[ 9.1.1 - Reciprocal Coverage Agreement Inquiries ][ 9.1.2 - Reciprocal Coverage Agreement Criteria ][ 9.1.3 - Reciprocal Coverage Agreement Forms ][ 9.1.4 - Reciprocal Coverage Agreement Initiating ][ 9.1.5 - Reciprocal Coverage Agreement Returned by State Agencies ][ 9.1.6 - Forms RC-2 Returned by the Employer ][ 9.1.7 - Agreement Initiated by another State Agency ][ 9.1.8 - Effective Date of Agreement ][ 9.1.9 - Termination of Agreement ][ 9.1.10 - Withdrawal of Agreement ]

Most states, including the state of Texas, subscribe to an agreement known as the Interstate Reciprocal Coverage Arrangement. This arrangement allows an Employer to file a reciprocal coverage agreement requesting permission to report all of a multi-state employee's wages, which might otherwise be covered by another state's unemployment tax laws, to a single state. A multi-state employee is a person whose services are not localized in Texas or any other state and who performs services in Texas and outside of Texas.

Commission participation in reciprocal arrangements is authorized under Section 201.044 of the Texas Unemployment Compensation Act (TUCA) and Rule 815.114. Reciprocal coverage is also addressed under Section 211.001 of the TUCA “Location of Service for Unemployment Insurance Purposes”.

Although reciprocal coverage agreements are not widely used, a few Employer's routinely file or ask for information about them. The absence of an approved reciprocal agreement mandates a multi-state employee's wages be reported according to Section 201.043 of the TUCA.

Reciprocal coverage agreements must be submitted through the state agency to which the Employer wishes to report the wages of the employees covered by a reciprocal coverage agreement.

If an Employer requests information regarding a reciprocal coverage agreement and wishes to report the wages to another state, refer the Employer to the state agency to which they wish to report the wages. That state agency must initiate the agreement. (See Chapter 9 – "Agreement Initiated by another State Agency").

If an Employer requests information regarding a reciprocal coverage agreement and wishes to report the wages to Texas, verify that the employee is a multi-state worker and furnish forms RC-1. If the employee is not a multi-state worker, inform the Employer that a reciprocal coverage agreement is not appropriate.

List of Reciprocal Agreement Forms:

RC-1 – Employer’s Election to Cover Multi-State Workers under the Texas Unemployment Compensation Act

RC-1A – Supplemental Attachment

RC-1B – Supplemental Attachment

RC-2 – Notice to Employees as To Unemployment Compensation Coverage

ECRC – Employee’s Consent to Coverage Under the Texas Unemployment Compensation Act (Interstate Reciprocal Coverage Agreement)

List of Reciprocal Agreement Letters:

FL-34 – Letter enclosing Forms RC-1 to other states involved in agreement

RC-2 – Letter to employer enclosing RC-1 (copy) & RC-2 forms

RC-3 – Letter addressed to state agency involved in agreement enclosing Approved Election Forms (2 copies)

For a reciprocal coverage agreement to be approved the employee covered must be multi-state. If the employee covered is not multi-state the election should be denied. This applies to reciprocal coverage agreements which initiate in either Texas or another state.

A multi-state employee is defined as a person whose services are not localized in Texas or any other state and who performs services in Texas and outside of Texas.

Often employers will want to apply for a reciprocal coverage agreement because they want to report the wages to the state in which they have their headquarters and to which they are already reporting wages. For example, an employer with headquarters in Louisiana might file an application to cover a multi-state worker who performs all his services in Dallas, Texas. This would not be approvable since all work is performed in Texas.

The exception to this multi-state requirement is salesmen. We regard salesmen as multi-state if the company headquarters are in one state and the services are performed in another state. The reason for this decision is that, while all services might be performed in Texas, a salesman is usually required to attend sales meetings in the headquarter's state.

Additionally, if an Employer elects to report multi-state employees' wages to Texas:

1. Some work must be performed in Texas, or
   
   
2. The employee must have a residence in Texas, or
   
   
3. The Employer must maintain a place of business in Texas to which the employee's services bear a reasonable relation.
   
   If a reciprocal coverage agreement does not meet one of these criteria it should not be approved. (See Rule 815.114).

The Commission furnishes forms for reciprocal coverage agreements only when the Employer wishes to report the multi-state wages to Texas.

Form RC-1 Employer's Election to Cover Multi-state Workers under the Texas Unemployment Compensation Act

The form RC-1 is the initial application filed when an Employer desires to report multi-state wages to Texas. The form is completed by the Employer and returned to the Commission for its approval. The form RC-1 must be approved by the Commission and then the approved RC-1 is forwarded to any other state agencies where the multi-state employee works.

