Title: Chase COVID Unemployment Fraud Act of 2022
Policy area: Labor and Employment

Summary:
Chase COVID Unemployment Fraud Act of 2022
This bill addresses fraud and overpayments of pandemic unemployment assistance, including by allowing states to retain a specified percentage of recovered funds and prohibiting the Department of Labor from allowing blanket waivers of overpayments.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4507 Introduced in Senate (IS)]

<DOC>






117th CONGRESS
  2d Session
                                S. 4507

 To provide incentives for States to recover fraudulently paid Federal 
      and State unemployment compensation, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 12, 2022

   Mr. Crapo (for himself, Mr. Portman, Mr. Braun, Mr. Marshall, Mr. 
Daines, Mrs. Blackburn, Mr. Thune, Mr. Cassidy, Mr. Risch, Mr. Kennedy, 
 Mrs. Fischer, Ms. Collins, Mr. Lankford, Mr. Romney, and Mr. Toomey) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To provide incentives for States to recover fraudulently paid Federal 
      and State unemployment compensation, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Chase COVID Unemployment Fraud Act 
of 2022''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Throughout the COVID-19 pandemic criminal 
        organizations, including international cybercrime rings and 
        opportunistic foreign actors, exploited a national crisis to 
        steal billions from American taxpayers. Fraud delayed 
        legitimate payments to unemployed workers and turned thousands 
        of Americans into unwitting identity theft victims.
            (2) The size, scope, and severity of pandemic unemployment 
        fraud is not fully known.
            (3) The Labor Department's Office of the Inspector General 
        estimates that at least $163 billion of the $872.5 billion in 
        Federal-State unemployment benefits paid during the pandemic 
        could have been improperly paid, with a significant portion 
        attributable to fraud. Just over $4 billion of these funds have 
        been recovered.
            (4) The White House has estimated an 18.71 percent improper 
        payment rate in the Federal-State unemployment insurance 
        program in fiscal year 2021. This estimate does not include 
        improper payments made in the Pandemic Unemployment Assistance 
        program, nor does it include the period of greatest fraudulent 
        activity when generous $600 weekly Federal supplements made 
        unemployment a lucrative target for fraudsters.
            (5) According to the Government Accountability Office, from 
        March 2020 through October 2021, 145 individuals pleaded guilty 
        to Federal charges of defrauding unemployment insurance 
        programs and Federal charges are pending against 250 
        individuals.
            (6) As of January 2022, the Labor Department's Inspector 
        General reported opening more than 31,000 investigative matters 
        involving alleged unemployment fraud and reported that it 
        assisted other Federal and State agencies in identifying and 
        recovering more than $565 million in fraudulently stolen 
        unemployment benefits.
            (7) In California, State workforce officials confirmed they 
        paid out fraudulent unemployment claims totaling $11 billion 
        and identified another $20 billion in claims still under 
        investigation.
            (8) The Pandemic Response Accountability Committee 
        published a report compiling the results of investigations from 
        16 State auditors, finding $39 billion in pandemic unemployment 
        fraud.
            (9) There is growing evidence that criminal groups 
        perpetrating unemployment fraud pose a threat to national 
        security.
            (10) According to the Department of Justice and U.S. Secret 
        Service, a significant amount of fraud was driven by known 
        transnational organized criminal networks, including cartels 
        with origins in countries including China, Ghana, Nigeria, 
        Romania, and Russia.
            (11) The Department of Justice reports that the 
        International Organized Crime Intelligence Operations Center 
        has referred a large number of unemployment fraud cases to the 
        Federal Bureau of Investigation.
            (12) The American people expect Congress to be an effective 
        steward of taxpayer dollars and vigilant in pursuit and 
        recovery of funds when taxpayer dollars are improperly paid.
            (13) Congress has a responsibility to gain restitution for 
        American taxpayers by ensuring aggressive identification, 
        investigation, and prosecution of criminal fraud in pandemic 
        unemployment programs.

SEC. 3. RECOVERING FEDERAL FRAUDULENT COVID UNEMPLOYMENT COMPENSATION 
              PAYMENTS.

