of the 
benefit. Regarding the health coverage benefit, several states told us 
that high out-of-pocket costs may discourage workers from using the 
benefit. Furthermore, states also reported that the health coverage 
benefit can be complicated and difficult to understand. We have 
suggested that the Congress may wish to consider increasing the length 
of time workers have to become eligible for wage insurance. In 
addition, we also recommended that a centralized resource be developed 
to assist workers with their questions about health coverage. In 
response, the agency has developed new simplified materials. 

Finally, an industry certification approach based on three petitions 
certified within any 180-day period would likely increase the number of 
workers eligible for TAA, potentially doubling those eligible. The 
approach also presents some design and implementation challenges. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-995T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Sigurd Nilsen at (202) 
512-7215 or nilsens@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss the challenges states have 
faced in implementing some aspects of the Trade Adjustment Assistance 
Act (TAA) program. We have conducted a number of studies on the TAA 
program since the program was last reauthorized in 2002, and my 
testimony today will focus primarily on the results of that work as 
well as from our ongoing work.[Footnote 1] Today I'll be talking about 
issues we identified and our recommendations for improving the program. 

The Trade Adjustment Assistance program, established in 1962 and 
administered by the Department of Labor (Labor), is the nation's 
primary program providing income support, job training, and other 
benefits for manufacturing workers who lose their jobs as a result of 
international trade. In fiscal year 2006, Congress appropriated about 
$655 million for income support payments and another $220 million for 
training for trade-affected workers. In 2002, Congress made a number of 
key changes designed to expand benefits and decrease the time it takes 
to get workers into services. Among the changes, the act: 

* established a deadline for workers to enroll in training, after they 
have been laid off or their petition has been approved, in order to 
maintain eligibility for extended income support payments; 

* created a wage insurance benefit for workers age 50 and older, 
subsidizing the difference between the prior and new wages of some 
trade-affected workers who find reemployment quickly; and: 

* created a health coverage tax credit to help trade-affected workers 
pay for health insurance. 

In order for workers to receive TAA benefits and services, Labor must 
certify that workers in a particular layoff have been adversely 
affected by international trade. The certification process begins when 
a petition is filed with Labor on behalf of a group of laid-off 
workers. Labor then surveys the firm undergoing the layoff and its 
customers and also reviews data on the firm's industry to determine 
whether it meets the criteria for certification. Congress is now 
considering approaches that would facilitate certifying entire 
industries for TAA. One approach being considered would make an 
industry eligible to be investigated for possible certification when 
Labor certifies three petitions from that industry within 180 days. An 
investigation would determine whether the entire industry has been 
affected by trade and, therefore, whether workers in any future layoff 
in that industry should automatically be eligible for TAA. 

In preparation for reauthorizing the program, you asked us to provide 
information on some of the key issues identified in our work that 
should be addressed in reauthorization. In addition, you asked us to 
analyze the impact of an alternative industrywide approach to 
certifying TAA petitions. My testimony today will provide information 
and highlight our recommendations on (1) Labor's administration of the 
TAA program, (2) the challenges states face in providing services to 
trade-affected workers, (3) the factors that affect workers' use of the 
wage insurance and health coverage benefits, and (4) the impact of 
using industrywide certification approaches on the number of workers 
potentially eligible for TAA. 

To address the first objective, we drew upon our most recent report and 
a 2006 report on TAA performance data.[Footnote 2] Our recent report 
was based, in part, on a survey of the 46 states that received an 
initial allocation of TAA training funds in federal fiscal year 2006, 
and a supplemental survey to collect additional financial information 
on fiscal year 2006 training expenditures and obligations. Information 
on performance data is based primarily on a survey of 46 states 
conducted between November 2005 and January 2006 and on site visits to 
five states--California, Iowa, Ohio, Texas, and Virginia. To answer the 
second and third objectives, we interviewed Labor and Internal Revenue 
Service (IRS) officials and visited state and local officials in four 
states--California, Massachusetts, Michigan, and North Carolina. We 
also analyzed Labor's quarterly activity reports and IRS's data on the 
health coverage benefit. To address the fourth objective, we 
interviewed officials at Labor and the International Trade Commission 
and analyzed Labor's data on TAA petitions from calendar year 2003 to 
2005, the Bureau of Labor Statistics' Mass Layoff Statistics data, and 
the Census Bureau's data on trade and production, as well as the 
International Trade Commission's data on trade remedies. We conducted 
our work in accordance with generally accepted government auditing 
standards. 

In summary, our work shows that Labor could improve the way it 
administers the program in two key areas--the process it uses to 
allocate training funds to states and its tracking of program outcomes. 
Labor's process for allocating training funds does not adequately 
reflect the current demand for training services in the state, and 
Labor distributes additional funds to states regardless of whether they 
need them. Regarding program outcomes, we found that TAA performance 
data are incomplete and may be inaccurate. For example, only half the 
states are including all participants, as required by Labor. States 
face challenges in providing services to workers, including the lack of 
flexibility to use training funds to provide trade-affected workers 
with case management services, such as counseling to help them decide 
whether they need training and which training would be most 
appropriate. States receive no TAA program funds for case management 
and must either use their limited administrative funds or seek 
resources from other programs, such as those funded by the Workforce 
Investment Act (WIA). States also reported that their efforts to enroll 
workers in training are sometimes hampered by the training enrollment 
deadline and that workers find the deadline confusing. Few TAA 
participants take advantage of the wage insurance and health coverage 
benefits, and several factors limit participation. For example, several 
states reported that the requirement that workers must find a job 
within 26 weeks to receive the wage insurance benefit was the major 
factor preventing more workers from taking advantage of the benefit. 
Regarding the health coverage benefit, several states told us that high 
out-of-pocket costs may discourage workers from using the benefit. 
Finally, an industry certification approach based on three petitions 
certified within any 180-day period would likely increase the number of 
workers eligible for TAA--potentially doubling those eligible--but also 
presents some design and implementation challenges. For example, using 
an industrywide approach raises the possibility that workers who have 
not been affected by trade will be certified. We made a number of 
recommendations to Labor to address the issues we identified, as well 
as suggested that Congress make changes during reauthorization to 
improve the program. 

