A bill to provide assistance to certain employers and States in 2011 and 2012, to improve the long-term solvency of the Unemployment Compensation program, and for other purposes.

Summary: Unemployment Insurance Solvency Act of 2011 - Amends title XII of the Social Security Act (Advances to State Unemployment Funds) to: (1) extend through December 31, 2012, the waiver granted to states for payment of interest on advances made from the federal unemployment account in the Unemployment Trust Fund; and (2) authorize the governor of any state that has outstanding repayable advances from the federal unemployment account to apply to the Secretary of Labor to enter into a voluntary principal abatement agreement.

Amends the Internal Revenue Code to: (1) extend the 6.2% employment tax rate for employers through 2013 and impose a reduced 5.78% rate in 2014, (2) modify the rate applicable to the limit on the credit allowed to employers for the federal unemployment tax, and (3) increase the taxable wage base for the federal unemployment tax to $15,000 in 2014.

Amends title IX of the Social Security Act (Miscellaneous Provisions Relating to Employment Security) to increase the rate of interest payable on unemployment compensation reserves and lower the rate of the employment tax for employers in states whose unemployment compensation fund remains solvent.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Unemployment 
Insurance Solvency Act of 2011''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Extension of assistance for States with advances.
Sec. 3. Reduction in the rate of employer taxes.
Sec. 4. Modifications of employer credit reductions.
Sec. 5. Increase in the taxable wage base.
Sec. 6. Voluntary State agreements to abate principal on Federal loans.
Sec. 7. Rewards and incentives for solvent States and employers in 
                            those States.

SEC. 2. EXTENSION OF ASSISTANCE FOR STATES WITH ADVANCES.

    (a) In General.--Section 1202(b)(10)(A) of the Social Security Act 
(42 U.S.C. 1322(b)(10)(A)) is amended by striking ``2010'' and 
inserting ``2012'' in the matter preceding clause (i).
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the enactment of section 2004 of the 
Assistance for Unemployed Workers and Struggling Families Act (Public 
Law 111-5; 123 Stat. 443).

SEC. 3. REDUCTION IN THE RATE OF EMPLOYER TAXES.

    (a) In General.--Section 3301 of the Internal Revenue Code of 1986 
is amended--
            (1) in paragraph (1), by striking ``2010 and the first 6 
        months of calendar year 2011'' and inserting ``2013''; and
            (2) in paragraph (2), by striking ``6.0 percent in the case 
        of the remainder of calendar year 2011'' and inserting ``5.78 
        percent in the case of calendar year 2014''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the earlier of--
            (1) the date of the enactment of this Act; or
            (2) July 1, 2011.

SEC. 4. MODIFICATIONS OF EMPLOYER CREDIT REDUCTIONS.

    (a) Limit on Total Credits.--Section 3302(c) of the Internal 
Revenue Code of 1986 is amended--
            (1) in paragraph (1), by striking ``90 percent of the tax 
        against which such credits are allowable'' and inserting ``an 
        amount equal to 5.4 percent of the total wages (as defined in 
        section 3306(b)) paid by such taxpayer during the calendar year 
        with respect to employment (as defined in section 3306(c))''; 
        and
            (2) in paragraph (2)--
                    (A) by striking subparagraphs (B) and (C) and the 
                flush matter following subparagraph (C);
                    (B) by striking ``(2) If'' and inserting ``(2)(A) 
                If'';
                    (C) by striking ``(A)(i) in'' and inserting ``(i) 
                in'';
                    (D) in clause (i) of subparagraph (A), as 
                redesignated by subparagraph (C), by striking ``5 
                percent of the tax imposed by section 3301 with respect 
                to the wages paid by such taxpayer during such taxable 
                year which are attributable to such State'' and 
                inserting ``an amount equal to 0.3 percent of the total 
                wages (as defined in section 3306(b)) paid by such 
                taxpayer during the calendar year with respect to 
                employment (as defined in section 3306(c))'';
                    (E) in clause (ii) of subparagraph (A)--
                            (i) by moving such clause 2 ems to the 
                        left;
                            (ii) by striking ``5 percent, for each such 
                        succeeding taxable year, of the tax imposed by 
                        section 3301 with respect to the wages paid by 
                        such taxpayer during such taxable year which 
                        are attributable to such State;'' and inserting 
                        ``an amount equal to 0.3 percent of the total 
                        wages (as defined in section 3306(b)) paid by 
                        such taxpayer during the calendar year with 
                        respect to employment (as defined in section 
                        3306(c)), for each succeeding taxable year;''; 
                        and
                            (iii) by striking the semicolon at the end 
                        and inserting a period; and
                    (F) by adding at the end the following new 
                subparagraph:
            ``(B) The provisions of subparagraph (A) shall be applied 
        with respect to the taxable year beginning January 1, 2011, or 
        any succeeding taxable year by deeming January 1, 2013, to be 
        the first January 1 occurring after January 1, 2010. For 
        purposes of subparagraph (A), consecutive taxable years in the 
        period commencing January 1, 2013, shall be determined as if 
        the taxable year which begins on January 1, 2013, were the 
        taxable year immediately succeeding the taxable year which 
        began on January 1, 2010. No taxpayer shall be subject to 
        credit reductions under this paragraph for taxable years 
        beginning January 1, 2011, and January 1, 2012.''.
    (b) Definitions and Special Rules.--Section 3302(d) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking paragraphs (1), (4), (5), (6), and (7); and
            (2) by redesignating paragraphs (2) and (3) as paragraphs 
        (1) and (2), respectively.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if enacted on January 1, 2011.

SEC. 5. INCREASE IN THE TAXABLE WAGE BASE.

    (a) In General.--Section 3306 of the Internal Revenue Code of 1986 
is amended--
            (1) in subsection (b), by striking ``$7,000'' both places 
        it appears and inserting ``the applicable wage base amount (as 
        defined in subsection (v)(1))''; and
            (2) by adding at the end the following new subsection:
    ``(v) Applicable Wage Base Amount.--
            ``(1) In general.--For purposes of subsection (b)(1), the 
        term `applicable wage base amount' means--
                    ``(A) for a calendar year before calendar year 
                2014, $7,000;
                    ``(B) for calendar year 2014, $15,000; and
                    ``(C) for calendar years beginning on or after 
                January 1, 2015, the amount determined under paragraph 
                (2).
            ``(2) Amount for calendar year 2015 and thereafter.--
                    ``(A) Amount.--
                            ``(i) In general.--For purposes of 
                        paragraph (1)(C), the amount determined under 
                        this paragraph for a calendar year is an amount 
                        equal to the product of--
                                    ``(I) the amount of average wage 
                                growth for the year (as determined in 
                                accordance with subparagraph (B)); and
                                    ``(II) the applicable wage base 
                                amount for the preceding calendar year.
                            ``(ii) Rounding.--If the amount determined 
                        under clause (i) is not a multiple of $100, 
                        such amount shall be rounded to the next higher 
                        multiple of $100.
                    ``(B) Average wage growth.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the amount of annual wage 
                        growth for a calendar year shall be determined 
                        by dividing the average annual wage in the 
                        United States for the 12-month period ending on 
                        the June 30 of the preceding calendar year by 
                        the average annual wage in the United States 
                        for the 12-month period ending on the second 
                        prior June 30, and rounding such ratio to the 
                        fifth decimal place.
                            ``(ii) Average annual wage.--For purposes 
                        of clause (i), using data from the Quarterly 
                        Census of Employment and Wages (or a successor 
                        program), the average annual wage for a 12-
                        month period shall be determined by dividing 
                        the total covered wages subject to 
                        contributions under all State unemployment 
                        compensation laws for such period by the 
                        average covered employment subject to 
                        contributions under all State unemployment 
                        compensation laws for such period, and rounding 
                        the result to the nearest whole dollar.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 6. VOLUNTARY STATE AGREEMENTS TO ABATE PRINCIPAL ON FEDERAL LOANS.

