I

104TH CONGRESS

2D SESSION H. R. 3738

To reform the Federal unemployment benefits system.

IN THE HOUSE OF REPRESENTATIVES

JUNE 27, 1996

Mr. ENGLISH of Pennsylvania introduced the following bill; which was referred

to the Committee on Ways and Means

A BILL

To reform the Federal unemployment benefits system.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. EXTENDED BENEFITS TRIGGER.

4 (a) IN GENERAL.—Section 203(d) of the Federal5 State Extended Unemployment Compensation Act of 1970

6 (26 U.S.C. 3304 note) is amended—

7 (1) in subparagraph (B) of paragraph (1), by

8 striking ‘‘5 per centum’’ and inserting ‘‘4 per cen9 tum’’, and

10 (2) in the first flush sentence following para11 graph (2), by striking ‘‘5’’ and inserting ‘‘4’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply to weeks of unemployment be3 ginning 6 months or more after the date of the enactment

4 of this Act.

5 SEC. 2. INCREASE AND DECREASE IN EARNINGS CREDITED

6 TO STATE ACCOUNTS WHEN STATES MEET OR

7 FAIL TO MEET FUNDING GOALS.

8 (a) IN GENERAL.—Section 904 of the Social Security

9 Act (42 U.S.C. 1104) is amended by adding at the end

10 the following new subsection:

11 ‘‘INCREASE AND DECREASE IN AMOUNT OF EARNINGS AL12 LOCATED TO STATE ACCOUNTS WHEN STATES MEET

13 OR FAIL TO MEET FUNDING GOALS

14 ‘‘(h)(1) If the average daily balance in a State ac15 count in the Unemployment Trust Fund for any calendar

16 quarter exceeds the funding goal of such State, the

17 amount otherwise creditable to such account under sub18 section (e) for such quarter shall be increased by the inter19 est premium on such excess. If the average daily balance

20 in such a State account for any calendar quarter is less

21 than the funding goal of such State, the amount otherwise

22 creditable to such account under subsection (e) for such

23 quarter shall be decreased by the interest penalty.

24 ‘‘(2) Paragraph (1) shall not apply with respect to

25 any interest premium or interest penalty to the extent that

26 such application would result in an increase or decrease
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1 of more than $2,500,000 in the amount creditable to any

2 State account for any calendar quarter.

3 ‘‘(3) For purposes of this subsection, the term ‘inter4 est premium’ means, for any calendar quarter—

5 ‘‘(A) with respect to the State with the largest

6 percentage value of excess of the average daily bal7 ance in the State account in the Unemployment

8 Trust Fund over the funding goal of such State,

9 one-half of one percent of the amount of such ex10 cess, and

11 ‘‘(B) with respect to each other State, the prod12 uct of—

13 ‘‘(i) the amount of the excess of the aver14 age daily balance in the State account in the

15 Unemployment Trust Fund over the funding

16 goal of such State, and

17 ‘‘(ii) the percentage which bears the same

18 ratio to one-half of one percent as—

19 ‘‘(I) the percentage value of such ex20 cess, bears to

21 ‘‘(II) the percentage value of the ex22 cess of the State referred to in subpara23 graph (A).

24 The Secretary shall make appropriate adjustments in the

25 interest premium for any calendar quarter if the aggregate
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1 interest premiums payable for such quarter exceed the ag2 gregate interest penalties for such quarter.

3 ‘‘(4) For purposes of this subsection, the term ‘inter4 est penalty’ means, for any calendar quarter—

5 ‘‘(A) with respect to the State with the largest

6 percentage value of excess of the funding goal of

7 such State over the average daily balance in the

8 State account in the Unemployment Trust Fund,

9 one-half of one percent of the amount otherwise

10 creditable to such account under subsection (e), and

11 ‘‘(B) with respect to each other State, the prod12 uct of—

13 ‘‘(i) the amount otherwise creditable to

14 such account under subsection (e), and

15 ‘‘(ii) the percentage which bears the same

16 ratio to one-half of one percent as—

17 ‘‘(I) the percentage value of the excess

18 of the funding goal of the State over such

19 average daily balance of such State, bears

20 to

21 ‘‘(II) the percentage value of such ex22 cess of the State referred to in subpara23 graph (A).

24 ‘‘(5) For purposes of this subsection, the term ‘fund25 ing goal’ means, for any State for any calendar quarter,
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1 the average of the unemployment insurance benefits paid

2 by such State during each of the 3 years, in the 20-year

3 period ending with the calendar year containing such cal4 endar quarter, during which the State paid the greatest

5 amount of unemployment benefits.

6 ‘‘(6) For purposes of this subsection, the term ‘per7 centage value’ means—

8 ‘‘(A) with respect to any excess of the average

9 daily balance in a State account in the Unemploy10 ment Trust Fund over the funding goal of such

11 State, the percentage which such excess bears to

12 such funding goal, and

13 ‘‘(B) with respect to any excess of such funding

14 goal over such average daily balance, the percentage

15 which such excess bears to such funding goal.’’

16 (b) CONFORMING AMENDMENTS.—

17 (1) AMOUNTS CREDITED TO STATE AC18 COUNTS.—Subsection (e) of section 904 of the So19 cial Security Act (42 U.S.C. 1104(e)) is amended in

20 the first sentence by inserting ‘‘(as modified by sub21 section (h))’’ after ‘‘a proportionate part’’.