Background: 

The TAA program was designed to assist workers who have lost their jobs 
as a result of international trade. The program provides two primary 
benefits to these workers--training and extended income support. In 
addition, as a result of the TAA Reform Act of 2002, workers also have 
access to wage insurance and health coverage benefits. In order to be 
eligible for any of these benefits, Labor must certify that a layoff 
was trade affected. 

TAA Benefits and Services: 

Under TAA, workers enrolled in the program have access to a variety of 
benefits and services, including the following: 

Training. Participants may receive up to 130 weeks of training, 
including 104 weeks of vocational training and 26 weeks of remedial 
training, such as English as a second language. 

Extended income support. Participants may receive a total of 104 weeks 
of extended income support beyond the 26 weeks of unemployment 
insurance (UI) benefits available in most states. 

Job search and relocation benefits. Payments are available to help 
participants search for a job in a different geographical area and to 
relocate to a different area to take a job. 

Wage insurance benefit. The wage insurance benefit, known as the 
Alternative Trade Adjustment Assistance (ATAA) program, was created by 
the TAA Reform Act of 2002 as a demonstration project for workers age 
50 or older and those who find reemployment within 26 weeks of being 
laid off that pays less than $50,000 and less than what they previously 
earned. Workers who meet these criteria are eligible to receive 50 
percent of the difference between their new and old wages, up to a 
maximum of $10,000 over 2 years. For the fiscal year 2008 budget 
request, Labor estimated wage insurance benefits at $23 million. 

Health coverage benefit. The health coverage benefit, known as the 
Health Coverage Tax Credit (HCTC) and also created by the TAA Reform 
Act, helps workers pay for health care insurance through a tax 
credit.[Footnote 3] Workers can choose to receive the benefit in one of 
two ways--as an advance option that covers 65 percent of their monthly 
premiums, allowing them to lower the amount they have to pay out of 
pocket for health coverage, or as an end-of-year tax credit that is 
claimed on their income taxes. To be eligible for the health coverage 
benefit, workers must either be (1) receiving extended income support 
payments or eligible for extended income support but still receiving UI 
payments, or (2) receiving the wage insurance benefit. IRS administers 
the health coverage tax credit program. There are three health plan 
options that are automatically eligible: COBRA continuation 
plans,[Footnote 4] coverage through the worker's spouse, and individual 
market plans purchased by the worker. In addition, the TAA Reform Act 
also allows states to designate other coverage alternatives--called 
state-qualified options. 

TAA Certification Process and Eligibility Requirements: 

Currently, Labor certifies workers for TAA on a layoff-by-layoff basis. 
Petitions may be filed by the employer experiencing the layoff, a group 
of at least three affected workers, a union, or the state or local 
workforce agency. Labor investigates whether a petition meets the 
requirements for TAA certification and is required to either certify or 
deny the petition within 40 days of receiving it. 

The TAA statute lays out certain basic requirements for petitions to be 
certified, including that a significant proportion of workers employed 
by a company be laid off or threatened with layoff and that affected 
workers must have been employed by a company that produces articles. In 
addition, a petition must demonstrate that the layoff is related to 
international trade in one of several ways, including the following: 

* Increased imports--imports of articles that are similar to or 
directly compete with articles produced by the firm have increased, the 
sales or production of the firm has decreased, and the increase in 
imports has contributed importantly to the decline in sales or 
production and the layoff or threatened layoff of workers. 

* Shift of production--the firm has shifted production of an article to 
another country, and either: 

* the country is party to a free trade agreement with the United States 
or: 

* the country is a beneficiary under the Andean Trade Preference Act, 
the African Growth and Opportunity Act, or the Caribbean Basin Economic 
Recovery Act or: 

* there has been or is likely to be an increase in imports of articles 
that are similar to or directly compete with articles produced by the 
firm. 

Labor investigates whether each petition meets the requirements for TAA 
certification by taking steps such as surveying officials at the 
petitioning firm, surveying its customers, and examining aggregate 
industry data. When Labor has certified a petition, it notifies the 
relevant state, which has responsibility for contacting the workers 
covered by the petition, informing them of the benefits available to 
them, and telling them when and where to apply for benefits. 

Training Funds: 

Approximately $220 million is available annually for training, and 
states have 3 years to spend these funds. Thus fiscal year 2006 funds 
must be used by the end of fiscal year 2008. Each year Labor allocates 
75 percent of the training funds to states according to a formula that 
takes into consideration several factors, including the average amount 
of training funds allocated to states, reported accrued training 
expenditures, and the average number of training participants over the 
previous 2˝ years. In addition, to minimize year-to-year fluctuations 
in state funding, Labor uses a hold harmless policy that ensures that 
each state's initial allocation is at least 85 percent of the initial 
allocation received in the previous year. In fiscal year 2006, Labor 
initially allocated $165 million of training funds to 46 states. To 
cover administrative costs, Labor allocates to each state an additional 
15 percent of its training allocation. Labor holds the remaining 25 
percent in reserve to distribute to states throughout the year 
according to need as they experience unexpected large layoffs. 