    (a) Allowing States To Retain Percentage of Overpayments for 
Administration, Information Technology Modernization, and Program 
Integrity.--
            (1) Pandemic unemployment assistance.--
                    (A) In general.--Section 2102 of the CARES Act (15 
                U.S.C. 9021) is amended--
                            (i) by redesignating subsection (h) as 
                        subsection (i); and
                            (ii) by inserting after subsection (g) the 
                        following:
    ``(h) Fraud and Overpayments.--
            ``(1) In general.--If an individual knowingly has made, or 
        caused to be made by another, a false statement or 
        representation of a material fact, or knowingly has failed, or 
        caused another to fail, to disclose a material fact, and as a 
        result of such false statement or representation or of such 
        nondisclosure such individual has received an amount of 
        pandemic unemployment assistance under this section to which 
        such individual was not entitled, such individual--
                    ``(A) shall be ineligible for further pandemic 
                unemployment assistance under this section in 
                accordance with the provisions of the applicable State 
                unemployment compensation law relating to fraud in 
                connection with a claim for unemployment compensation; 
                and
                    ``(B) shall be subject to prosecution under section 
                1001 of title 18, United States Code.
            ``(2) Repayment.--In the case of individuals who have 
        received amounts of pandemic unemployment assistance under this 
        section to which they were not entitled, the State shall 
        require such individuals to repay the amounts of such pandemic 
        unemployment assistance to the State agency, except that the 
        State agency may waive such repayment if it determines that--
                    ``(A) the payment of such pandemic unemployment 
                assistance was without fault on the part of any such 
                individual; and
                    ``(B) such repayment would be contrary to equity 
                and good conscience.
            ``(3) Recovery by state agency.--
                    ``(A) In general.--The State agency shall recover 
                the amount to be repaid, or any part thereof, by 
                deductions from any unemployment compensation payable 
                to such individual under any State or Federal 
                unemployment compensation law administered by the State 
                agency or under any other State or Federal law 
                administered by the State agency which provides for the 
                payment of any assistance or allowance with respect to 
                any week of unemployment, during the 5-year period 
                after the date such individuals received the payment of 
                the pandemic unemployment assistance to which they were 
                not entitled, in accordance with the same procedures as 
                apply to the recovery of overpayments of regular 
                unemployment benefits paid by the State, except that a 
                State may retain a percentage of any amounts recovered 
                as described in subparagraph (C).
                    ``(B) Opportunity for hearing.--No repayment shall 
                be required, and no deduction shall be made, until a 
                determination has been made, notice thereof and an 
                opportunity for a fair hearing has been given to the 
                individual, and the determination has become final.
                    ``(C) Retention of percentage of recovered funds.--
                The State agency may retain 25 percent of any amount 
                recovered from overpayments of pandemic unemployment 
                assistance that were determined to be made due to 
                fraud. Amounts so retained by the State agency shall be 
                used for administration of the State's unemployment 
                compensation program for any of following:
                            ``(i) Modernizing unemployment compensation 
                        systems and information technology to improve 
                        accuracy of benefit payments, cybersecurity, 
                        and identity verification and validation of 
                        applicants.
                            ``(ii) Administrative costs incurred by the 
                        State to identify and pursue recovery of 
                        fraudulent overpayments.
                            ``(iii) Hiring fraud investigators and 
                        prosecutors.
                            ``(iv) Other program integrity purposes 
                        identified by the State and approved by the 
                        Secretary.''.
                    (B) Conforming amendment.--Section 2102(d) of such 
                Act (15 U.S.C. 9021(d)) is amended by striking 
                paragraph (4).
            (2) Federal pandemic unemployment compensation.--Section 
        2104(f)(3) of such Act (15 U.S.C. 9023(f)(3)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``3-year'' and inserting 
                        ``5-year''; and
                            (ii) by inserting ``, except that a State 
                        may retain a percentage of any amounts 
                        recovered as described in subparagraph (C)'' 
                        before the period at the end; and
                    (B) by adding at the end the following:
                    ``(C) Retention of percentage of recovered funds.--
                The State agency may retain 25 percent of any amount 
                recovered from overpayments of Federal Pandemic 
                Unemployment Compensation or Mixed Earner Unemployment 
                Compensation that were determined to be made due to 
                fraud. Amounts so retained by the State agency shall be 
                used for administration of the State's unemployment 
                compensation program for any of following:
                            ``(i) Modernizing unemployment compensation 
                        systems and information technology to improve 
                        accuracy of benefit payments, cybersecurity, 
                        and identity verification and validation of 
                        applicants.
                            ``(ii) Administrative costs incurred by the 
                        State to identify and pursue recovery of 
                        fraudulent overpayments.
                            ``(iii) Hiring fraud investigators and 
                        prosecutors.
                            ``(iv) Other program integrity purposes 
                        identified by the State and approved by the 
                        Secretary.''.
            (3) Pandemic emergency unemployment compensation.--Section 
        2107(e)(3) of such Act (15 U.S.C. 9025(e)(3)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``3-year'' and inserting 
                        ``5-year''; and
                            (ii) by inserting ``, except that a State 
                        may retain a percentage of any amounts 
                        recovered as described in subparagraph (C)'' 
                        before the period at the end; and
                    (B) by adding at the end the following:
                    ``(C) Retention of percentage of recovered funds.--
                The State agency may retain 25 percent of any amount 
                recovered from overpayments of pandemic emergency 
                unemployment compensation that were determined to be 
                made due to fraud. Amounts so retained by the State 
                agency shall be used for administration of the State's 
                unemployment compensation program for any of following:
                            ``(i) Modernizing unemployment compensation 
                        systems and information technology to improve 
                        accuracy of benefit payments, cybersecurity, 
                        and identity verification and validation of 
                        applicants.
                            ``(ii) Reimbursement of administrative 
                        costs incurred by the State to identify and 
                        pursue recovery of fraudulent overpayments.
                            ``(iii) Hiring fraud investigators and 
                        prosecutors.
                            ``(iv) Other program integrity purposes 
                        identified by the State and approved by the 
                        Secretary.''.
    (b) Treatment Under Withdrawal Requirements.--Any amount retained 
by a State pursuant to section 2102(h)(3)(C), section 2104(f)(3)(C), or 
2107(e)(3)(C) of the CARES Act, and used for the purposes described 
therein, shall not be considered to violate the withdrawal requirements 
of paragraph (4) or (5) of section 303(a) of the Social Security Act 
(42 U.S.C. 503(a)) or paragraph (4) or (5) of section 3304(a) of the 
Internal Revenue Code of 1986.
    (c) Limitation on Retention Authority.--The authority of a State to 
retain any amount pursuant to section 2102(h)(3)(C), section 
2104(f)(3)(C), and 2107(e)(3)(C) of the CARES Act shall apply only--
            (1) with respect to an amount recovered on or after the 
        date of enactment of this Act; and
            (2) during the 5-year period beginning on the date on which 
        such amount was received by an individual not entitled to such 
        amount.

