A bill to replace the caseload reduction credit with an employment credit under the program of block grants to States for temporary assistance for needy families, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Making Work Pay Act''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents of this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Replacement of caseload reduction credit with employment 
                            credit.
Sec. 4. States to receive partial credit toward work participation rate 
                            for recipients engaged in part-time work.
Sec. 5. TANF recipients who qualify for supplemental security income 
                            benefits removed from work participation 
                            rate calculation for entire year.
Sec. 6. State option to include recipients of substantial child care or 
                            transportation assistance in work 
                            participation rate.
Sec. 7. Elimination of separate work participation rate for 2-parent 
                            families.
Sec. 8. Effective date.

SEC. 3. REPLACEMENT OF CASELOAD REDUCTION CREDIT WITH EMPLOYMENT 
              CREDIT.

    (a) Employment Credit To Reward States in Which Families Leave 
Welfare for Work; Additional Credit for Families With Higher 
Earnings.--
            (1) In general.--Section 407(a) of the Social Security Act 
        (42 U.S.C. 607(a)) is amended by adding at the end the 
        following:
            ``(3) Employment credit.--
                    ``(A) In general.--The minimum participation rate 
                otherwise applicable to a State under this subsection 
                for a fiscal year shall be reduced by the number of 
                percentage points in the employment credit for the 
                State for the fiscal year, as determined by the 
                Secretary--
                            ``(i) using information in the National 
                        Directory of New Hires, or
                            ``(ii) with respect to a recipient of 
                        assistance under the State program funded under 
                        this part who is placed with an employer whose 
                        hiring information is not reported to the 
                        National Directory of New Hires, using 
                        quarterly wage information submitted by the 
                        State to the Secretary not later than such date 
                        as the Secretary shall prescribe in 
                        regulations.
                    ``(B) Calculation of credit.--
                            ``(i) In general.--The employment credit 
                        for a State for a fiscal year is an amount 
                        equal to--
                                    ``(I) twice the average quarterly 
                                number of families that ceased to 
                                receive cash payments under the State 
                                program funded under this part during 
                                the preceding fiscal year and that were 
                                employed during the calendar quarter 
                                immediately succeeding the quarter in 
                                which the payments ceased, plus, at 
                                State option, twice the number of 
                                families that received a non-recurring 
                                short-term benefit under the State 
                                program funded under this part during 
                                the preceding fiscal year and that were 
                                employed in during the calendar quarter 
                                immediately succeeding the quarter in 
                                which the non-recurring short-term 
                                benefit was so received; divided by
                                    ``(II) the average monthly number 
                                of families that include an adult who 
                                received cash payments under the State 
                                program funded under this part during 
                                the preceding fiscal year, plus, if the 
                                State elected the option under 
                                subclause (I), twice the number of 
                                families that received a non-recurring 
                                short-term benefit under the State 
                                program funded under this part during 
                                the preceding fiscal year.
                            ``(ii) Special rule for former recipients 
                        with higher earnings.--In calculating the 
                        employment credit for a State for a fiscal 
                        year, a family that, during the preceding 
                        fiscal year, earned at least 33 percent of the 
                        average wage in the State (determined on the 
                        basis of State unemployment data) shall be 
                        considered to be 1.5 families.
                    ``(C) Publication of amount of credit.--Not later 
                than August 30 of each fiscal year, the Secretary shall 
                cause to be published in the Federal Register the 
                amount of the employment credit that will be used in 
                determining the minimum participation rate applicable 
                to a State under this subsection for the immediately 
                succeeding fiscal year.''.
            (2) Authority of secretary to use information in national 
        directory of new hires.--Section 453(i) of such Act (42 U.S.C. 
        653(i)) is amended by adding at the end the following:
            ``(5) Calculation of employment credit for purposes of 
        determining state work participation rates under tanf.--The 
        Secretary may use the information in the National Directory of 
        New Hires for purposes of calculating State employment credits 
        pursuant to section 407(a)(2).''.
    (b) Elimination of Caseload Reduction Credit.--Section 407(b) of 
such Act (42 U.S.C. 607(b)) is amended by striking paragraph (3) and 
redesignating paragraphs (4) and (5) as paragraphs (3) and (4), 
respectively.

SEC. 4. STATES TO RECEIVE PARTIAL CREDIT TOWARD WORK PARTICIPATION RATE 
              FOR RECIPIENTS ENGAGED IN PART-TIME WORK.

    Section 407(c)(1)(A) of the Social Security Act (42 U.S.C. 
607(c)(1)(A)) is amended by adding at the end the following flush 
sentence:
                ``For purposes of subsection (b)(1)(B)(i), a family 
                that does not include a recipient who is participating 
                in work activities for an average of 30 hours per week 
                during a month but includes a recipient who is 
                participating in such activities during the month for 
                an average of at least 50 percent of the minimum 
                average number of hours per week specified for the 
                month in the table set forth in this subparagraph shall 
                be counted as a percentage of a family that includes an 
                adult or minor child head of household who is engaged 
                in work for the month, which percentage shall be the 
                number of hours for which the recipient participated in 
                such activities during the month divided by the number 
                of hours of such participation required of the 
                recipient under this section for the month.''.