TAA Performance Reporting System: 

Labor is responsible for monitoring the performance of the TAA program. 
States are required to submit information on exiting participants 
through the Trade Act Participant Report (TAPR) each quarter. The TAPR 
data submitted by states are used to calculate national and state 
outcomes on the TAA performance measures for each fiscal year, which 
include reemployment rate, retention rate, and wage replacement rate. 
Unlike other training programs, like WIA, TAA has no individual state 
performance goals, and states do not receive incentives or sanctions 
based on their performance levels, nor are they otherwise held 
accountable for their performance. In addition to submitting TAPR data, 
states also submit data to Labor on TAA services and expenditures each 
quarter. 

Labor Could Improve Its TAA Program Administration: 

Labor could improve the way it administers the program in two key 
areas--the process it uses to allocate training funds and its tracking 
of program outcomes. Labor's process for allocating training funds 
presents two significant challenges to states. First, the amount states 
receive at the beginning of the fiscal year does not adequately reflect 
states' spending the year before or the current demand for training 
services in the state. Second, Labor distributes a significant amount 
of funds to most states on the last day of the fiscal year, even to 
states that have spent virtually none of their current year's 
allocation. In addition the performance information that Labor makes 
available on the TAA program does not provide a complete and credible 
picture of the program's performance. For example, only half the states 
are including all participants, as required, in the performance data 
they submit to Labor. 

Labor's Policies for Allocating Training Funds Present Challenges to 
States in Managing Their Funds: 

Labor's process for allocating training funds does not adequately 
recognize the episodic nature of layoffs or the extent to which states 
have used their previous year's allocations. Labor allocates 75 percent 
of TAA training funds based upon a formula that takes into account 
expenditures and participation over the previous 2˝ years. The year-to- 
year fluctuation in layoffs within a state may result in states 
receiving more or less funds than they actually need. For example, the 
estimated number of trade-affected workers being laid off declined 
dramatically in Kansas from fiscal years 2004 to 2005 and increased 
somewhat in 2006. Overall the estimated number of trade-affected 
workers in Kansas laid off in fiscal year 2006 represented about an 80 
percent decrease from 2004. On the other hand, Missouri experienced an 
80 percent increase in the number of trade-affected workers being laid 
off between fiscal years 2004 and 2006 (see fig. 1). Kansas used hardly 
any of its fiscal year 2006 training fund allocation, while Missouri 
used virtually all of its. Despite these trends, both states received 
about 15 percent less in fiscal year 2007 than they received in 2006. 

Figure 1: Fluctuation in Estimated Number of Trade-Affected Workers 
Laid Off from Fiscal Years 2004 to 2006 in Kansas and Missouri: 

[See PDF for image] 

Source: GAO analysis of Department of Labor petitions data. 

[End of figure] 

While the 46 states responding to our survey reported using (spending 
or obligating), on average, about 62 percent of their fiscal year 2006 
training funds during the fiscal year, the percentage of funds states 
expended and obligated varied widely. Thirteen of the states reported 
using less than 1 percent of their fiscal year 2006 funds for training, 
while 9 states reported using more than 95 percent of their fiscal year 
2006 training funds(see fig. 2). The amount individual states reported 
using ranged from 0 percent in several states to about 230 percent in 1 
state. 

Figure 2: States with High and Low Use of Fiscal Year 2006 Training 
Funds: 

[See PDF for image] 

Source: Department of Labor, (Map) Map Resources. 

[End of figure] 

A particular problem with Labor's allocation process is the hold 
harmless policy, which guarantees that each state receives no less than 
85 percent of what it received in the previous year. While this policy 
is intended to minimize significant fluctuations in state funding from 
prior years, it awards states comparable training funds without 
recognition of the previous year's expenditures or obligations. For 
example, the 13 states that used less than 1 percent of the fiscal year 
2006 funds received nearly $41 million in fiscal year 2007--an amount 
slightly less than they received in fiscal year 2006. Moreover, 5 of 
the 13 states received a larger allocation in fiscal year 2007 than 
they received in 2006. 

Labor distributes a significant amount of funds to most states on the 
last day of the fiscal year, regardless of whether states need these 
additional funds. Labor distributed end-of-year funds to 48 states, 
including about $5 million to states that had spent or obligated less 
than 1 percent of their initial fiscal year 2006 allocation.[Footnote 
5] Labor distributes these funds to each state based upon a calculation 
that takes into account the amount of training funds each state 
received from its initial allocation plus any additional amount it 
received during the year.[Footnote 6] According to Labor officials, all 
states will receive an end-of-year allocation unless a state 
specifically informs Labor it does not want any additional funds or if 
it had not received any funds at all during the year. Waiting until the 
last day of the fiscal year to distribute training funds to states does 
not reflect good planning or management of program funds. Labor 
officials agreed that the distribution of reserve training funds could 
be improved so that more funds are disbursed throughout the year rather 
than on the last day. Officials also acknowledged that states that have 
not spent or obligated any of their initial allocation probably should 
not receive additional training funds at the end of the year. 

In our recent report, we recommended that the Secretary of Labor 
develop procedures to better allocate training funds and ensure that 
any reserve funds are given to only those states that have spent or 
obligated a substantial portion of the current fiscal year allocation. 
In its comments, Labor agreed with our findings and recommendations and 
noted that it would examine the process for allocating training funds 
to states. 

