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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. The Department of Labor wants to test whether providing parents with BAA-VC at a point during the first year of a newborn's life, or after placement of a child for adoption, will help employees maintain or even promote their connection to the workforce by allowing them time to bond with their children and to develop stable child care systms while adjusting to the accompanying changes in lifestyle before returning to work.

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: The Department estimates that the possible annual aggregate cost for BAA-VC could range from zero to approximately $68 million. The regulation is permissive, and the Department of Labor does not know how many states will choose to enact experimental BAA-VC programs. The estimate of the annual aggregate BAA-VC cost of $68 million is based on the expressed interest of a small number of states. 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.