SEC. 5. TANF RECIPIENTS WHO QUALIFY FOR SUPPLEMENTAL SECURITY INCOME 
              BENEFITS REMOVED FROM WORK PARTICIPATION RATE CALCULATION 
              FOR ENTIRE YEAR.

    Section 407(b)(1)(B)(ii) of the Social Security Act (42 U.S.C. 
607(b)(1)(B)(ii)) is amended--
            (1) in subclause (I), by inserting ``who has not become 
        eligible for supplemental security income benefits under title 
        XVI during the fiscal year'' before the semicolon; and
            (2) in subclause (II), by inserting ``, and that do not 
        include an adult or minor child head of household who has 
        become eligible for supplemental security income benefits under 
        title XVI during the fiscal year'' before the period.

SEC. 6. STATE OPTION TO INCLUDE RECIPIENTS OF SUBSTANTIAL CHILD CARE OR 
              TRANSPORTATION ASSISTANCE IN WORK PARTICIPATION RATE.

    (a) In General.--Section 407(a)(1) of the Social Security Act (42 
U.S.C. 607(a)(1)) is amended by inserting ``(including, at the option 
of the State, a family that includes an adult who is receiving 
substantial child care or transportation assistance, as defined by the 
Secretary, in consultation with directors of State programs funded 
under this part, which definition shall specify for each type of 
assistance a threshold which is a dollar value or a length of time over 
which the assistance is received, and take account of large one-time 
transition payments, except any family taken into account under 
paragraph (2)(B)(i)(I))'' before the colon.
    (b) Data Collection and Reporting.--Section 411(a)(1)(A) of such 
Act (42 U.S.C. 611(a)(1)(A)) is amended in the matter preceding clause 
(i) by inserting ``(including any family with respect to whom the State 
has exercised its option under section 407(a)(1))'' after 
``assistance''.

SEC. 7. ELIMINATION OF SEPARATE WORK PARTICIPATION RATE FOR 2-PARENT 
              FAMILIES.

    Section 407 (42 U.S.C. 607) of the Social Security Act is amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), by striking ``All families'' 
                and inserting ``In general''; and
                    (B) by striking paragraph (2) and redesignating 
                paragraph (3) (as added by section 3(a)(1) of this Act) 
                as paragraph (2); and
            (2) in subsection (b)--
                    (A) by striking paragraph (2);
                    (B) in paragraph (3) (as so redesignated by section 
                3(b) of this Act), by striking ``paragraphs (1)(B) and 
                (2)(B)'' and inserting ``paragraph (1)(B)'';
                    (C) in paragraph (4) (as so redesignated), by 
                striking ``rates'' and inserting ``rate''; and
                    (D) by redesignating such paragraphs (3) and (4) 
                (as so redesignated) as paragraphs (2) and (3), 
                respectively.

SEC. 8. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), the 
amendments made by this Act shall take effect on October 1, 2003.
    (b) State Option To Phase-in Replacement of Caseload Reduction 
Credit With Employment Credit and Delay Applicability of Other 
Provisions.--A State may elect to have the amendments made by sections 
3(b) and 4 through 6 of this Act not apply to the State program funded 
under part A of title IV of the Social Security Act until October 1, 
2004, and if the State makes the election, then, in determining the 
participation rate of the State for purposes of sections 407 and 
409(a)(3) of the Social Security Act for fiscal year 2004, the State 
shall be credited with \1/2\ of the reduction in the rate that would 
otherwise result from applying section 407(a)(2) of the Social Security 
Act (as added by section 3(a)(1), and as so redesignated by section 
7(1)(B), of this Act) to the State for fiscal year 2004 and \1/2\ of 
the reduction in the rate that would otherwise result from applying 
section 407(b)(3) of the Social Security Act to the State for fiscal 
year 2004.

Summary: Making Work Pay Act - Amends part A (Temporary Assistance to Needy Families) (TANF) of title IV of the Social Security Act (SSA), with respect to rewards to States in which families leave welfare for work, to replace the caseload reduction credit with an employment credit. Requires the reduction of a State's minimum participation rate by the number of percentage points in the State's employment credit for the fiscal year.Allows States to receive partial credit toward their work participation rate for recipients engaged in part-time work for an average of at least half the minimum average number of hours per week.Removes from the work participation rate calculation for a entire year any TANF recipients who qualify for supplemental security income benefits under SSA title XVI.Grants States the option to include recipients of substantial child care or transportation assistance in the work participation rate.Repeals the separate work participation rate for two-parent families (thus lowering their rate to the one applied to one-parent families).