SEC. 4. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR PROGRAM 
              ADMINISTRATION.

    (a) Withdrawal Standard in the Internal Revenue Code.--Section 
3304(a)(4) of the Internal Revenue Code of 1986 is amended--
            (1) in subparagraph (F), by striking ``and'' after the 
        semicolon;
            (2) by inserting after subparagraph (G) the following new 
        subparagraphs:
                    ``(H) an amount, not to exceed 5 percent, of any 
                overpayment of compensation recovered by the State 
                (other than an overpayment made as the result of agency 
                error) may, immediately following the State's receipt 
                of such recovered amount, be deposited in a State fund 
                from which money may be withdrawn for--
                            ``(i) the payment of costs of deterring, 
                        detecting, and collecting improper payments to 
                        individuals;
                            ``(ii) purposes relating to the proper 
                        classification of employees as independent 
                        contractors, implementation of provisions of 
                        State law implementing section 303(k) of the 
                        Social Security Act, or other provisions of 
                        State law relating to employer fraud or evasion 
                        of contributions;
                            ``(iii) the payment to the Secretary of the 
                        Treasury to the credit of the account of the 
                        State in the Unemployment Trust Fund;
                            ``(iv) modernizing the State's unemployment 
                        insurance technology infrastructure; or
                            ``(v) otherwise assisting States in 
                        improving the timely and accurate 
                        administration of a State's unemployment 
                        compensation law; and
                    ``(I) an amount, not to exceed 5 percent, of any 
                payments of contributions, or payments in lieu of 
                contributions, that are collected as a result of an 
                investigation and assessment by the State agency may, 
                immediately following receipt of such payments, be 
                deposited in a State fund from which moneys may be 
                withdrawn for the purposes specified in subparagraph 
                (H);''.
    (b) Definition of Unemployment Fund.--Section 3306(f) of the 
Internal Revenue Code of 1986 is amended by striking ``and for refunds 
of sums'' and all that follows and inserting ``, except as otherwise 
provided in section 3304(a)(4), section 303(a)(5) of the Social 
Security Act, or any other provision of Federal unemployment 
compensation law.''.
    (c) Withdrawal Standard in Social Security Act.--Section 303(a)(5) 
of the Social Security Act (42 U.S.C. 503(a)(5)) is amended by striking 
``and for refunds of sums'' and all that follows and inserting ``except 
as otherwise provided in this section, section 3304(a)(4) of the 
Internal Revenue Code of 1986, or any other provisions of Federal 
unemployment compensation law; and''.
    (d) Immediate Deposit Requirements in the Internal Revenue Code.--
Section 3304(a)(3) of the Internal Revenue Code of 1986 is amended to 
read as follows:
            ``(3) all money received in the unemployment fund shall 
        immediately upon such receipt be paid over to the Secretary of 
        the Treasury to the credit of the Unemployment Trust Fund 
        established by section 904 of the Social Security Act (42 
        U.S.C. 1104), except for--
                    ``(A) refunds of sums improperly paid into such 
                fund;
                    ``(B) refunds paid in accordance with the 
                provisions of section 3305(b); and
                    ``(C) amounts deposited in a State fund in 
                accordance with subparagraph (H) or (I) of paragraph 
                (4);''.
    (e) Immediate Deposit Requirement in Social Security Act 
Requirement.--Section 303(a)(4) of the Social Security Act (42 U.S.C. 
503(a)(4)) is amended by striking the parenthetical and inserting 
``(except as otherwise provided in this section, section 3304(a)(3) of 
the Internal Revenue Code of 1986, or any other provisions of Federal 
unemployment compensation law)''.
    (f) Application to Federal Payments.--When administering any 
Federal program providing compensation (as defined in section 3306 of 
the Internal Revenue Code of 1986), the State shall use the authority 
provided under subparagraphs (H) and (I) of section 3304(a)(4) of such 
Code in the same manner as such authority is used with respect to 
improper payments made under the State unemployment compensation law. 
With respect to improper Federal payments recovered consistent with the 
authority under subparagraphs (H) and (I) of such section, the State 
shall immediately deposit the same percentage of the recovered payments 
into the same State fund as provided in the State law implementing that 
section.
    (g) Effective Date.--The amendments made by this section shall 
apply to overpayments or payments or contributions (or payments in lieu 
of contributions) that are collected as a result of an investigation 
and assessment by the State agency after the end of the 2-year period 
beginning on the date of the enactment of this Act, except that nothing 
in this section shall be interpreted to prevent a State from amending 
its law before the end of such period.