TAA Data Do Not Provide a Complete and Credible Picture of the 
Program's Performance: 

TAA performance data are incomplete and may be inaccurate. States 
report that they are not including all TAA participants in their 
performance data, despite Labor's requirement that all participants be 
included after they exit the program. We found that only 23 of the 46 
states we surveyed reported that they are including all exiting 
participants in their submissions to Labor. In general, states have 
information on those in training, but may not systematically track 
those who receive other assistance, but not training. Furthermore, 
Labor does not have a process in place to ensure that states are 
including all exiting TAA participants in their reporting submissions. 
Despite the importance of accurately identifying exiters, the exit 
dates themselves may not be accurate because some states do not 
consistently obtain proper documentation to verify the dates. Accurate 
exit dates are critical to TAA performance data for two reasons. First, 
whether a participant exits determines if the individual should be 
included in the state's report to Labor. Second, the actual exit date 
determines when a participant's employment outcome will be assessed. 

Some states are not using all available data sources to determine TAA 
participants' employment outcomes. Labor requires states to use UI wage 
records to determine the employment outcomes of participants reported 
to Labor. However, each state's wage record database includes only wage 
data on workers within the state and does not have data on participants 
who found employment in another state. 

In our 2006 report, we made several recommendations to Labor to help 
ensure that TAA participant data reported by states are consistent, 
complete, and accurate, including issuing clarifying guidance. Labor 
has taken some steps to share information with states and to improve 
data quality. In fiscal year 2006, Labor distributed $250,000 to each 
state to help them improve their TAA performance data systems, but it 
is too soon to know whether their efforts will improve the quality of 
the data. 

States Face Challenges in Providing Services to Workers: 

States report being challenged by the lack of flexibility to use 
training funds to provide trade-affected workers with case management 
services, such as counseling to help them decide whether they need 
training and what type of training would be most appropriate. In 
addition, efforts to enroll workers in training are sometimes hampered 
by the confusing TAA training enrollment deadline that requires workers 
be enrolled in training within 8 weeks of certification or 16 weeks of 
layoff to qualify for extended income support. 

Limited Flexibility in Use of Training Funds Hinders Case Management 
Services: 

States also cited the lack of flexibility to use training funds to 
provide trade-affected workers with case management services as a 
challenge. Workers often need help making decisions about training-- 
what type of training to take or whether to enroll in training at all. 
Difficulty funding case management services for trade-affected workers 
was a concern among officials in the states we visited. For example, 
state officials in one state said providing proper assessment, career 
counseling, and other case management services was a real challenge and 
noted that additional funds from other sources are limited. States do 
not receive TAA program funds for case management and, by law, cannot 
use training funds for this service. As a result, states must either 
use their limited TAA administrative funds or use funds from other 
programs to pay for case management, but there are limitations with 
these funding sources. 

According to Labor officials, states are encouraged to co-enroll 
participants in the Workforce Investment Act (WIA) program, and in 
Labor's view states have sufficient WIA funds to pay for case 
management for TAA participants. About three-fourths of the states 
reported in our survey that they were able to utilize WIA funds to help 
pay for case management services. Yet nearly half of the states also 
reported that coordination with WIA was a challenge. For example, WIA 
funding may not always be available for TAA workers, especially during 
a large layoff. Furthermore, local officials in a state we visited said 
that while 85 percent of TAA participants do co-enroll in WIA, a large 
layoff can strain funding and makes it difficult for WIA to completely 
fund case management for trade-affected workers. 

States also reported limitations to using administrative funds to 
provide case management. More than half of the states responding to our 
survey reported the shortage of administrative funds as a challenge. 
One state noted that its administrative funds are usually exhausted by 
the end of the first quarter because of the amount of case management 
that is required for the program. A local official in one state we 
visited said that it uses Wagner-Peyser funds to pay for case 
management because not enough TAA administrative funds are received and 
TAA training funds cannot be used. As a result, only one case manager 
could be funded, and this one person had to cover three counties and 
serve approximately 1,000 workers. Moreover, officials in some of the 
states we visited cautioned that administrative funds should not be 
used for case management because case management is a program activity-
-any increase in the administrative limit to pay for this service could 
lead to the misconception that the program has too much overhead. These 
state officials noted that having the flexibility to use TAA training 
funds for case management would alleviate this concern. 

In our recent report, we suggested that Congress may wish to consider 
allowing a portion of TAA training funds to be used for case management 
services to allow states greater flexibility in how they may use their 
TAA funds to provide services to workers. Labor, however, contended 
that the WIA, rather than TAA, should finance case management. We agree 
with Labor that co-enrollment with WIA should be encouraged, but as our 
report points out, WIA funds are not always available to provide this 
service, especially during large layoffs. We believe that states would 
benefit from having the option to use a portion of their training funds 
to defray the costs of providing case management services to trade- 
affected workers. 

Training Deadline Can be Challenging and Confusing: 

Efforts to enroll workers in training are sometimes hampered by the "8- 
16" training enrollment deadline--that is, the requirement that workers 
be enrolled in training within 8 weeks of certification or 16 weeks of 
layoff, whichever is later, to qualify for extended income support. 
Nearly three-quarters of the states responding to our survey reported 
that enrolling workers in training by the 8-16 deadline was a 
challenge. For example, one state noted that trying to enroll 
participants in training by the 8-16 deadline is particularly 
challenging when dealing with large layoffs because it is difficult to 
handle all the logistics, such as notifying workers and setting up 
appointments, for a large number of workers within the deadline. 
Moreover, officials in the four states we visited also indicated that 
the deadline is very confusing to workers. They told us that workers 
become confused about which point in time the 8 weeks or 16 weeks apply 
to and, as a result, are not sure when the clock starts and stops. We 
previously reported that about three-fourths of states responded that 
workers, at least occasionally, inadvertently miss the deadline and 
consequently lose their eligibility for extended income 
support.[Footnote 7] In that report, we recommended that Labor track 
the ability of workers to meet the 8-16 deadline.[Footnote 8] As of 
April 2007, Labor had not yet begun gathering information on the impact 
of the deadline. In our recent report, we suggested that in order to 
make it easier for workers to comply with the training enrollment 
deadline, Congress may wish to consider simplifying the deadline by 
specifying a single time period that commences when workers are laid 
off or petitions are certified, whichever is later. 

