II 117th CONGRESS 1st Session S. 2898 IN THE SENATE OF THE UNITED STATES September 29, 2021 Mr. Young introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title III of the Social Security Act to provide for improvements to State unemployment systems and to strengthen program integrity, and for other purposes.

1. Short title This Act may be cited as the Unemployment Insurance Systems Modernization Act of 2021 . 2. Improvements to State unemployment systems and strengthening program integrity (a) Unemployment compensation systems (1) In general Section 303(a) of the Social Security Act ( 42 U.S.C. 503(a) ) is amended— (A) in the matter preceding paragraph (1), by striking provision for— and inserting provision for each of the following: ; (B) at the end of each of paragraphs (1) through (10), by striking ; and and inserting a period; (C) in paragraph (11)(B), by striking The immediate and inserting the immediate ; and (D) by adding at the end the following new paragraph: (13) The State system shall, in addition to meeting the requirements under section 1137, meet the following requirements: (A) The system shall be capable of accurately and expeditiously processing a surge of claims, including those filed under temporary Federal benefit programs that the State may be expected to administer, that would represent a twentyfold increase in claims from January 2020 levels, occurring over a one-month period. (B) The system shall be capable of— (i) adjusting wage replacement levels for each individual receiving unemployment compensation, but not to exceed 100 percent of wage replacement; (ii) adjusting weekly earnings disregards, including the ability to adjust such disregards in relation to an individual’s earnings or weekly benefit amount; and (iii) providing for wage replacement levels that vary based on the individual's duration of benefit receipt. (C) The system shall have in place an automated process for receiving and processing claims for disaster unemployment assistance under section 410(a) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( 42 U.S.C. 5177(a) ), with flexibility to adapt rules regarding individuals eligible for assistance and the amount payable. (D) In the case of a State that makes payments of short-time compensation under a short-time compensation program (as defined in section 3306(v) of the Internal Revenue Code of 1986), the system shall have in place an automated process of receiving and processing claims for short-time compensation. (E) The system shall have in place an automated process for receiving and processing claims for— (i) unemployment compensation for Federal civilian employees under subchapter I of chapter 85 of title 5, United States Code; (ii) unemployment compensation for ex-servicemembers under subchapter II of chapter 85 of title 5, United States Code; and (iii) trade readjustment allowances under sections 231 through 233 of the Trade Act of 1974 ( 19 U.S.C. 2291–2293 ). (F) The system shall have in place an automated process capable of receiving and processing claims under future temporary Federal benefit programs, such as those that may— (i) provide extended benefits for individuals exhausting State compensation (such as under the Pandemic Emergency Unemployment Compensation program established in section 2107 of the CARES Act ( 15 U.S.C. 9025 )); or (ii) expand coverage to include individuals not eligible for State compensation (such as under the Pandemic Unemployment Assistance program established in section 2102 of the CARES Act ( 15 U.S.C. 9021 )). . (2) Effective date The amendments made by paragraph (1) shall apply to weeks of unemployment beginning on or after the earlier of— (A) the date the State changes its statutes, regulations, or policies in order to comply with such amendment; or (B) October 1, 2024. (b) Electronic transmission of unemployment compensation information Section 303 of the Social Security Act ( 42 U.S.C. 503 ) is amended by adding at the end the following new subsection: (n) Electronic transmission of unemployment compensation information (1) In general Not later than October 1, 2024, the State agency charged with administration of the State law shall use a system developed (in consultation with stakeholders) and designated by the Secretary of Labor for automated electronic transmission of requests for information relating to unemployment compensation and the provision of such information between such agency and employers or their agents. Such system shall ensure that any information shared is secure and safeguarded from potential abuse or misuse. (2) Use of appropriated funds The Secretary of Labor may use funds appropriated for grants to States under this title to make payments on behalf of States as the Secretary determines is appropriate for the use of the system described in paragraph (1). (3) Employer participation The Secretary of Labor shall work with the State agency charged with administration of the State law to increase the number of employers using this system and to resolve any technical challenges with the system. (4) Reports on use of electronic system After the end of each fiscal year, on a date determined by the Secretary, each State shall report to the Secretary information on— (A) the proportion of employers using the designated system described in paragraph (1); (B) the reasons employers are not using such system; and (C) the efforts the State is undertaking to increase employer’s use of such system. (5) 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 there is a failure 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 the State. . (c) Unemployment compensation integrity data hub (1) In general Section 303(a) of the Social Security Act ( 42 U.S.C. 503(a) ), as amended by subsection (a), is amended by adding at the end the following new paragraph: (14) 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. . (2) Effective date The amendment made by paragraph (1) shall apply to weeks of unemployment beginning on or after the earlier of— (A) the date the State changes its statutes, regulations, or policies in order to comply with such amendment; or (B) October 1, 2024. (d) Use of National directory of new hires in administration of unemployment compensation programs and penalties on noncomplying employers (1) In general Section 303 of the Social Security Act ( 42 U.S.C. 503 ), as amended by subsection (b), is amended by adding at the end the following new subsection: (o) Use of National directory of new hires (1) In general Not later than October 1, 2024, the State agency charged with administration of the State law shall— (A) compare information in the National Directory of New Hires established under section 453(i) against information about individuals claiming unemployment compensation to identify any such individuals who may have become employed, in accordance with any regulations or guidance that the Secretary of Health and Human Services may issue and consistent with the computer matching provisions of the Privacy Act of 1974; (B) take timely action to verify whether the individuals identified pursuant to subparagraph (A) are employed; and (C) upon verification pursuant to subparagraph (B), take appropriate action to suspend or modify unemployment compensation payments, and to initiate recovery of any improper unemployment compensation payments that have been made. (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 there is a failure 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 the State. . (2) Penalties (A) In general Section 453A(d) of the Social Security Act ( 42 U.S.C. 653a(d) ), in the matter preceding paragraph (1), is amended by striking have the option to set a State civil money penalty which shall not exceed and inserting set a State civil money penalty which shall be not less than . (B) Effective date The amendment made by subparagraph (A) shall apply to penalties assessed on or after October 1, 2024. (e) State performance (1) In general Section 303 of the Social Security Act ( 42 U.S.C. 503 ), as amended by subsections (b) and (d), is amended by adding at the end the following new subsection: (p) State performance (1) In general For purposes of assisting States in meeting the requirements of this title, title IX, title XII, or chapter 23 of the Internal Revenue Code of 1986 (commonly referred to as the Federal Unemployment Tax Act ), the Secretary of Labor may— (A) consistent with subsection (a)(1), establish measures of State performance, including criteria for acceptable levels of performance, performance goals, and performance measurement programs; (B) consistent with subsection (a)(6), require States to provide to the Secretary of Labor data or other relevant information from time to time concerning the operations of the State or State performance, including the measures, criteria, goals, or programs established under paragraph (1); (C) require States with sustained failure to meet acceptable levels of performance or with performance that is substantially below acceptable standards, as determined based on the measures, criteria, goals, or programs established under subparagraph (A), to implement specific corrective actions and use specified amounts of the administrative grants under this title provided to such States to improve performance; and (D) based on the data and other information provided under subparagraph (B)— (i) to the extent the Secretary of Labor determines funds are available after providing grants to States under this title for the administration of State laws, recognize and make awards to States for performance improvement, or performance exceeding the criteria or meeting the goals established under subparagraph (A); or (ii) to the extent the Secretary of Labor determines funds are available after providing grants to States under this title for the administration of State laws, provide incentive funds to high-performing States based on the measures, criteria, goals, or programs established under subparagraph (A). (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 there is a failure 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 the State. . (2) Effective date The amendments made by this subsection shall take effect on the date of enactment of this Act. (f) Funding Notwithstanding any other provision of law, out of any payments of compensation from the unemployment fund of the State that were made under the provisions of subtitle A of title II of division A of the CARES Act and are determined to have been made in error and are subsequently recovered by the State, the State may, immediately following receipt of such recovered amount— (1) deposit 50 percent of such amount in a fund from which moneys may be withdrawn to carry out the provisions of, and the amendments made by, this section, including any regional or multi-State efforts; and (2) pay 50 percent of such amount to the Secretary of the Treasury to the credit of the account of the State in the Unemployment Trust Fund. (g) Permissible use of CARES Act funding Section 2118 of the CARES Act ( 15 U.S.C. 9034 ) is amended by adding at the end the following new subsection: (d) Permissible use of grant funds A grant to a State or territory awarded under subsection (b)(3) may be used for purposes of carrying out the provisions of, and the amendments made by, subsections (a) through (e) of section 2 of the Unemployment Insurance Systems Modernization Act of 2021 . .