Q & A: TANF Requirements Related to EBT Transactions

TANF Requirements Related to EBT Transactions

Q1: What are the TANF requirements specified in the Middle Class Tax Relief and Job Creation Act of 2012?

A1: Section 4004 of the Middle Class Tax Relief and Job Creation Act of 2012  (P.L. 112-96) requires states receiving TANF grants to “maintain policies and practices as necessary to prevent assistance provided under the State program funded under this part from being used in any electronic benefit transfer transaction in any liquor store; any casino, gambling casino, or gaming establishment; or any retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment.”

The legislation also imposes a reporting requirement, as well as a penalty and a modification to state plans.  Each state is required to report to the Secretary by February 22, 2014 on its implementation of policies and practices required by the law; states may submit reports to tanfebtreports@acf.hhs.gov.  ACF is required to reduce a state’s block grant if the state fails to comply with this reporting requirement or if, based on the information that the state reports, ACF finds that the state has not implemented and maintained the required policies and practices.  Furthermore, states are required to include in their state plans a statement outlining how they intend to implement policies and procedures to prevent access to assistance through electronic benefit transfer (EBT) transactions in an automated teller machine or point-of-sale device located in casinos, gaming establishments, liquor stores, and retail establishments which provide adult-oriented entertainment.  The state plan must also include an explanation of how the state plans to ensure that (1) recipients of the assistance have adequate access to their cash assistance, and (2) recipients of assistance have access to using or withdrawing assistance with minimal fees or charges, including an opportunity to access assistance with no fee or charges, and are provided information on applicable fees and surcharges that apply to electronic fund transactions involving the assistance, and that such information is made publicly available.

Please note that the federal law does not expressly prevent certain products from being purchased with TANF assistance via EBT transactions; rather it specifies locations where state policies and practices should prevent any transfer of TANF assistance via EBT transaction from occurring, regardless of the product being purchased.  For example, the federal law does not require a state to prevent a recipient from buying beer at a grocery store, but it does require that a state implement policies and practices to prevent any purchase involving an electronic transfer of TANF cash assistance, even non-alcoholic items, from a liquor store.  While a state maintains the flexibility to implement policies and practices that go beyond federal requirements, if it does not implement policies and practices that include preventing TANF EBT transactions at the specified locations (but rather policies that simply focus on preventing the purchase of prohibited items), it will not be in compliance with federal law.  (Posted: 2/25/2013)

Q2: In Transmittal No.TANF-ACF-IM-2012-02, ACF stated that it intends to initiate a rulemaking to regulate the TANF requirements specified in P.L. 112-96.  How may a state proceed to implement the required policies and practices without regulations?

A2: We remind states that the statutory requirements were effective upon the enactment date of February 22, 2012.  Each state has the responsibility to take the necessary actions in order to be able to report on its implemented policies and practices by February 22, 2014.  Any state that fails to report by February 22, 2014 on its implementation of policies and practices will be subject to a penalty.

Absent regulations, a state needs to formulate policies and implement the requirements in section 4004 of P.L. 112-96 based on its reasonable interpretation of these requirements.  For the period before final federal rules are in effect, states will not be subject to penalties under section 4004 so long as the required report due February 22, 2014, indicates that the state has developed and is implementing policies and practices based on a reasonable interpretation of the statutory language.  A state will be subject to a penalty if it does not report on the required policies and practices by February 22, 2014, or if the information in the state’s report does not indicate that the state has implemented the required policies and practices, or if the state describes policies and practices that do not reflect a reasonable interpretation of the statutory language.  (Posted: 2/25/2013)

Q3: Does the federal statute mandate state legislation be enacted in order to implement the required policies and practices?

A3: No. P.L. 112-96 does not specifically require state or local legislation to implement the federal statutory requirements.  Each state will need to make its own determination as to whether state legislation is needed in order to meet the federal requirements.

States should review their policies and practices that relate to preventing EBT transactions or withdrawals in the specified locations that are currently in effect, and evaluate the extent to which they comply with the requirements specified in P.L. 112-96.  If a state determines that existing efforts are insufficient, the state should then take additional actions as necessary to fully comply with P.L. 112-96.  These actions may include enactment of state legislation, issuance of executive orders and/or amendments to agency policies.  (Posted: 2/25/2013)

Q4: What resources are available to states as they implement policies and practices to prevent TANF assistance from being used in any electronic benefit transfer transaction in any liquor store; any casino, gambling casino, or gaming establishment; or any retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment?