Several Factors Limit Participation in the Wage Insurance and Health 
Coverage Benefits: 

Several factors, including a short deadline for getting a job and the 
cost of buying health coverage, may limit participation in two new 
benefits resulting from the TAA Reform Act of 2002. In our site visits, 
states reported that the requirement that workers must find a job 
within 26 weeks to receive the wage insurance benefit was the major 
factor preventing more workers from taking advantage of the benefit. An 
additional factor that may limit participation in wage insurance by 
some older workers is the requirement that for a group of workers to be 
certified as eligible, the petitioning workers must have been laid off 
from a firm where the affected workers lacked easily transferable 
skills and a significant portion of those workers were aged 50 or over. 
While cost is one of the most significant factors limiting 
participation in the health coverage benefit, some states also reported 
that the health coverage tax credit program can be complicated and 
difficult to understand for both workers and local case managers. 

Deadline to Find Employment and Other Requirements Limit Participation 
in the Wage Insurance Benefit: 

Few TAA participants take advantage of the wage insurance benefit. 
According to Labor officials, in calendar year 2006, 6,316 workers 
received the wage insurance benefit. The universe of workers eligible 
for wage insurance cannot be estimated because data are not available 
on the number of workers certified for TAA who are 50 years old or 
older and meet the other eligibility requirements. However, two-thirds 
of the states we surveyed reported that 5 percent or less of TAA 
participants received wage insurance in fiscal year 2006.[Footnote 9] 
We previously reported in a study of five layoffs that less than 20 
percent of the workers potentially eligible for the wage insurance 
benefit received it.[Footnote 10] In this study, we found that workers' 
awareness of the wage insurance benefit varied greatly--many workers 
who were 50 years old and older were simply unaware of the benefit. 
While state or local officials told us they discussed the ATAA benefit 
at rapid response meetings or TAA information meetings, workers were 
often overwhelmed by the volume of information received after the 
layoff, and didn't necessarily recall some of the specifics. 

Although officials in the states we visited for our most recent study 
believe the wage insurance benefit is beneficial to older workers close 
to retirement, two key factors limit participation. Officials said that 
one of the greatest obstacles to participation was the requirement for 
workers to find a new job within 26 weeks after being laid off. For 
example, according to officials in one state, 80 percent of 
participants who were seeking wage insurance but were unable to obtain 
it because they failed to find a job within the 26-week period. The 
challenges of finding a job within this time frame may be compounded by 
the fact that workers may actually have less than 26 weeks to secure a 
job if they are laid off prior to becoming certified for TAA. For 
example, a local case worker in one state we visited said that the 26 
weeks had passed completely before a worker was certified for the 
benefit. 

Another factor that may limit participation by some older workers is 
the requirement that, under the TAA Reform Act, for a group of workers 
to be certified, they must have been laid off from a firm where the 
affected workers lacked easily transferable skills and a significant 
portion were aged 50 or over. Labor interprets a "significant portion" 
as the lesser of 5 percent of the affected workforce or 50 workers at a 
firm with 50 or more workers, or at least 3 workers in a firm with 
fewer than 50 affected workers. Labor investigates each petition to see 
if the firm meets the requirements, and in fiscal year 2006, nearly 90 
percent of TAA-certified petitions were also certified for the wage 
insurance benefit. Labor officials said that eliminating this step of 
the TAA certification process--that is, allowing any TAA-certified 
workers who meet the individual eligibility criteria for the wage 
insurance benefit to participate--would decrease the agency's 
investigation workload somewhat and may increase participation in the 
wage insurance benefit. 

Labor officials told us they are taking steps to overcome the lack of 
awareness of wage insurance and promote the benefit by informally 
encouraging states to ensure case workers talk about wage insurance 
during one-on-one case management sessions. Furthermore, in our most 
recent report, we suggested that in order to enable more workers to 
take advantage of the wage insurance benefit, Congress may wish to 
consider increasing the length of time workers have to become 
reemployed and eliminating the requirement that to be certified as 
eligible for wage insurance, the petitioning workers must have been 
laid off from a firm where the affected workers lacked easily 
transferable skills and a significant portion of those workers were 
aged 50 or over. 

Cost Is a Key Factor Limiting Participation in the Health Coverage 
Benefit: 

The high cost of the health coverage benefit to participants is the 
greatest barrier to higher participation. State officials said that 
many laid-off workers cannot afford to pay 35 percent of their health 
care premiums while their primary income is unemployment insurance 
benefits. IRS officials reported that the workers' 35 percent share is 
among the primary barriers to participation in the benefit. For 
example, in the four states we visited, the average monthly premium for 
COBRA policies covering two or more individuals was about $800. The 
workers' out-of-pocket cost for COBRA coverage in these states would be 
nearly one-fourth of their monthly UI payment (see table 1). 

Table 1: Comparison of Average Monthly Premiums: 

State: California; 
Average monthly UI payment: $1,176; 
Average monthly COBRA premium for two or more: $777; 
Workers' 35 percent share of monthly premium: $272; 
Percentage of monthly UI payment: 23. 

