I
107TH CONGRESS
2D SESSION
H. R. 4373
To amend the Federal Unemployment Tax Act and the Social Security Act
to modernize the unemployment insurance system, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 16, 2002
Mr. MCDERMOTT (for himself, Mr. WYNN, Mrs. CHRISTENSEN, Ms. KAPTUR,
Mr. FROST, Mr. GEORGE MILLER of California, Mr. BONIOR, Mr. STARK,
Mr. KUCINICH, Ms. LEE, Mr. UDALL of New Mexico, Mr. JACKSON of
Illinois, Mr. ACEVEDO-VILA´, and Mrs. MINK of Hawaii) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Federal Unemployment Tax Act and the So-
cial Security Act to modernize the unemployment insur-
ance system, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Keep America Working Act of 2002’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—RESTORING INSURANCE ELIGIBILITY IN AN EVOLVING
ECONOMY
Sec. 101. Expansion of circumstances under which unemployment compensation
is payable.
Sec. 102. Expansion of unemployment tax wage base.
Sec. 103. Determinations of whether individuals are employees for purposes of
employment taxes.
Sec. 104. Repeal of determination of employer’s liability for certain employment
taxes.
Sec. 105. Effective dates.
TITLE II—INCREASING JOB MOBILITY AND ENCOURAGING
ADEQUATE COMPENSATION
Sec. 201. Separation from work due to a move relating to spouse’s or domestic
partner’s new principal place of work not a bar to receiving un-
employment compensation; replacement ratios for lower paid
workers who become unemployed.
TITLE III—ENSURING SOLVENCY AND PREPARING FOR
RECESSION
Sec. 301. Increase and decrease in earnings credited to State accounts when
States meet or fail to meet funding goals.
Sec. 302. Amendments to trigger provisions of extended benefit program.
Sec. 303. Eliminate special Federal eligibility requirements for extended com-
pensation.
TITLE IV—IMPROVED LABOR AND WORKFORCE DATA; IMPROVE-
MENTS IN ADMINISTRATIVE FUNDING FOR AND MEASURING
ACCESS TO THE UNEMPLOYMENT SYSTEM
Sec. 401. Data and reporting requirements.
Sec. 402. Funding for administration of State unemployment compensation,
State systems of public employment offices and veterans em-
ployment service programs.
TITLE 
I—RESTORING 
INSUR-
ANCE 
ELIGIBILITY 
IN 
AN
EVOLVING ECONOMY
SEC. 101. EXPANSION OF CIRCUMSTANCES UNDER WHICH
UNEMPLOYMENT 
COMPENSATION 
IS 
PAY-
ABLE.
(a) IN GENERAL.—Subsection (a) of section 3304 of
the Internal Revenue Code of 1986 (relating to approval
of State unemployment compensation laws) is amended by
striking ‘‘and’’ at the end of paragraph (18), by redesig-
nating paragraph (19) as paragraph (28), and by insert-
ing after paragraph (18) the following new paragraphs:
‘‘(19) compensation shall not be denied to an
individual solely because such individual is seeking
only part-time work, if—
‘‘(A) such individual otherwise qualifies for
unemployment compensation, based wholly or
mostly on part-time work; and
‘‘(B) the part-time work sought by such in-
dividual generally requires at least 20 hours per
week;
‘‘(20) compensation is payable to an eligible in-
dividual in an amount which is not less than the
amount determined by applying a base period ending
at the close of the calendar quarter most recently
completed before the date of the individual’s applica-
tion for benefits;
‘‘(21) except as provided in paragraphs (6) and
(13), compensation shall not be denied in such State
to any otherwise eligible individual solely on the
basis that such individual is a seasonal worker;
‘‘(22)(A) if any individual leaves employment
because of sexual harassment, for purposes of deter-
mining such individual’s eligibility for compensation
for any subsequent week for which such individual
meets the State law requirements relating to avail-
ability for work and active search for work, such in-
dividual shall be treated as having left such employ-
ment for good cause, and
‘‘(B) for purposes of subparagraph (A), ‘sexual
harassment’ shall be considered to have been shown
upon the demonstration of facts sufficient to estab-
lish a prima facie case that the individual involved