A4: We encourage states to review Transmittal No.TANF-ACF-IM-2012-02 in order to ensure that the approaches being considered comply with the statutory requirements.  Furthermore, the comments ACF has received in response to the Request for Public Comment, published in the Federal Register on April 25, 2012, have been made available to the public and can be found at www.regulations.gov .  (Posted: 2/25/2013)

Q5: What additional state plan requirements are specified in P.L. 112-96?

A5: In accordance with section 4004(c) of the P.L. 112-96, which amends section 402(a)(1)(A) of the Social Security Act (42 U.S.C. 602(a)(1)(A)), states are required to include in their state plans an outline of how they intend to implement policies and procedures to prevent access to assistance through electronic fund transactions at casinos, liquor stores, and establishments providing adult-oriented entertainment.  (Please note that this plan update action is in addition to the preparation of the report due to the Secretary described in QA #1 above.)  The state  must also include an explanation of how it plans to ensure that (1) recipients of the assistance have adequate access to their cash assistance, and (2) recipients of assistance have access to using or withdrawing assistance with minimal fees or charges, including an opportunity to access assistance with no fee or charges, and are provided information on applicable fees and surcharges that apply to electronic fund transactions involving the assistance, and that such information is made publicly available.

States must proceed with implementing the state plan requirements of P.L. 112-96, as they were effective upon enactment.  To update  its state plan, a state  should either submit an amendment to its current state plan or include the required information with its next plan renewal, so long as ACF receives the amendment or plan renewal before February 22, 2014.  (Posted: 2/25/2013)

Q6: How do the requirements of section 4004(a) of P.L. 112-96 affect assistance payments provided to cases that do not include a recipient adult - - i.e., child-only cases?

A6: Section 4004(a) of P.L. 112-96 specifies that a state “shall maintain policies and practices as necessary to prevent assistance provided under the State program funded under this part from being used in any electronic benefit transfer transaction in any liquor store; any casino, gambling casino, or gaming establishment; or any retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment.”

The requirement to prevent these transactions applies to all Federal and MOE-funded TANF assistance provided via a credit or debit card service, automated teller machine, point-of-sales terminal, or access to an online system for the withdrawal of funds or the processing of a payment for merchandise or a service, in accordance with definition of electronic benefit transfer transaction at section 4004(a).  This includes such Federal and MOE-funded TANF assistance provided to a payee – e.g., a non-recipient parent or non-recipient caretaker relative – on behalf of a child-only assistance unit.  (Posted: 3/14/2013)

Q7: If any of the three types of establishments specified at section 4004(a) of P.L. 112-96 does not exist in a state, what should the state do to demonstrate compliance with the statutory requirements?

A7: A state is responsible for identifying the establishments that are subject to the requirements at section 4004(a) of P.L. 112-96 and that fall within definitions specified in the law. If one or more of the establishments specified at section 4004(a) of P.L. 112-96 does not exist in a state, the state should explain this in its report to the Secretary on its implementation of policies and practices required by the law.  (Posted: 3/25/2013)

Q8: What information is required for complete state plan amendments/renewals submitted in accordance with section 4004(c) of the P.L. 112-96?

A8: In accordance with section 402 (a)(1)(A), a state must provide “a written document that outlines how the state intends to” meet the requirements set forth in the subsections.  Therefore, state plan amendments addressing section 4004(c) of P.L. 112-96 must outline how states will meet 402(a)(1)(A)(vii) and (viii) of the Social Security Act (see Q&A #5 above for statutory language).

We appreciate that states will be providing substantial additional details in their annual EBT reports about their policies and procedures to prevent access to assistance through any electronic  benefit transfer transaction located in a place described in section 408(a)(12) of the Act.  States may provide a summary of these policies and practices in their state plans.   

However, annual EBT reports will not necessarily contain substantial information about how states are ensuring adequate access to cash assistance and the ability to use or withdraw assistance with minimal or no fees or charges, and how they are making the information about fees publically available.  We therefore encourage states in their state plans to detail what steps they are taking to ensure that : (1) recipients of assistance have adequate access to their cash assistance, and (2) recipients of assistance have access to using or withdrawing assistance with minimal fees or charges, including an opportunity to access assistance with no fee or charges, and are provided information on applicable fees and surcharges that apply to electronic fund transactions involving the assistance, and that such information is made publicly available. (Posted: 1/22/2014)

Q9: What information should states submit in order for ACF to determine whether the state has implemented and maintained the policies and practices required by section 408(a)(12) of the Social Security Act, and is not subject to a penalty under section 409(a)(16) of the Act?

A9: As explained in Q&A #2 above, absent regulations, a state needs to formulate policies and implement the requirements in section 4004 of P.L. 112-96 based on its reasonable interpretation of these requirements. For the period before final federal rules are in effect, states will not be subject to penalties under section 4004 so long as the required report due February 22, 2014, demonstrates that the state has developed and implemented policies and practices based on a reasonable interpretation of the statutory language.