State: Massachusetts; 
Average monthly UI payment: 1,465; 
Average monthly COBRA premium for two or more: 895; 
Workers' 35 percent share of monthly premium: 313; 
Percentage of monthly UI payment: 21. 

State: Michigan; 
Average monthly UI payment: 1,161; 
Average monthly COBRA premium for two or more: 737; 
Workers' 35 percent share of monthly premium: 258; 
Percentage of monthly UI payment: 22. 

State: North Carolina; 
Average monthly UI payment: 1,074; 
Average monthly COBRA premium for two or more: 770; 
Workers' 35 percent share of monthly premium: 270; 
Percentage of monthly UI payment: 25. 

State: Average; 
Average monthly UI payment: 1,219; 
Average monthly COBRA premium for two or more: 795; 
Workers' 35 percent share of monthly premium: 278; 
Percentage of monthly UI payment: 23. 

Source: Source: GAO analysis of UI data from states and average COBRA 
premiums from IRS. 

[End of table] 

State-qualified plans are similarly expensive and are often more 
expensive than COBRA coverage. Currently, 43 states have such plans, 
which, among other requirements, must provide for preexisting 
conditions. For example, in one state we visited, the premium for the 
state-qualified plan for a family was about $940 per month, while the 
average COBRA premium was about $740 per month. The worker's share of 
the state-qualified premium was about $330---or about 30 percent of the 
UI benefit--compared to about $260 for COBRA coverage. 

In addition, there is currently a period of up to about 3 months where 
workers must cover the full cost of their health premiums before 
beginning to receive the advance credit, and these costs are not 
reimbursable. IRS officials reported that inability to pay the out-of- 
pocket costs between layoff and application for the advance credit is 
one of the reasons workers lose eligibility and may be denied the 
benefit. 

While cost is one of the most significant factors limiting 
participation in the health coverage benefit, some states also reported 
that the health coverage tax credit program can be complicated and 
difficult to understand for both workers and local case managers. In 
our survey, nearly two-thirds of the states reported that limited IRS 
guidance on the benefit was still a challenge. Furthermore, during our 
site visits, some state and local officials said that they are not 
experts on the health coverage benefit and do not know enough details 
of the benefit to get information out to workers and to assist them 
with the enrollment process. In some local areas, case managers we 
interviewed said that they provide minimal information about the 
benefit and primarily refer workers to pamphlets or the IRS call center 
for details. We previously reported on the complexity of the health 
coverage benefit, noting that the process for workers to become 
eligible and enroll for the benefit was fragmented and difficult to 
navigate.[Footnote 11] In that report, we recommended to several 
agencies, including Labor and IRS, that a centralized resource be made 
available at the time individuals must make decisions about purchasing 
qualifying health coverage and meeting other eligibility requirements. 
In February 2007, IRS began distributing to all workers covered by a 
petition a more simplified program kit for the health coverage benefit. 

Certification Applied Industrywide May Increase Number Eligible, but 
Implementation Challenges Exist: 

Two alternatives are being considered that would expand the current 
firm by firm petition certification approach. One approach being 
considered would make an industry eligible to be investigated for 
possible certification when Labor certifies three petitions from that 
industry within 180 days. Another approach would require certification 
of an industry once a trade remedy had been applied.[Footnote 12] An 
industry certification approach based on three petitions certified 
within 180 days would likely increase the number of workers eligible 
for TAA, but the extent of the increase depends upon the specific 
criteria that are used. Using trade remedies for industrywide 
certification could also result in expanded worker eligibility for TAA 
in a number of industries, but the extent is uncertain. As we identify 
in our forthcoming report, either approach presents some design and 
implementation challenges.[Footnote 13] 

Extent of Increase in Eligible Workers Depends on How Additional 
Criteria Are Set: 

From 2003 to 2005, 222 industries had three petitions certified within 
180 days and therefore would have triggered an investigation to 
determine whether an entire industry should be certified, if such an 
approach had been in place at that time. These industries represented 
over 40 percent of the 515 industries with at least one TAA 
certification in those 3 years and included 71 percent of the workers 
estimated to be certified for TAA from 2003 to 2005.[Footnote 14] The 
222 are a diverse set of industries, including textiles, apparel, 
wooden household furniture, motor vehicle parts and accessories, 
certain plastic products, and printed circuit boards. 

The proposals for this approach would require that, once an industry 
meets the three-petition criterion, Labor investigate to determine 
whether there is evidence of industrywide trade effects. Not all 222 
industries would likely be certified industrywide. In its 
investigation, Labor would use additional criteria and likely consider 
such factors as the extent to which an industry has been affected by 
imports, changes in production levels in the industry, or changes in 
employment levels. 

The number of workers that would become eligible for TAA through an 
industry certification approach depends on what additional criteria are 
established. We used information from the 69 industries for which we 
had comprehensive data on petitions, unemployment, trade and production 
to estimate the potential increases in eligible workers 
programwide.[Footnote 15] We found that, if there were no additional 
criteria beyond three petitions certified in 180 days, the overall 
number of workers eligible for TAA might have nearly doubled, from 
about 118,000 to about 233,000 in 2005. If the trade threshold were set 
at a 10 percent increase in the import share of the domestic market, 
the number of eligible workers might have increased by approximately 49 
percent from 118,000 to about 175,000. If certification were limited to 
industries with a 15 percent increase in any 1 year, the number of 
workers eligible for TAA might have increased by approximately 27 
percent to about 150,000. Finally, if the criterion was a 20 percent 
increase in the import share in any 1 year, the number of workers might 
have increased by about 22 percent, to 144,000. More stringent criteria 
would result in a smaller increase in the number of workers eligible 
for TAA.[Footnote 16] 