was victimized by sexual harassment in violation of
title VII of the Civil Rights Act of 1964;
‘‘(23) if any individual leaves employment be-
cause of loss of adequate child care for a dependent
child under the age of 13, for purposes of deter-
mining such individual’s eligibility for compensation
for any subsequent week for which such individual
meets the State law requirements relating to avail-
ability for work and active search for work—
‘‘(A) such individual shall be treated as
having left such employment for good cause,
and
‘‘(B) any failure to return to such employ-
ment or to otherwise meet such State law re-
quirements, while the lack of such child care
continues, shall be disregarded;
‘‘(24) if any individual leaves employment be-
cause the individual is a victim of domestic violence,
for purposes of determining such individual’s eligi-
bility for compensation for any subsequent week for
which such individual meets the State law require-
ments relating to availability for work and active
search for work—
‘‘(A) such individual shall be treated as
having left such employment for good cause,
and
‘‘(B) any failure to return to such employ-
ment or to otherwise meet such State law re-
quirements while the risk of further domestic
violence is significant shall be disregarded;
‘‘(25) the State law provides for the distribution
to unemployed individuals information packets ex-
plaining unemployment insurance eligibility condi-
tions in that State;
‘‘(26) the State periodically reviews and adopts
the best practices of other States in addressing con-
tract and temporary worker issues, including—
‘‘(A) clarifying the definitions of employee
and independent contractor,
‘‘(B) specifying employer liability for pay-
roll taxes,
‘‘(C) licensing, bonding, or regulating the
employee leasing industry, and
‘‘(D) the strategic targeting of audits;
‘‘(27) compensation shall not be denied in such
State to any otherwise eligible individual solely on
the basis that such individual was employed at the
applicable minimum wage for not less than 20 hours
a week for 30 weeks in the base period; and’’.
(b) UNEMPLOYMENT COMPENSATION NOT REDUCED
BY EXEMPT TRUST ROLLOVERS.—Paragraph (15) of sec-
tion 3304(a) of such Code is amended by inserting ‘‘(other
than a rollover described in section 402(c), 403(a)(4),
403(b)(8), 408(d)(3), or 457(e)(16))’’ after ‘‘periodic pay-
ment’’ the first place it appears.
SEC. 102. EXPANSION OF UNEMPLOYMENT TAX WAGE BASE.
(a) IN GENERAL.—Paragraph (1) of section 3306(b)
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘$7,000’’ and inserting ‘‘the contribution and benefit
base (as determined under section 230 of the Social Secu-
rity Act)’’.
(b) DECREASE IN FUTA TAX RATE.—Section 3301
of such Code is amended by striking ‘‘equal to—’’ and
all that follows through ‘‘thereafter;’’ and inserting ‘‘equal
to 5.59 percent’’.
SEC. 103. DETERMINATIONS OF WHETHER INDIVIDUALS
ARE EMPLOYEES FOR PURPOSES OF EM-
PLOYMENT TAXES.
(a) REPEAL OF PRIOR AUDIT SAFE HARBOR WITH
RESPECT TO DETERMINATIONS OF EMPLOYMENT STA-
TUS.—
(1) IN
GENERAL.—Paragraph (2) of section
530(a) of the Revenue Act of 1978 is amended by
striking subparagraph (B) and redesignating sub-
paragraph (C) as subparagraph (B).
(2) 
CONFORMING
AMENDMENTS.—Section
530(e) of such Act is amended—
(A) in paragraph (2) by striking subpara-
graph (A) and redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respec-
tively,
(B) in paragraph (4)(B) by striking ‘‘sub-
paragraph (A), (B), or (C)’’ and inserting ‘‘sub-
paragraph (A) or (B)’’.
(b) REPEAL
OF PROHIBITION AGAINST REGULA-
TIONS AND RULINGS ON EMPLOYMENT STATUS.—Section
530 of the Revenue Act of 1978 is amended by striking
subsection (b).
SEC. 104. REPEAL OF DETERMINATION OF EMPLOYER’S LI-
ABILITY FOR CERTAIN EMPLOYMENT TAXES.
(a) IN GENERAL.—Section 3509 of the Internal Rev-
enue Code of 1986 is repealed.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 25 of such Code is amended by striking the
item relating to section 3509.