SEC. 5. PREVENTING UNEMPLOYMENT COMPENSATION FRAUD THROUGH DATA 
              MATCHING, IDENTITY VERIFICATION, AND INCOME VERIFICATION.

    (a) Unemployment Compensation Data Integrity Hub.--
            (1) In general.--Section 303(a) of the Social Security Act 
        (42 U.S.C. 503(a)) is amended by adding at the end the 
        following:
            ``(13) The State agency charged with administration of the 
        State law shall use the system designated by the Secretary of 
        Labor for cross-matching claimants of unemployment compensation 
        under State law against any databases in the system to prevent 
        and detect fraud and improper payments.''.
    (b) Use of Fraud Prevention and Detection Systems in Administration 
of Unemployment Compensation Programs.--
            (1) In general.--Section 303 of the Social Security Act (42 
        U.S.C. 503), as amended by subsection (a), is further amended 
        by adding at the end the following:
    ``(n) State Use of Fraud Prevention and Detection Systems.--
            ``(1) In general.--The State agency charged with 
        administration of the State law shall establish procedures to 
        do the following:
                    ``(A) National directory of new hires.--Use the 
                National Directory of New Hires established under 
                section 453(i)--
                            ``(i) to compare information in such 
                        Directory against information about individuals 
                        claiming unemployment compensation to identify 
                        any such individuals who may have become 
                        employed, in accordance with any regulations 
                        that the Secretary of Health and Human Services 
                        may issue and consistent with the computer 
                        matching provisions of the Privacy Act of 1974;
                            ``(ii) to take timely action to verify 
                        whether the individuals identified pursuant to 
                        clause (i) are employed; and
                            ``(iii) upon verification pursuant to 
                        clause (ii), to take appropriate action to 
                        suspend or modify unemployment compensation 
                        payments, and to initiate recovery of any 
                        improper unemployment compensation payments 
                        that have been made.
                    ``(B) State information data exchange system.--Use 
                the Department of Labor's State Information Data 
                Exchange System to facilitate employer responses to 
                requests for information from State workforce agencies.
                    ``(C) Incarcerated individuals.--Seek information 
                from the Commissioner of Social Security under sections 
                202(x)(3)(B)(iv) and 1611(e)(1)(I)(iii), and from such 
                other sources as the State agency determines 
                appropriate, to obtain the information necessary to 
                carry out the provisions of a State law under which an 
                individual who is confined in a jail, prison, or other 
                penal institution or correctional facility is 
                ineligible for unemployment compensation on account of 
                such individuals inability to satisfy the requirement 
                under subsection (a)(12).
                    ``(D) Deceased individuals.--Compare information of 
                individuals claiming unemployment compensation against 
                the information regarding deceased individuals 
                furnished to or maintained by the Commissioner of 
                Social Security under section 205(r).
            ``(2) Enforcement.--Whenever the Secretary of Labor, after 
        reasonable notice and opportunity for hearing to the State 
        agency charged with the administration of the State law, finds 
        that the State agency fails to comply substantially with the 
        requirements of paragraph (1), the Secretary of Labor shall 
        notify such State agency that further payments will not be made 
        to the State until the Secretary of Labor is satisfied that 
        there is no longer any such failure. Until the Secretary of 
        Labor is so satisfied, such Secretary shall make no future 
        certification to the Secretary of the Treasury with respect to 
        such State.
            ``(3) Unemployment compensation.--For the purposes of this 
        subsection, any reference to unemployment compensation 
        described in this paragraph shall be considered to refer to--
                    ``(A) regular or extended compensation (as defined 
                by section 205 of the Federal-State Extended 
                Unemployment Compensation Act of 1970);
                    ``(B) unemployment compensation (as defined by 
                section 85(b) of the Internal Revenue Code of 1986) 
                provided under any program administered by a State 
                under an agreement with the Secretary; and
                    ``(C) short-time compensation under a short-time 
                compensation program (as defined in section 3306(v) of 
                the Internal Revenue Code of 1986).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect with respect to each State to weeks of unemployment beginning on 
or after the earlier of--
            (1) the date the State changes its statutes, regulations, 
        or policies in order to comply with such amendment; or
            (2) October 1, 2024.

