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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. EXTENDED BENEFITS TRIGGER.
(a) IN GENERAL.—Section 203(d) of the Federal-
State Extended Unemployment Compensation Act of 1970
(26 U.S.C. 3304 note) is amended—
(1) in subparagraph (B) of paragraph (1), by
striking ‘‘5 per centum’’ and inserting ‘‘4 per cen-
tum’’, and
(2) in the first flush sentence following para-
graph (2), by striking ‘‘5’’ and inserting ‘‘4’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to weeks of unemployment be-
ginning 6 months or more after the date of the enactment
of this Act.
SEC. 2. INCREASE AND DECREASE IN EARNINGS CREDITED
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 AL-
LOCATED 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, 1996.
SEC. 3. INTEREST-FREE ADVANCES TO STATE ACCOUNTS IN
UNEMPLOYMENT TRUST FUND RESTRICTED
TO STATES WHICH MEET FUNDING GOALS.
(a) IN GENERAL.—Paragraph (2) of section 1202(b)
of the Social Security Act (42 U.S.C. 1322(b)) is amended
by striking ‘‘and’’ at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and
inserting ‘‘, and’’, and by adding at the end the following
new subparagraph:
‘‘(C) the average daily balance in the ac-
count of such State in the Unemployment Trust
Fund for each of 4 of the 5 calendar quarters
preceding the calendar quarter in which such
advances were made exceeds the funding goal of
such State (as defined in section 904(h)).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to calendar years beginning
after December 31, 1996.
SEC. 4. STATE COLLECTION OF FEDERAL UNEMPLOYMENT
TAX.
(a) IN GENERAL.—Chapter 23 of the Internal Reve-
nue Code of 1986 (relating to Federal Unemployment Tax
Act) is amended by redesignating section 3311 as section
3312 and by inserting after section 3310 the following new
section:
‘‘SEC. 3311. STATE COLLECTION OF TAX.
‘‘(a) IN GENERAL.—At the election of any State
which is certified as provided in section 3304, each em-
ployer who pays contributions, with respect to any wages,
into an unemployment fund maintained under the unem-
ployment compensation law of such State shall submit the
tax imposed by this chapter with respect to such wages
to such State rather than to the Secretary.
‘‘(b) COORDINATION WITH DEPOSITARY REQUIRE-
MENTS.—Payment under subsection (a) of the tax im-
posed by this chapter with respect to any wages shall be
treated as timely paid for purposes of this title if paid
by the employer to the State at the same time as a timely
paid payment, with respect to such wages, of contributions
into an unemployment fund maintained under the unem-
ployment compensation law of such State.
‘‘(c) EXCEPTION
FOR
PAYMENTS
NOT
TIMELY
PAID.—Subsection (a) shall not apply to any payment of
the tax imposed by this chapter which is not paid by an
employer on or before the last date on which such payment
would be treated as timely paid under subsection (b).
‘‘(d) 
FEDERAL
TAX
TRANSFERRED
TO
SEC-
RETARY.—Each State making an election under sub-
section (a) shall transmit to the Secretary, at the time
and in the manner prescribed by the Secretary, the
amount of the tax imposed by this chapter which is sub-
mitted to such State under subsection (a) and a copy of
the State tax return of each employer making such a sub-
mission. The Secretary may, after consultation with the
Interstate Conference of Employment Security Adminis-
trators, prescribe regulations requiring that additional in-
formation be submitted by such State with respect to the
amount of such tax payable by such employer.’’
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 23 of such Code is amended by striking the
item relating to section 3311 and inserting the following
new items:
‘‘Sec. 3311. State collection of tax.
‘‘Sec. 3312. Short title.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 5. REQUIRED DISTRIBUTION OF STATE-SPECIFIC IN-
FORMATION PACKETS.
(a) IN GENERAL.—Subsection (a) of section 3304 of
the Internal Revenue Code of 1986 (relating to approval
of State laws) is amended by striking ‘‘and’’ at the end
of paragraph (18), by striking the period at the end of
paragraph (19) and inserting ‘‘; and’’, and by adding at
the end the following new paragraph:
‘‘(20) the State will distribute to unemployed
individuals State-specific information packets ex-
plaining unemployment insurance eligibility condi-
tions.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to certifications of States for
1997, except that section 3304(a)(20) of such Code, as
added by subsection (a), shall not be a requirement for
the State law of any State prior to July 1, 1998, if the
legislature of such State does not meet in a regular session
which closes during the calendar year 1997.
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