SEC. 105. EFFECTIVE DATES.
(a) IN GENERAL.—Except as provided by subsection
(b), the amendments made by this title—
(1) shall take effect on January 1, 2003, and
(2) in the case of sections 103 and 104, shall
apply to periods beginning after December 31, 2002.
(b) EXCEPTION.—In the case of any State the legisla-
ture of which has not been in session for at least 30 cal-
endar days (whether or not successive) between the date
of the enactment of this Act and December 31, 2002, the
amendments made by section 101 shall take effect 30 cal-
endar days after the first day on which such legislature
is in session on or after January 1, 2003.
TITLE II—INCREASING JOB MO-
BILITY 
AND 
ENCOURAGING
ADEQUATE COMPENSATION
SEC. 201. SEPARATION FROM WORK DUE TO A MOVE RE-
LATING TO SPOUSE’S OR DOMESTIC PART-
NER’S NEW PRINCIPAL PLACE OF WORK NOT
A BAR TO RECEIVING UNEMPLOYMENT COM-
PENSATION; 
REPLACEMENT 
RATIOS 
FOR
LOWER PAID WORKERS WHO BECOME UNEM-
PLOYED.
(a) REVENUES FROM INDIVIDUAL INCOME TAXES
ATTRIBUTABLE TO UNEMPLOYMENT COMPENSATION TO
BE CREDITED TO UNEMPLOYMENT ACCOUNTS OF QUALI-
FYING STATES.—
(1) IN
GENERAL.—There is hereby appro-
priated to accounts of certified States in the Unem-
ployment Trust Fund (as described in section 903 of
the Social Security Act (42 U.S.C. 1103)) amounts
equivalent to the amount of tax liabilities under
chapter 1 of the Internal Revenue Code of 1986
which is attributable to the application of section 85
of such Code to payments from such accounts.
(2) TRANSFERS.—The amounts appropriated
by paragraph (1) to any such account shall be trans-
ferred from time to time (but not less frequently
than quarterly) from the general fund of the Treas-
ury on the basis of estimates made by the Secretary
of the Treasury, in consultation with the Secretary
of Labor, of the amounts referred to in such para-
graph. Any such quarterly payment shall be made on
the first day of such quarter and shall take into ac-
count unemployment compensation estimated to be
received from such account during such quarter.
Proper adjustments shall be made in the amounts
subsequently transferred to the extent prior esti-
mates were in excess of or less than the amounts re-
quired to be transferred.
(3) CERTIFIED STATES.—For purposes of this
subsection, the term ‘certified State’ means a State
for which a certification under subsection (d) is in
effect.
(4) REPORTS.—The Secretary of the Treasury
shall submit annual reports to the Congress on—
(A) the transfers made under this sub-
section during the year, and the methodology
used in determining the amount of such trans-
fers and the account to which made, and
(B) the anticipated operation of this sub-
section during the next 5 years.
(b) CONDITIONS FOR APPROVAL OF STATE LAWS.—
The Secretary of Labor shall (for purposes of this section)
approve any State law submitted to the Secretary under
this section, within 30 days of such submission, which the
Secretary finds provides that—
(1) compensation shall not be denied to any in-
dividual by reason of such individual’s separating
from employment, if—
(A) that separation is related to a change
in such individual’s spouse’s place of residence
in connection with the commencement of work
by the spouse (as an employee or as a self-em-
ployed individual) at a new principal place of
work;
(B) the spouse’s new principal place of
work satisfies the condition under subsection
(c)(1) of section 217 of the Internal Revenue
Code of 1986 (relating to the minimum dis-
tance required, between a taxpayer’s former
residence and new principal place of work, in
order to qualify for a moving expenses deduc-
tion under such section); and
(C) the separating individual has both the
former residence and the new residence as his
principal place of abode; and
(2) in the case of any individual who becomes
entitled to receive compensation from such State,
and whose average weekly wages (for the period on
the basis of which such individual qualifies for such
compensation, determined without any limitation on
amount) do not exceed 50 percent of the average
weekly wages subject (determined without any limi-
tation on amount) to contributions under the unem-
ployment compensation law of such State (as deter-
mined by the Secretary based on the data the Sec-
retary considers most appropriate), compensation
shall be computed in a manner that results in a
wage replacement ratio for such individual that is at
least equal to the sum of—
(A) 50 percent, plus
(B) 1⁄4 of 1 percent times the percentage
by which such individual’s average weekly
wages (for the aforementioned period) are less
than the average weekly wages subject to con-
tributions under the unemployment compensa-
tion law of such State (as so determined).