    (a) In General.--Section 1203 of the Social Security Act (42 U.S.C. 
1323) is amended--
            (1) by inserting ``(a) Advances.--'' after ``1203''; and
            (2) by adding at the end the following new subsection:
    ``(b) Voluntary Abatement Agreements.--
            ``(1) In general.--The governor of any State that has 
        outstanding repayable advances from the Federal unemployment 
        account pursuant to subsection (a) may apply to the Secretary 
        of Labor to enter into a voluntary principal abatement 
        agreement.
            ``(2) Contents of application.--An application described in 
        paragraph (1) shall include a plan that, based upon reasonable 
        economic projections, describes how the State will, within a 
        reasonable period of time--
                    ``(A) repay the outstanding principal on its 
                remaining advance to the Federal unemployment account, 
                less the amount of the principal abatement pursuant to 
                paragraph (4); and
                    ``(B) restore the solvency of the State's account 
                in the Unemployment Trust Fund to an average high cost 
                multiple of 1.0, as calculated and defined by the 
                United States Department of Labor.
            ``(3) Requirement for plan.--A plan described in paragraph 
        (2) shall be premised on the existing unemployment compensation 
        law of the State and may take into consideration the enactment 
        of any changes in law scheduled to become effective during the 
        life of the plan.
            ``(4) Agreement.--Upon review of the application and 
        satisfaction that the State's plan will meet the repayment and 
        solvency goals described in paragraph (2), the Secretary of 
        Labor may enter into a principal abatement agreement with the 
        State. Such an agreement shall be for a period of no more than 
        7 years.
            ``(5) Calculation.--Under any voluntary abatement agreement 
        under this subsection, the amount of principal abatement shall 
        be calculated as follows:
                    ``(A) The State's repayable advances as of the date 
                of the enactment of this subsection or December 31, 
                2011, whichever is earlier, shall be multiplied by a 
                loan forgiveness multiplier.
                    ``(B) The State's loan forgiveness multiplier shall 
                be calculated on the same basis as the temporary 
                increase of Medicaid FMAP under section 5001(c)(2)(A) 
                of division B of the American Recovery and Reinvestment 
                Act of 2009, using the State's additional FMAP tier as 
                of December 31, 2010. In the case of a State that meets 
                the criteria described in--
                            ``(i) clause (i) of such section 
                        5001(c)(2)(A), the loan multiplier shall be 
                        0.2;
                            ``(ii) clause (ii) of such section 
                        5001(c)(2)(A), the loan multiplier shall be 
                        0.4; and
                            ``(iii) clause (iii) of such section 
                        5001(c)(2)(A), the loan multiplier shall be 
                        0.6.
                    ``(C) The annual amount of principal abatement 
                shall equal one-seventh of the total amount of 
                principal abatement.
            ``(6) Certification.--Under any voluntary abatement 
        agreement under this subsection, the State shall certify that 
        during the period of the agreement--
                    ``(A) the method governing the computation of 
                regular unemployment compensation under the State law 
                of the State will not be modified in a manner such that 
                the average weekly benefit amount of regular 
                unemployment compensation which will be payable during 
                the period of the agreement will be less than the 
                average weekly benefit amount of regular unemployment 
                compensation which would have otherwise been payable 
                under the State law as in effect on the date of the 
                enactment of this subsection;
                    ``(B) State law will not be modified in a manner 
                such that any unemployed individual who would be 
                eligible for regular unemployment compensation under 
                the State law in effect on such date of enactment would 
                be ineligible for regular unemployment compensation 
                during the period of the agreement or would be subject 
                to any disqualification during the period of the 
                agreement that the individual would not have been 
                subject to under the State law in effect on such date 
                of enactment;
                    ``(C) State law will not be modified in a manner 
                such that the maximum amount of regular unemployment 
                compensation that any unemployed individual would be 
                eligible to receive in a benefit year during the period 
                of the agreement will be less than the maximum amount 
                of regular unemployment compensation that the 
                individual would have been eligible to receive during a 
                benefit year under the State law in effect on such date 
                of enactment; and
                    ``(D) upon a determination by the Secretary of 
                Labor that the State has modified State law in a manner 
                inconsistent with the certification described in the 
                preceding provisions of this paragraph or has failed to 
                comply with any certifications required by this 
                paragraph, the State shall be liable for any principal 
                previously abated under the agreement.
            ``(7) Transfer.--Under a voluntary abatement agreement 
        under this subsection, a transfer of the annual amount of the 
        principal abatement shall be made to the State's account in the 
        Unemployment Trust Fund on December 31st of the year in which 
        the agreement is executed so long as the State has complied 
        with the terms of the agreement. For each subsequent year that 
        the Secretary of Labor certifies that the State is in 
        compliance with the terms of the agreement, the annual amount 
        of the State's principal abatement will be credited to its 
        outstanding loan balance. If the loan balance reaches zero 
        while the State still has a remaining principal abatement 
        amount, the remaining amount shall be made as a positive 
        balance transfer to the State's account in the Unemployment 
        Trust Fund.
            ``(8) Regulations.--The Secretary of Labor shall promulgate 
        such regulations as are necessary to implement this subsection. 
        Such regulations shall include--
                    ``(A) standards prescribing a reasonable period of 
                time for a State plan to reach a solvency level equal 
                to an average high cost multiple of 1.0, taking into 
                account the economic conditions and level of insolvency 
                of the State; and
                    ``(B) guidelines for insuring progress toward 
                solvency for States with agreements that include plans 
                that require more than 7 years to reach an average high 
                cost multiple of 1.0.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 7. REWARDS AND INCENTIVES FOR SOLVENT STATES AND EMPLOYERS IN 
              THOSE STATES.

    (a) Increased Interest for Solvent States.--
            (1) In general.--Section 904(e) of the Social Security Act 
        (42 U.S.C. 1104(e)) is amended by adding at the end the 
        following new flush sentences:
``The separate book account for each State agency shall be augmented by 
0.5 percent over the rate of interest provided in subsection (b) when 
the State maintains reserves in the account that equal or exceed an 
average high cost multiple of 1.0 as defined by the Secretary of Labor 
as of December 31st of the preceding year. The State may apply the 
additional funds to support State administration pursuant to the 
requirements in section 903(c).''.
    (b) Lower Rate of Tax for Solvent States.--
            (1) In general.--Section 3301 of the Internal Revenue Code 
        of 1986, as amended by section 3, is amended by adding at the 
        end the following new sentence: ``For the second 6-month period 
        of 2011 or for each calendar year thereafter, in the case of a 
        State that maintains reserves in the State's separate book 
        account that equal or exceed an average high cost multiple of 
        1.0 as of December 31st of the year preceding the period or 
        year involved, paragraph (1) shall be applied for such period 
        or year in the State by substituting `6.0 percent' for `6.2 
        percent' or, as the case may be, paragraph (2) shall be applied 
        for such period or year in the State by substituting `5.68 
        percent' for `5.78 percent'.''.
            (2) Effective date.--The amendment made by this subsection 
        shall take effect on the earlier of--
                    (A) the date of the enactment of this Act; or
                    (B) July 1, 2011.