Certifying Industries Subject to Trade Remedies Could Increase Eligible 
Population, but the Extent Is Uncertain: 

Using trade remedies for industrywide certification could result in 
expanded worker eligibility for TAA in a number of industries. The 
number of workers eligible for TAA might increase under this approach 
in areas in which there have been few or no TAA petitions. For example, 
even though ITC found that domestic producers of certain kinds of 
orange juice had been injured by imports, there appear to be no TAA 
petitions for workers producing orange juice.[Footnote 17] 

However, the number of workers eligible for TAA may not increase 
substantially in some areas, in part because of overlap between trade 
remedies and TAA petitions. For example, over half of outstanding 
antidumping and countervailing duty orders are for iron and steel 
products, for which hundreds of TAA petitions have been certified. In 
addition, industries with trade remedies may not necessarily have 
experienced many trade-related job losses because the International 
Trade Commission (ITC) does not focus on employment when determining 
whether an industry has been injured, according to an ITC official. 
Furthermore, trade remedies are intended to mitigate the trade-related 
factors that caused the injury to the industry, so employment 
conditions in an industry could improve after the trade remedy is in 
place. 

It is difficult to estimate the extent that industry certification 
based on trade remedies would increase the number of workers eligible 
for TAA because trade remedies are imposed on specific products coming 
from specific U.S. trade partners, and data are not available on job 
losses at such a detailed level. The product classifications for a 
given trade remedy can be very narrow, such as a dye known as 
"carbazole violet pigment 23" or "welded ASTM A-312 stainless steel 
pipe." 

Potential Design and Implementation Challenges Exist: 

Although industry certification based on three petitions certified in 
180 days is likely to increase the number of workers eligible for TAA, 
it also presents several potential challenges. 

* Designing additional criteria for certification. Any industrywide 
approach raises the possibility of certifying workers who were not 
adversely affected by trade. Even in industries that are heavily 
affected by trade, workers could lose their jobs for other reasons, 
such as the work being relocated domestically. In addition, using the 
same thresholds for all industries would not take into account industry-
specific patterns in trade and other economic factors. 

* Determining appropriate duration of certification. Determining the 
length of time that an industry would be certified may also present 
challenges. If the length of time is too short, Labor may bear the 
administrative burden of frequently re-investigating industries that 
continue to experience trade-related layoffs after the initial 
certification expires. However, if the time period is too long, workers 
may continue to be eligible for TAA even if conditions change and an 
industry is no longer adversely affected by trade. 

* Defining the industries. How the industries are defined would 
significantly affect the number of workers who would become eligible 
for TAA through an industry certification approach. Our analysis 
defined industries according to industry classification systems used by 
government statistical agencies. However, some of these industry 
categories are broad and may encompass products that are not adversely 
affected by trade. 

* Notifying workers and initiating the delivery of services. Notifying 
workers of their eligibility for TAA has been a challenge and would 
continue to be under industry certification. Under the current 
certification process, workers are linked to services through the 
petition process. The specific firm is identified on the petition 
application, and state and local workforce agencies work through the 
firm to reach workers in layoffs of all sizes. For industry 
certification, however, there are no such procedures in place to notify 
all potentially eligible workers in certified industries. For large 
layoffs in a certified industry, agencies could make use of the 
existing Worker Adjustment and Retraining Notification (WARN) notices 
to connect with workers.[Footnote 18] However, in smaller layoffs in 
certified industries, or when firms do not provide advance notice, 
workforce agencies may not know that the layoff has occurred.[Footnote 
19] 

* Verifying worker eligibility. Verifying that a worker was laid off 
from a job in a certified industry to ensure that only workers eligible 
for TAA receive TAA benefits may be more of a challenge under industry 
certification than under the current system. For example, it may be 
difficult to identify the specific workers who made a product in the 
certified industry if their employer also makes products that are not 
covered under industrywide certification. In addition, determining who 
should conduct this verification may also present challenges. A 
centralized process conducted by Labor would likely be unwieldy, while 
verification by state or local workforce agencies could take less time, 
but ensuring consistency across states might prove challenging. 

An approach using trade remedies presents some of the same challenges 
as an industry certification approach based on three petitions 
certified in 180 days. 

Concluding Observations: 

Through our work on the Trade Adjustment Assistance Program since 
passage of the Reform Act in 2002 we have identified a number of areas 
where Labor and the Congress should take action. Taking steps to limit 
confusion, ease restrictions, and provide support for case management 
would facilitate workers' access to services and benefits. States' 
ability to assist these workers would be enhanced by an improved 
process for allocating training funds. 

Mr. Chairman, this concludes my prepared statement. I will be happy to 
respond to any questions you or other members of the committee may have 
at this time. 

GAO Contacts and Staff Acknowledgments: 

For information regarding this testimony, please contact Sigurd R. 
Nilsen, Director, Education, Workforce, and Income Security Issues, at 
(202) 512-7215. Individuals who made key contributions to this 
testimony include Dianne Blank, Wayne Sylvia, Yunsian Tai, Michael 
Hoffman, and Rhiannon Patterson. 

[End of section] 

Related GAO Products: 

Trade Adjustment Assistance: Changes to Funding Allocation and 
Eligibility Requirements Could Enhance States' Ability to Provide 
Benefits and Services. GAO-07-701, GAO-07-702. (Washington, D.C.: May 
31, 2007). 