SEC. 6. REPORTING UNEMPLOYMENT COMPENSATION OVERPAYMENTS AND FRAUD.

    (a) In General.--The Secretary of Labor shall collect data from 
each State on the amount of overpayment recoveries that are waived 
related to unemployment compensation programs authorized by the CARES 
Act (15 U.S.C. 9021 et seq.), with a separate accounting for the 
pandemic unemployment assistance program, and any unemployment 
compensation amounts excluded by each State from IRS Form 1099-G, 
Certain Government Payments, during taxable years 2020 and 2021 due to 
suspected or confirmed fraud.
    (b) Report to Congress.--Not later than 120 days after the date of 
enactment of this Act, the Secretary of Labor shall submit a report to 
the Committees on Ways and Means and Oversight and Reform of the House 
of Representatives and the Committees on Finance and Homeland Security 
and Governmental Affairs of the Senate that conveys the overpayment 
data described in subparagraph (a) and includes an estimate of the 
aggregate amount of pandemic unemployment compensation overpayments 
nationally, including the subset of overpayments made due to fraud, and 
total amounts recovered by Federal or State agencies. Such report shall 
be updated by the Secretary not later than 120 days after submission of 
the initial report to Congress.
    (c) Expedited Collection.--The Secretary of Labor may waive the 
requirements of subchapter I of chapter 35 of title 44, United States 
Code (commonly referred to as the ``Paperwork Reduction Act'') with 
respect to the provisions in the amendments made by this Act.

SEC. 7. PROHIBITION ON DEPARTMENT OF LABOR ALLOWING BLANKET WAIVERS OF 
              OVERPAYMENTS.

    Upon the date of enactment, the Secretary of Labor shall be 
prohibited from issuing guidance that permits States to use blanket or 
issue categorical waivers of overpayment recovery in Federal pandemic 
unemployment compensation programs authorized under the CARES Act (15 
U.S.C. 9021 et seq.). The Secretary shall amend or rescind any guidance 
as necessary to conform with the prohibition in the preceding sentence.

SEC. 8. EXTENSION OF EMERGENCY STATE STAFFING FLEXIBILITY.

    If a State modifies its unemployment compensation law and policies 
with respect to personnel standards on a merit basis on an emergency 
temporary basis as determined by the Secretary, including for 
detection, pursuit, and recovery of fraudulent pandemic unemployment 
benefits, subject to the succeeding sentence, such modifications shall 
be disregarded for the purposes of applying section 303 of the Social 
Security Act (42 U.S.C. 503) and section 3304 of the Internal Revenue 
Code of 1986 to such State law. Such modifications shall apply through 
December 31, 2023, and may include engaging temporary staff, hiring 
retirees or former employees on a non-competitive basis, contracting 
with vendors, and other temporary actions to identify, investigate, 
prosecute, and recover fraudulent pandemic unemployment compensation 
benefits.
                                 <all>