The condition under paragraph (2) shall not be considered
met if, in order to satisfy such paragraph, the State modi-
fies its State law in a way that, as determined by the Sec-
retary, has the general effect of reducing the replacement
ratio for individuals whose average weekly wages equal or
exceed the 50 percent threshold described in such para-
graph, except for good cause shown.
(c) NOTIFICATION.—The Secretary of Labor shall,
upon approving such law for purposes of this section, no-
tify the governor (or, if none, the chief executive officer)
of the State of the Secretary’s approval.
(d) CERTIFICATION.—On October 31 of each year,
the Secretary of Labor shall certify to the Secretary of
the Treasury each State whose law the Secretary of Labor
has previously approved for purposes of this section, ex-
cept that the Secretary of Labor shall not certify any
State which, after reasonable notice and opportunity for
hearing to the State agency, the Secretary of Labor finds
has amended its law so that it no longer contains the pro-
visions specified in subsection (b) or has with respect to
the 12-month period ending on such October 31 failed to
comply substantially with either provision of such sub-
section.
(e) NOTICE OF NONCERTIFICATION.—If at any time
the Secretary of Labor has reason to believe that a State
whose law the Secretary has previously approved for pur-
poses of this section may not be certified under subsection
(d), the Secretary shall promptly so notify the governor
(or, if none, the chief executive officer) of such State.
(f) DEFINITIONS.—For purposes of this section—
(1) the terms ‘‘State’’, ‘‘State law’’, ‘‘State
agency’’, ‘‘compensation’’, and ‘‘week’’ have the re-
spective meanings given such terms under section
205 of the Federal-State Extended Unemployment
Compensation Act of 1970;
(2) the terms ‘‘wages’’ and ‘‘contributions’’
have the respective meanings given such terms under
section 3306 of the Internal Revenue Code of 1986;
(3) the term ‘‘wage replacement ratio’’ shall
have such meaning as the Secretary of Labor shall
by regulation prescribe consistent with the purposes
of this section; and
(4) the term ‘‘spouse’’ shall include a domestic
partner, as defined under regulations of the Sec-
retary of Labor.
TITLE III—ENSURING SOLVENCY
AND PREPARING FOR RECES-
SION
SEC. 301. INCREASE AND DECREASE IN EARNINGS CRED-
ITED TO STATE ACCOUNTS WHEN STATES
MEET OR FAIL TO MEET FUNDING GOALS.
(a) IN GENERAL.—Section 904 of the Social Security
Act (42 U.S.C. 1104) is amended by adding at the end
the following new subsection:
‘‘Increase and Decrease in Amount of Earnings Allocated
to State Accounts When States Meet or Fail to Meet
Funding Goals
‘‘(h)(1) If the average daily balance in a State ac-
count in the Unemployment Trust Fund for any calendar
quarter exceeds the funding goal of such State, the
amount otherwise creditable to such account under sub-
section (e) for such quarter shall be increased by the inter-
est premium on such excess. If the average daily balance
in such a State account for any calendar quarter is less
than the funding goal of such State, the amount otherwise
creditable to such account under subsection (e) for such
quarter shall be decreased by the interest penalty.
‘‘(2) Paragraph (1) shall not apply with respect to
any interest premium or interest penalty to the extent that
such application would result in an increase or decrease
of more than $2,500,000 in the amount creditable to any
State account for any calendar quarter.
‘‘(3) For purposes of this subsection, the term ‘inter-
est premium’ means, for any calendar quarter—
‘‘(A) with respect to the State with the largest
percentage value of excess of the average daily bal-
ance in the State account in the Unemployment
Trust Fund over the funding goal of such State,
one-half of one percent of the amount of such ex-
cess, and
‘‘(B) with respect to each other State, the prod-
uct of—
‘‘(i) the amount of the excess of the aver-
age daily balance in the State account in the
Unemployment Trust Fund over the funding
goal of such State, and
‘‘(ii) the percentage which bears the same
ratio to one-half of one percent as—
‘‘(I) the percentage value of such ex-
cess, bears to
‘‘(II) the percentage value of the ex-
cess of the State referred to in subpara-
graph (A).