Trade Adjustment Assistance: New Program for Farmers Provides Some 
Assistance, but Has Had Limited Participation and Low Program 
Expenditures. GAO-07-201. (Washington, D.C.: December 18, 2006). 

National Emergency Grants: Labor Has Improved Its Grant Award 
Timeliness and Data Collection, but Further Steps Can Improve Process. 
GAO-06-870. (Washington, D.C.: September 5, 2006). 

Trade Adjustment Assistance: Labor Should Take Action to Ensure 
Performance Data Are Complete, Accurate, and Accessible. GAO-06-496. 
(Washington, D.C.: April, 25, 2006). 

Trade Adjustment Assistance: Most Workers in Five Layoffs Received 
Services, but Better Outreach Needed on New Benefits. GAO-06-43. 
Washington, D.C.: January 31, 2006. 

Workforce Investment Act: Substantial Funds Are Used for Training, but 
Little Is Known Nationally about Training Outcomes. GAO-05-650. 
Washington, D.C.: June 29, 2005. 

Trade Adjustment Assistance: Reforms Have Accelerated Training 
Enrollment, but Implementation Challenges Remain. GAO-04-1012. 
Washington, D.C.: September 22, 2004. 

Workforce Investment Act: Better Guidance and Revised Funding Formula 
Would Enhance Dislocated Worker Program. GAO-02-274. Washington, D.C.: 
February 11, 2002. 

FOOTNOTES 

[1] For further information on TAA, please see the following reports: 
GAO, Trade Adjustment Assistance: Changes to Funding Allocation and 
Eligibility Requirements Could Enhance States' Ability to Provide 
Benefits and Services, GAO-07-701, GAO-07-702 (Washington, D.C.: May 
31, 2007); Trade Adjustment Assistance: Labor Should Take Action to 
Ensure Performance Data Are Complete, Accurate, and Accessible, GAO-06-
496 (Washington, D.C.: Apr. 25, 2006); Trade Adjustment Assistance: 
Most Workers in Five Layoffs Received Services, but Better Outreach 
Needed on New Benefits, GAO-06-43 (Washington, D.C.: Jan. 31, 2006); 
and Trade Adjustment Assistance: Reforms Have Accelerated Training 
Enrollment, but Implementation Challenges Remain, GAO-04-1012 
(Washington, D.C.: Sept. 22, 2004). 

[2] GAO-07-701, GAO-07-702, GAO-06-496. 

[3] The Trade Adjustment Assistance Reform Act of 2002 created a health 
coverage tax credit for certain workers who are eligible to receive 
income support benefits under the TAA program because their jobs were 
lost due to foreign competition and for certain retirees whose pensions 
from a former employer were terminated and are now paid by the Pension 
Benefit Guaranty Corporation (PBGC). 

[4] Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 
1985, certain employers with 20 or more employees are required to make 
available 18 to 36 months of continued health care coverage for former 
employees and their dependents who lose health coverage due to certain 
circumstances, such as when a worker is laid off. 

[5] Hawaii and North Dakota did not receive end-of-the year funding 
because these states received no training funds at all during the year. 

[6] For example, if Labor had distributed a total of $200 million in 
training funds during the year and a state had received a total of $10 
million (received $7 million from its initial training allocation and 
had requested an additional $3 million during the year), then that 
state would receive 5 percent of any reserve funds distributed at the 
end of the year. 

[7] GAO-04-1012. 

[8] GAO-06-43. 

[9] This percentage is based on the total number of TAA participants 
because the number of workers potentially eligible for the wage 
insurance benefit is not readily available. 

[10] GAO-06-43. 

[11] GAO, Health Coverage Tax Credit: Simplified and More Timely 
Enrollment Process Could Increase Participation. GAO-04-1029. 
(Washington, D.C.: September 30, 2004). 

[12] Trade remedies include, for example, a duty imposed on an imported 
product because the industry had been injured by unfair trade 
practices. 

[13] For more detailed information on our analysis, see our forthcoming 
report, Trade Adjustment Assistance: Industry Certification Would 
Likely Make More Workers Eligible, but Design and Implementation 
Challenges Exist. GAO-07-919. (Washington, D.C.: forthcoming). 

[14] These industries are classified according to the four-digit 
Standard Industrial Classification (SIC) System codes. 

[15] Of the 222 industries, we analyzed 69 for which we had complete 
data. The data available used different classification systems that we 
matched to each other, but we only included data for which we had 
complete and well-defined matches. Since the 69 industries were not 
drawn from a random sample, the results of this analysis are not 
necessarily representative of the entire 222 industries. 

[16] Our analysis applied the same threshold to all industries. In 
practice, the criteria would likely vary by industry in order to take 
into account industry-specific patterns in trade and other economic 
factors. 

[17] We cannot be certain about the degree of overlap between TAA 
petitions and trade remedy products because product information is not 
recorded in a standardized way in Labor's petitions data. 

[1] The WARN Act requires employers to give their employees or their 
representatives, the state's dislocated worker unit, and local 
government officials 60 days advance notice of a mass layoff or plant 
closure. Generally speaking, the WARN Act applies to employers with 100 
or more full-time workers involved in layoffs or plant closures that 
affect 50 or more workers. 

[19] In a 2003 report on the WARN Act, GAO found that employers 
provided notice for an estimated 36 percent of mass layoffs or plant 
closures that appeared subject to WARN's advance notice requirements. 
GAO, The Worker Adjustment and Retraining Notification Act: Revising 
the Act and Educational Materials Could Clarify Employer 
Responsibilities and Employee Rights, GAO-03-1003 (Washington, D.C.: 
Sept. 19, 2003). 

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