22 (2) INTEREST RATE ON REPAYMENT OF AD23 VANCES DETERMINED WITHOUT REGARD TO INTER24 EST PREMIUMS OR PENALTIES ON AMOUNTS CRED25 ITED TO STATE ACCOUNTS.—Subparagraph (A) of
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1 section 1202(b)(4) of such Act (42 U.S.C.

2 1322(b)(4)) is amended by inserting ‘‘(determined

3 without regard to section 904(h))’’ after ‘‘preceding

4 calendar year’’.

5 (c) REPORT.—Not later than 6 months after the date

6 of the enactment of this Act, the Secretary of Labor shall

7 submit to the Congress a report recommending sources of

8 funding for the crediting of interest premiums under sub9 section (h) of section 904 of the Social Security Act (42

10 U.S.C. 1104), as added by this section, in the event that

11 the imposition of interest penalties under such subsection

12 is insufficient to fund such premiums.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to calendar years beginning after

15 December 31, 1996.

16 SEC. 3. INTEREST-FREE ADVANCES TO STATE ACCOUNTS IN

17 UNEMPLOYMENT TRUST FUND RESTRICTED

18 TO STATES WHICH MEET FUNDING GOALS.

19 (a) IN GENERAL.—Paragraph (2) of section 1202(b)

20 of the Social Security Act (42 U.S.C. 1322(b)) is amended

21 by striking ‘‘and’’ at the end of subparagraph (A), by

22 striking the period at the end of subparagraph (B) and

23 inserting ‘‘, and’’, and by adding at the end the following

24 new subparagraph:
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1 ‘‘(C) the average daily balance in the ac2 count of such State in the Unemployment Trust

3 Fund for each of 4 of the 5 calendar quarters

4 preceding the calendar quarter in which such

5 advances were made exceeds the funding goal of

6 such State (as defined in section 904(h)).’’

7 (b) EFFECTIVE DATE.—The amendment made by

8 subsection (a) shall apply to calendar years beginning

9 after December 31, 1996.

10 SEC. 4. STATE COLLECTION OF FEDERAL UNEMPLOYMENT

11 TAX.

12 (a) IN GENERAL.—Chapter 23 of the Internal Reve13 nue Code of 1986 (relating to Federal Unemployment Tax

14 Act) is amended by redesignating section 3311 as section

15 3312 and by inserting after section 3310 the following new

16 section:

17 ‘‘SEC. 3311. STATE COLLECTION OF TAX.

18 ‘‘(a) IN GENERAL.—At the election of any State

19 which is certified as provided in section 3304, each em20 ployer who pays contributions, with respect to any wages,

21 into an unemployment fund maintained under the unem22 ployment compensation law of such State shall submit the

23 tax imposed by this chapter with respect to such wages

24 to such State rather than to the Secretary.
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1 ‘‘(b) COORDINATION WITH DEPOSITARY REQUIRE2 MENTS.—Payment under subsection (a) of the tax im3 posed by this chapter with respect to any wages shall be

4 treated as timely paid for purposes of this title if paid

5 by the employer to the State at the same time as a timely

6 paid payment, with respect to such wages, of contributions

7 into an unemployment fund maintained under the unem8 ployment compensation law of such State.

9 ‘‘(c) EXCEPTION FOR PAYMENTS NOT TIMELY

10 PAID.—Subsection (a) shall not apply to any payment of

11 the tax imposed by this chapter which is not paid by an

12 employer on or before the last date on which such payment

13 would be treated as timely paid under subsection (b).

14 ‘‘(d) FEDERAL TAX TRANSFERRED TO SEC15 RETARY.—Each State making an election under sub16 section (a) shall transmit to the Secretary, at the time

17 and in the manner prescribed by the Secretary, the

18 amount of the tax imposed by this chapter which is sub19 mitted to such State under subsection (a) and a copy of

20 the State tax return of each employer making such a sub21 mission. The Secretary may, after consultation with the

22 Interstate Conference of Employment Security Adminis23 trators, prescribe regulations requiring that additional in24 formation be submitted by such State with respect to the

25 amount of such tax payable by such employer.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 for chapter 23 of such Code is amended by striking the

3 item relating to section 3311 and inserting the following

4 new items:

‘‘Sec. 3311. State collection of tax.

‘‘Sec. 3312. Short title.’’

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 December 31, 1996.

8 SEC. 5. REQUIRED DISTRIBUTION OF STATE-SPECIFIC IN9 FORMATION PACKETS.

10 (a) IN GENERAL.—Subsection (a) of section 3304 of

11 the Internal Revenue Code of 1986 (relating to approval

12 of State laws) is amended by striking ‘‘and’’ at the end

13 of paragraph (18), by striking the period at the end of

14 paragraph (19) and inserting ‘‘; and’’, and by adding at

15 the end the following new paragraph:

16 ‘‘(20) the State will distribute to unemployed

17 individuals State-specific information packets ex18 plaining unemployment insurance eligibility condi19 tions.’’

20 (b) EFFECTIVE DATE.—The amendment made by

21 subsection (a) shall apply to certifications of States for

22 1997, except that section 3304(a)(20) of such Code, as

23 added by subsection (a), shall not be a requirement for

24 the State law of any State prior to July 1, 1998, if the
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1 legislature of such State does not meet in a regular session

2 which closes during the calendar year 1997.

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