Employers should be encouraged to furnish four completed forms RC-1 when initiating a reciprocal coverage agreement. Once the Commission receives completed forms RC-1, the Commission will retain one and forward three to each state agency involved. If the Employer does not furnish enough copies, photocopy the forms as necessary.

Form RC-1A Supplemental Attachment - Employer's Election to Cover Multi-state Workers

This form is a continuation page for form RC-1. The form is completed whenever items #1 and #2 of form RC-1 do not provide enough space. This form is furnished to the Employer only when the situation warrants its completion.

Form RC-1B Supplemental Attachment - Employer's Election to Cover Multi-state Workers

This form is an optional form which is completed by the Employer at the request of the Commission or another state agency. The completed form details each employee covered by the reciprocal coverage agreement by name and social security number along with the name of each state in which they perform services.

This form is very helpful if form RC-1 lists many employees and many states. It can be used as a guide to determine what states agencies to contact for approval of form RC-1.

Form RC-2 Notice to Employees as to Unemployment Compensation Coverage

The blank form RC-2 is provided to the Employer when a reciprocal agreement has received final approval. The reciprocal agreement is approved after all state agencies involved have returned the RC-1 indicating their approval. The form is completed by the Employer and notifies the employee, covered by a reciprocal coverage agreement, that their wages will be reported to the Texas Workforce Commission. One copy of the form RC-2 is given to the employee, one copy is returned to the Commission and one copy is retained by the Employer.

Employee's Consent to Coverage under the Texas Unemployment Compensation Act-Form ECRC

The optional blank form ECRC is completed by the Employer at the request of another state. The Commission provides the form only when another state agency requests employee consent to a reciprocal coverage agreement. The covered employee signs the form indicating consent.

The process of initiating a reciprocal coverage agreement begins when completed forms RC-1 are received from an Employer.

1. Review forms RC-1.
   
   
2. If the forms RC-1 are incomplete or cannot be approved, write the Employer a  letter, approved by your supervisor, informing them of the situation. Place the file copy of the letter in the Doc Log & Destroy basket.
   
   
3. If the forms RC-1 are complete and can be approved, sign and date the forms in the area for Commission approval.
   
   
4. Send an FL-34 PC Template letter to each state agency listed in Item #1 of Form RC-1 enclosing 2 approved RC-1 forms. The FL-34 letter solicits another state agency's approval on the reciprocal coverage agreement. Item #1 lists the states in which the employee may do some work. The other state agencies should approve the two approved enclosed form RC-1's, retaining one for their records and returning the other to the Commission.
   
   If the Employer has submitted multiple applications it is not necessary to send multiple FL-34 letters. Send one FL-34 letter to each state agency listed in item #1, enclosing 2 approved sets of each RC-1.
   
   
5. Attach one approved copy of form RC-1 to the file copy of the FL-34 and trace the account for one year.

When a reciprocal coverage agreement is returned by another state agency it can be returned approved, disapproved or unapproved. Unapproved means that the other state agency did not deny the agreement, but did not sign form RC-1 to designate approval.

1. If an agreement is returned approved or unapproved (with no comments indicating objection to the wages being reported to Texas), check the file to determine if all of the other state agencies covered by the agreement have approved the election.
   
   
2. If all of the state agencies have approved the election, send the Employer the RC-2 (Reciprocal Approval) PC Template letter, returning one copy of the approved form RC-1 and blank forms RC-2 for each employee covered.
   
   The employer should complete and give each employee one copy of the form RC-2, retain a copy for himself, and return one copy to TWC.
   
   Place one copy of the approved form in the file folder and update the FTC screen to designate an approved reciprocal coverage agreement on file. Comments should include the name and social security number of each employee covered by the agreement.
   
   Trace the account for three months to insure return of forms RC-2.
   
   
3. If all of the states have not yet approved the election, make the approved form part of the existing trace file. The Employer should not be notified until all states have responded.
   
   When you receive back the initial RC-1 from one of the states involved, attach it to the file copy of FL-34 and set up a one year trace. Continue to accumulate approved forms in the trace file until all states have responded.
   
   
4. If the election is returned disapproved, write the Employer a letter, approved by your supervisor, enclosing a copy of the other state agency's disapproval letter and a copy of the disapproved election. Make the disapproval letter and election part of the existing trace file.
   
   Sometimes all of the employees covered by an agreement will work in all of the states covered by the agreement. If all of these employees reside in the same state and that state wants the wages reported to them on the basis of employee residency, any approved agreements are void. The Commission will then notify the employer that his request for reciprocal coverage is not approvable.
   
   If this situation arises, write the Employer a letter, approved by your supervisor, enclosing a copy of the disapproving agency's letter and a copy of the disapproved RC-1. Inform the Employer that the reciprocal agreement cannot be approved. Place a copy of the letter in the Doc Log & Destroy basket and update the FTC screen to document the actions.
   
   
5. If after one year an RC-1 agreement has not been approved by all of the states covered by it, write the Employer a letter, approved by your supervisor, advising them of the situation enclosing copies of the agreement as appropriate. Place the file copy of the letter in the Doc Log & Destroy basket and update the FTC screen to document the actions.
   
   
6. The disapproval from a state agency makes only the application to that state null and void. The state agency that disapproves or does not respond (after 1 year) will need the employees involved in that particular application reported to that state. If there are other employees from state agencies that have approved the application, those employees can be reported to Texas.
   
   
7. If another state requests additional information regarding RC-1 agreement, such as completion of a Status Report or Employee Consent Form (ECRC), write the Employer a letter, approved by your supervisor, to secure the information. Make the file copy of the letter part of the existing trace file.

After all forms RC-2 have been returned by the Employer, delete any trace on the system and send form to Doc Log & Destroy. Place a comment on the employer's account that a reciprocal coverage agreement has been approved. Place a comment on the employer's account that a reciprocal coverage agreement has been approved.

Reciprocal Agreements Non-participating Entities

The following have chosen not to participate in the Interstate Reciprocal Coverage Arrangement:

Alaska	New Jersey
Connecticut	New York
Kentucky	Puerto Rico
Mississippi

If a reciprocal coverage agreement form RC-1 is initiated through Texas and the RC-1 agreement covers one of above entities, do not assume the other state will disapprove the agreement. If the RC-1 agreement is approved from the Commission perspective, approve and forward the RC-1 to the concerned state agencies for their approval, disapproval, or unapproval.

When a reciprocal coverage agreement is received from another state agency seeking Texas approval, it should be approved or denied according to Commission approval criteria. In either event a copy of the agreement should be maintained in Commission records. For a reciprocal coverage agreement to be approved the employee covered must be multi-state. If the employee covered is not multi-state the election should be denied.

If a reciprocal coverage agreement is received from another state agency:

1. Assign a Pending account number to the Employer if one is not already assigned.
   
   
2. Approve or deny the agreement according to Commission approval criteria.
   
   
3. Write a letter, approved by your supervisor, to the state agency where the agreement initiated informing them of the Commission decision and enclose a copy of the agreement.
   
   
4. Place the file copy of the letter in the Doc Log & Destroy basket.
   
   
5. Access the STA screen and change the account from Pending to Not Liable.
   
   

   Key	ACCT
   Press	<Enter>
   Key	REG CODE  => 2 DOM CODE => 2 AGR CODE  => 2
   Press	<PF5> to add the record

   
   
6. Update the FTC screen to document the actions. Comments should include the name and social security number of the employee covered by the agreement. Also include the approval date of the agreement and the date it became effective.

A reciprocal coverage agreement becomes effective the calendar quarter in which RC-1 is received unless the Employer indicates an earlier effective date on the application. This earlier effective date can be no earlier than the beginning of the calendar year in which the agreement is submitted.

If an agreement is received and the Employer indicates an effective date in a prior year it should be disapproved. When disapproving the agreement write the Employer a letter, approved by your supervisor, to inform them of the actions enclosing a copy of the agreement. Place a file copy of the letter in the Doc Log & Destroy basket and update the FTC screen to document the actions.

Once submitted a reciprocal coverage agreement remains in effect until:

1. The Employer terminates the agreement in writing, or
   
   
2. The state agency to which multi-state wages are reported determines that the services performed are no longer multi-state in nature.
   
   If an Employer gives written notice of their desire to terminate an agreement, the agreement ends at the close of the calendar quarter in which they give notice to all concerned parties. When terminating an agreement the Employer is responsible for notifying any effected individual. Document the FTC when an Employer terminates their reciprocal coverage agreement.
   
   If the state agency to which multi-state wages are reported terminates an agreement, the agreement ends at the close of the calendar quarter in which the state agency gives notice to all concerned parties. When the Commission or another state agency terminates an agreement, document FTC.

Under certain conditions a reciprocal coverage agreement may be withdrawn by an Employer. An agreement may be withdrawn if:

1. Part of the reciprocal coverage agreement is disapproved, or
   
   
2. Only part of the reciprocal coverage agreement is approved.
   
   To withdraw an agreement the Employer must notify the Commission in writing within ten days of the time they are notified that an agreement has been disapproved or approved only in part.
   
   If a reciprocal coverage agreement is withdrawn, update both the file and the FTC screen to document the actions.