I 117th CONGRESS 2d Session H. R. 8661 IN THE HOUSE OF REPRESENTATIVES August 5, 2022 Mr. Horsford introduced the following bill; which was referred to the Committee on Ways and Means , and in addition to the Committee on the Budget , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To improve equity and accountability in State unemployment programs, recover fraudulent payments, and prevent future fraud in the unemployment insurance program.

1. Short title This Act may be cited as the Guaranteeing Unemployment Assistance and Reducing Deception Act or the GUARD Act . I Payment Recovery for Pandemic Fraud Victims and Taxpayers 101. Support for Federal recovery of payments made due to fraud There is authorized to be appropriated $5,000,000 in each of fiscal years 2023 and 2024 to the Secretary of Labor for costs related to funding any coordinating body or task force which includes the Secretary of Labor, the Inspector General of the Department of Labor, the Attorney General, the Secretary of Homeland Security, and other appropriate Federal agencies charged with supporting recovery of amounts paid due to fraud under an agreement under section 2102, 2104, 2105, or 2107 of the CARES Act. 102. Support for State recovery of payments made due to fraud (a) In general In determining the payments due to a State for administrative expenses incurred by the State by reason of an agreement under section 2102, 2104, 2105, or 2107 of the CARES Act (as required under sections 2102(f)(2)(B), 2104(d)(1)(A)(ii), 2105(c)(1)(B), and 2107(d)(2)(A) of such Act, respectively), the Secretary of Labor shall, subject to subsection (b), include the cost of any administrative expenses incurred for the purposes of— (1) identifying payments made under the agreement potentially due to fraud; (2) recovering payments made under the agreement due to fraud; and (3) supporting prosecution of such fraud. (b) State participation requirements Subsection (a) shall not apply to any State that does not agree to submit annual reports to the Secretary of Labor through fiscal year 2024 describing any open fraud investigations and recoveries in the State relating to assistance paid under an agreement under section 2102, 2104, 2105, or 2107 of the CARES Act. (c) BBDCA exemption Any payments due to a State for administrative expenses under an agreement described in subsection (a) shall be exempt from any reduction ordered under the Balanced Budget and Emergency Deficit Control Act of 1985. 103. Defined point of contact for identity theft victims Section 303 of the Social Security Act ( 42 U.S.C. 503 ) is amended by adding at the end the following: (n) (1) For purposes of subsection (a), the State agency charged with the administration of the State law shall— (A) ensure that individuals who report that they are victims of identity theft and that their information was or is being used fraudulently to claim unemployment benefits have a defined point of contact within the State organization to follow up on their report; (B) coordinate with other State and Federal agencies to ensure prompt resolution of issues reported as described in subparagraph (A) and any other consequences related to the making of such a report; and (C) ensure clear and timely communication with each individual making a report as described in subparagraph (A) about the status of the resolution of issues reported. (2) Not later than 60 days after the date of enactment of this subsection, the Secretary of Labor shall publish guidance to States establishing appropriate minimum standards, in consultation with appropriate Federal agencies, to ensure consistent reporting and resolution of issues reported to States as described in paragraph (1)(A). (3) The Secretary of Labor shall provide such technical and financial assistance as may be necessary to assist States in carrying out the requirements of paragraph (1). (4) The requirements of paragraph (1) shall be effective for weeks beginning on or after the date that is 60 days after the Secretary of Labor issues the guidance required under paragraph (2). . II Preventing Future Unemployment Fraud and Improving Program Integrity 201. Mandatory participation in information sharing systems (a) In general Section 303(a) of the Social Security Act ( 42 U.S.C. 503(a) ) is amended— (1) in paragraph (11)(B), by striking the period at the end and inserting ; and ; (2) in paragraph (12), by striking the period at the end and inserting ; and ; and (3) by adding at the end the following: (13) Participation by the State in any system designated by the Secretary of Labor for the purpose of preventing and detecting payments due to fraud and other improper payments, including any such system for— (A) cross-matching claimants of unemployment compensation under State and Federal law to prevent and detect payments due to fraud and other improper payments; (B) the electronic transmission of requests from employers (or their agents) for cross-matching information relating to unemployment compensation held by the State agency charged with the administration of the State law; (C) the authentication of bank account or payment information; (D) the interstate exchange of beneficiary information for the purposes of identifying individuals who have filed a claim for unemployment compensation in more than one State; (E) cross-matching information on individuals who are incarcerated using data which is verified to be accurate and up-to-date; (F) cross-matching against the National Directory of New Hires established under section 453(i) in accordance with section 453(j)(8); and (G) any other purpose determined by the Secretary of Labor. (14) Provision of access by the State to the system specified in paragraph (13)(A) to the Inspector General of the Department of Labor solely for purposes of investigating unemployment compensation fraud. . (b) Regulations Not later than 1 year after the date of the enactment of this Act, the Secretary of Labor shall issue a regulation designating the systems described in section 303(a)(13) of the Social Security Act, and may, in such regulations, remove a designation or designate other systems as necessary. Such regulations shall— (1) specify the method and frequency of cross-matching; (2) specify methods to ensure that data used for cross-matching is accurate and up-to-date; (3) provide for a period of time for States to implement a cross-matching system modified or newly designated by the Secretary of Labor; and (4) take into account equity, access, and due process in developing processes for using cross-match data. (c) Effective date The amendment made by subsection (a) shall apply with respect to a system designated by the Secretary of Labor under section 303(a)(13) of the Social Security Act beginning 2 years after the date on which such system is so designated. 