Although final rules specifying the information that ACF will require in annual EBT reports will not be published prior to February 22, 2014, we encourage states to address the following : processes for identifying locations where states must prevent the use of TANF assistance via EBT transactions, methods to prevent use of TANF assistance via EBT transactions in these locations, procedures for monitoring and enforcing compliance.  This will allow ACF to determine whether the state has implemented the policies and practices required by section 4004 of P.L. 112-96. (Posted: 1/22/2014)

Q10: Does the statute provide states the flexibility to avoid imposing a restriction at an ATM or POS terminal located in one of the prohibited establishments if such a restriction would limit the ability of recipients in a geographic area to access their cash assistance? 

A10: No. As section 402(a)(1)(A)(7) makes clear, states must implement policies and practices to prevent assistance from being used in an electronic benefit transfer transaction in a prohibited location while also ensuring that recipients continue to have adequate access to their cash assistance.  If for instance, there is an insufficient number of allowable access points in a geographic area, the statute imposes a responsibility on states to provide recipients adequate access to their cash assistance, for example, by increasing the non-prohibited locations where TANF recipients may access their cash assistance.

We will be unable to deem a state plan complete if it includes exceptions for ATMs or POS terminals in prohibited locations as part of the state’s plan to ensure adequate access to cash assistance. (Posted: 1/22/2014)

Q11: If a state’s policies and practices include taking an adverse action (e.g., reduction of assistance payment, temporary disqualification from receipt of TANF assistance, misdemeanor charge) against a recipient who uses his/her EBT card in the prohibited locations, may the state consider “lack of adequate access to cash assistance” or “inability to use or withdraw assistance with a minimal/no fees or charge” as reasonable cause for not imposing the adverse action? 

A11: Yes.  However, this measure does not suffice as a plan to ensure that recipients have adequate access to their cash assistance, including the ability to access cash with minimal fees or no fees (see sections 402(a)(1)(A)(vii) and (viii)).  If recipients are using EBT in prohibited locations due to lack of access at non-prohibited locations or the inability to withdraw funds with minimal and no fees, the state must take measures to  fulfill its statutory requirement to provide recipients adequate access to their cash assistance in non-prohibited locations, including the ability to withdraw their assistance with minimal and no fees or charges.  (Posted: 1/22/2014)

Q12: If a state issues cash assistance through paper checks only, it is required to submit a report in accordance with section 4004(b) of P.L. 112-96?

A12: Yes. P.L. 112-96 imposes a reporting requirement for all states to report to the Secretary by February 22, 2014 on its implementation of policies and practices required by the law.  ACF is required to reduce a state’s block grant if the state fails to comply with this reporting requirement.

The policies and practices required to comply with section 4004of P.L. 112-96, which amend section 408(a)(12) of the Social Security Act, only apply to assistance used via electronic benefit transfer transactions. The law defines the term “electronic benefit transfer transaction” to mean “the use of a credit or debit card service, automated teller machine, point-of-sale terminal, or access to an online system for the withdrawal of funds or the processing of a payment for merchandise or a service.”

Assistance provided to recipients via paper checks does not allow for the use of those assistance funds via electronic benefit transfer transactions.  Nevertheless, a state that only uses paper checks to issue cash assistance is still required to submit a report; its report would simply indicate the state’s only method of providing TANF assistance is via paper checks.  It must submit a report annually to verify whether this continues to be the case.  If at any time the state begins providing TANF assistance via a method that allows for recipients to use or withdraw funds in an electronic benefit transfer transaction, then it is required to implement the policies and practices necessary to comply with section 4004of P.L. 112-96 and update its report to ACF accordingly.  (Posted: 1/22/2014)

Q13: If a state issues cash assistance through paper checks only, it is required to submit a state plan amendment in accordance with section 4004(b) of P.L. 112-96?

A13: Yes. While the state plan requirements outlined at sections 402(a)(1)(A)(vii) and (viii) of the Social Security Act only apply to electronic fund transactions involving TANF assistance (see Q&A #5 above for more information), a state that only uses paper checks to issue cash assistance is still required to submit a state plan amendment.  It may satisfy these state plan requirements by simply indicating that the only method of providing TANF assistance it uses is the issuance of paper checks.  If at any time the state begins providing TANF assistance via a method that allows for recipients to use or withdraw funds in an electronic benefit transfer transaction, then it is required to implement the policies and practices necessary to comply with section 4004of P.L. 112-96 and update its state plan accordingly.  (Posted: 1/22/2014)