The Secretary shall make appropriate adjustments in the
interest premium for any calendar quarter if the aggregate
interest premiums payable for such quarter exceed the ag-
gregate interest penalties for such quarter.
‘‘(4) For purposes of this subsection, the term ‘inter-
est penalty’ means, for any calendar quarter—
‘‘(A) with respect to the State with the largest
percentage value of excess of the funding goal of
such State over the average daily balance in the
State account in the Unemployment Trust Fund,
one-half of one percent of the amount otherwise
creditable to such account under subsection (e), and
‘‘(B) with respect to each other State, the prod-
uct of—
‘‘(i) the amount otherwise creditable to
such account under subsection (e), and
‘‘(ii) the percentage which bears the same
ratio to one-half of one percent as—
‘‘(I) the percentage value of the excess
of the funding goal of the State over such
average daily balance of such State, bears
to
‘‘(II) the percentage value of such ex-
cess of the State referred to in subpara-
graph (A).
‘‘(5) For purposes of this subsection, the term ‘fund-
ing goal’ means, for any State for any calendar quarter,
the average of the unemployment insurance benefits paid
by such State during each of the 3 years, in the 20-year
period ending with the calendar year containing such cal-
endar quarter, during which the State paid the greatest
amount of unemployment benefits.
‘‘(6) For purposes of this subsection, the term ‘per-
centage value’ means—
‘‘(A) with respect to any excess of the average
daily balance in a State account in the Unemploy-
ment Trust Fund over the funding goal of such
State, the percentage which such excess bears to
such funding goal, and
‘‘(B) with respect to any excess of such funding
goal over such average daily balance, the percentage
which such excess bears to such funding goal.’’.
(b) CONFORMING AMENDMENTS.—
(1) 
AMOUNTS
CREDITED
TO
STATE
AC-
COUNTS.—Subsection (e) of section 904 of the So-
cial Security Act (42 U.S.C. 1104(e)) is amended in
the first sentence by inserting ‘‘(as modified by sub-
section (h))’’ after ‘‘a proportionate part’’.
(2) INTEREST RATE ON REPAYMENT OF AD-
VANCES DETERMINED WITHOUT REGARD TO INTER-
EST PREMIUMS OR PENALTIES ON AMOUNTS CRED-
ITED TO STATE ACCOUNTS.—Subparagraph (A) of
section 
1202(b)(4) 
of 
such 
Act 
(42 
U.S.C.
1322(b)(4)) is amended by inserting ‘‘(determined
without regard to section 904(h))’’ after ‘‘preceding
calendar year’’.
(c) REPORT.—Not later than 6 months after the date
of the enactment of this Act, the Secretary of Labor shall
submit to the Congress a report recommending sources of
funding for the crediting of interest premiums under sub-
section (h) of section 904 of the Social Security Act (42
U.S.C. 1104), as added by this section, in the event that
the imposition of interest penalties under such subsection
is insufficient to fund such premiums.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years beginning after
December 31, 2004.
SEC. 302. AMENDMENTS TO TRIGGER PROVISIONS OF EX-
TENDED BENEFIT PROGRAM.
(a) LOWERING OF EXTENDED BENEFIT ‘‘ON’’ INDI-
CATOR.—Section 203(d) of the Federal-State Extended
Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note) is amended—
(1) in paragraph (1)(B), by striking ‘‘5 per cen-
tum’’ and inserting ‘‘4 per centum’’, and
(2) in the first sentence following paragraph
(2)—
(A) by striking ‘‘5’’ and inserting ‘‘4’’, and
(B) by striking ‘‘6’’ and inserting ‘‘5’’.
(b) ALTERNATIVE TRIGGER.—Section 203(f) of such
Act is amended—
(1) by striking ‘‘(f)(1)’’ and all that follows
through ‘‘section—’’ and inserting the following: