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Statement of Need: This effort responds to the President's Executive Memorandum issued May 24, 1999, directing the Secretary of Labor to allow States the opportunity to develop innovative ways of using UC to support parents taking leave to be with their newborns or newly-adopted children and to evaluate the effectiveness of using the UC system for these or related purposes. That Memorandum cited a Family and Medical Leave Commission study indicating that lost pay was the most significant barrier to parents taking advantage of unpaid leave after the birth or adoption of a child.

Summary of the Legal Basis: This rulemaking action is undertaken under the authority of sections 1102(a) and 303(a)(2) and (5) of the Social Security Act, sections 3304(a)(1) and (4) and 3306(h) of the Federal Unemployment Tax Act, and the Secretary's Orders No. 4-75 and 14-75.

Alternatives: The Department of Labor considered different regulatory alternatives and intends to pursue, in the proposed rule, an approach that gives States as much flexibility as possible within the defined parameters of the experimental program.

Anticipated Costs and Benefits: Based on legislative activity and expressed interest, the Department of Labor anticipates that a relatively small number of States will enact experimental Birth and Adoption Unemployment Compensation programs and, on this basis, estimates that the annual aggregate cost of Birth and Adoption Unemployment Compensation to the States will be between $50 and $87 million. The benefit of this regulatory action will be to help eliminate a significant barrier that parents face in taking leave, thus having a positive effect on family well-being.

Risks: This action does not affect public health, safety, or the environment.