TANF-ACF-PI-2007-05 (Policy on “subject to a penalty” for refusing to participate in work activities)
State Agencies Administering the Temporary Assistance for Needy Families Program and other Interested Parties
Policy on “subject to a penalty” for refusing to participate in work activities
Section 407 (b)(1)(B)(ii)(II) of the Social Security Act and 45 CFR 261.22 (b)(2)
To clarify our policy on the meaning of “subject to a penalty” for refusing to participate in work activities
Section 407(b) of the Social Security Act specifies the calculation of the overall and two-parent work participation rates. States must meet these work participation rates or face financial penalties. It specifies that the denominator of each participation rate calculation excludes the number of families receiving assistance using TANF or any other State program funded with qualified State expenditures “that are subject in such month to a penalty described in subsection (e)(1) [for refusing to participate in work] but have not been subject to such penalty for more than 3 months within the preceding 12-month period (whether or not consecutive).” Because we had not previously issued our policy to States in regulation or other policy issuance, some States have interpreted “subject to a penalty” for refusing to work to include a period of time prior to imposing any actual penalty.
During a conciliation or notice period, before the State actually reduces or terminates the family’s grant, a family is not “subject to a penalty.” Before that time, the family is at risk of a penalty but not subject to it. We think this is the most reasonable interpretation of the statute. In the original TANF rule, we included the following language at § 261.22(b)(3): “If a family has been sanctioned for more than three of the last 12 months, we will not exclude it from the participation rate calculation.” (Emphasis added.) Further, in the interim final rule implementing the provisions of the Deficit Reduction Act of 2005, published June 29, 2006, we reiterated this concept in § 261.22(b)(2), specifying that “if a family with a work-eligible individual has been penalized for refusal to participate in work activities for more than three of the last 12 months, we will not exclude it from the participation rate calculation.” (Emphasis added.) In both instances, this language makes clear that the State must actually have imposed the penalty before we exclude the family from the participation rate calculation.
We have applied this interpretation since the beginning of TANF because it encourages a State to take action to resolve the problem that led to the sanction in the first place. If we were to consider a family“ subject to a penalty” when the State had merely notified the family of the possibility that it would reduce or terminate benefits, it could benefit from disregarding the family from the participation rate regardless of whether it provides services to address barriers to employment or works to resolve a dispute.
Many States choose to impose a full-family sanction instead of reducing the family’s benefits. Our interpretation treats the period before actual imposition of a sanction in the same way for all States, regardless of whether a State’s policy choice is for a full or partial sanction. If a State uses a full-family sanction, then the family is removed from the work participation calculation indefinitely and, as a result, benefits from an indefinitely smaller denominator.
A sanction against a family for another reason, such as because a teen parent is not attending school or an individual refuses to cooperate in establishing paternity, is not a work sanction. These are separate and distinct sanctions and they do not qualify a family for exclusion in the work participation rate calculation.
States are hereby notified that the meaning of “subject to a penalty” in section 407(b)(1)(B)(ii)(II) is as follows: During a conciliation or notice period, before the State actually reduces or terminates the family’s grant, a family is not “subject to a penalty.” Before that time, the family is at risk of a penalty but not subject to it. To be subject to a penalty for refusing to participate in work activities the grant must be reduced or terminated.
Beginning with the first fiscal quarter of FY 2007, we established an edit in our work participation programs to ensure that States were adhering to our long standing policy on “subject to a penalty for refusing to work.” The new edit has flagged cases as being in error if they are coded as “subject to a penalty” but show no reduction in aid. To provide States with relief from any potential detrimental reliance issues on the policy, we will not impose a penalty for FY 2007 if a State’s failure to meet its required work participation standard is solely the result of improperly disregarding families from the work participation rate during the conciliation period. To accomplish this, we will change our edit to a warning for FY 2007. Beginning in FY 2008, the warning will change back to an edit, and States will no longer be allowed to disregard a family from the participation rate during the conciliation period.
Inquiries should be direct to the TANF Manager in your Region.
Office of Family Assistance
Last Reviewed: November 20, 2015