202. Improving program integrity through communication with claimants Section 303(a)(12) of the Social Security Act ( 42 U.S.C. 503(a) ), as amended by section 201, is further amended by inserting after actively seeking work the following: , except that in any case in which the State agency charged with the administration of the State law determines that a claimant is not actively seeking work, the State agency may issue not more than one warning during a benefit year before taking any other action with respect to the claimant’s eligibility for unemployment compensation . 203. Retention of certain recoveries for program integrity and equitable access (a) In general 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: (H) amounts may be withdrawn, to be deposited in a separate State fund from which amounts may be withdrawn for administrative costs related to program integrity or equitable access to benefits for workers, up to the sum of— (i) a portion, not to exceed 5 percent, of any overpayment of compensation due to fraud that is recovered by the State; and (ii) a portion, not to exceed 5 percent, of any contribution collected as a result of the misclassification 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; and (I) amounts collected by the State in penalty and interest payments shall be deposited in a separate State fund from which amounts may be withdrawn for administrative costs, including costs relating to improving technology and access, and for reemployment services under section 306 of the Social Security Act, except that, in the case of a State with an improper payment rate of 10 percent or higher, at least 50 percent of such funds must be used for program integrity; . (b) Conforming amendments (1) Internal Revenue Code Chapter 23 of the Internal Revenue Code of 1986 is amended— (A) in section 3304(a)(3), by striking and except for refunds paid in accordance with the provisions of section 3305(b) and inserting refunds paid in accordance with the provisions of section 3305(b), and as otherwise provided in section 3304(a)(4) ; and (B) in section 3306(f), by striking ; except that— and all that follows and inserting , except as otherwise provided in section 3304(a)(4). . (2) Social Security Act Section 303(a) of the Social Security Act ( 42 U.S.C. 503(a) ) is amended— (A) in paragraph (4), by striking and except for refunds paid in accordance with the provisions of 3305(b) of the Federal Unemployment Tax Act and inserting refunds paid in accordance with the provisions of 3305(b) of the Internal Revenue Code of 1986, and as otherwise provided in section 3304(a)(4) of such Code ; and (B) in paragraph (5), by striking refunds paid in accordance with the provisions of 3305(b) and all that follows and inserting , except as otherwise provided in section 3304(a)(4) of the Internal Revenue Code of 1986. . (c) Guidance Not later than 1 year after the date of the enactment of this Act, the Secretary of Labor shall issue guidance describing— (1) the method by which a State shall determine the amounts for deposit under a separate State fund pursuant to each of subparagraphs (H) and (I) of section 3304(a)(4) of the Internal Revenue Code of 1986; (2) requirements for the establishment of such separate State funds; and (3) the purposes for which amounts withdrawn from such separate State funds may be used. (d) Effective date The amendments made by this section shall apply with respect to overpayments and contributions (or payments in lieu of contributions) collected as a result of an investigation and assessment by a State agency and to penalties and interest collected after the earlier of— (1) the end of the two-year period beginning on the date of the enactment of this Act; or (2) the date on which a State’s law comes into conformity with the requirements of this section. III Improving Equity and Accountability 301. Additional targeted penalties to enforce Federal requirements (a) In general Section 303(b) of the Social Security Act ( 42 U.S.C. 503(b) ) is amended— (1) by striking Whenever and inserting (1) Whenever ; (2) by striking (1) A denial and inserting (A) A denial ; (3) by striking (2) A failure to comply substantially with any provision specified in this section and inserting (B) A failure to comply substantially with any provision specified in this section or section 307 ; (4) by inserting , except as provided in paragraph (2), after the Secretary of Labor shall notify ; (5) by striking clause (1) and inserting subparagraph (A) ; and (6) by adding at the end the following: (2) (A) Whenever a denial or failure to comply as described in paragraph (1) occurs in a substantial number of cases, the Secretary of Labor may, in lieu of imposing the penalty described in such paragraph, withhold up to 15 percent of each payment (with such percentage to be determined by the Secretary of Labor based on factors including the severity and the extent of such denial or failure) made to the State under section 302 until such time as the Secretary of Labor is satisfied that there is no longer any such denial or failure to comply. The Secretary of Labor may make such withheld amount available to the State, and shall provide technical assistance to the State for such purpose. (B) The Secretary of Labor shall provide for a reduction to, or an exemption from, the penalty described in subparagraph (A) in cases where the Secretary of Labor determines that good cause for substantial noncompliance exists, and may allow for flexibility in times of heightened workload or reduced penalties in a case in which a State is making progress toward compliance. . (b) Regulations Not later than 2 years after the date of enactment of this Act, the Secretary of Labor shall issue an interim final regulation prescribing— (1) the circumstances in which a penalty described in paragraph (2)(A) of section 303(b) of the Social Security Act will be imposed, including a description of what constitutes substantial noncompliance within the meaning of such section; (2) the method to be used to determine— (A) the percentage of payment to be withheld; (B) any increased penalty to be imposed for failure to take corrective action after the imposition of an initial penalty; and (C) a description of any circumstances in which all or a portion of the penalty will be provided to the State to be used only for corrective action as specified by the Secretary of Labor; (3) procedures under which the Secretary of Labor shall notify a State of any penalty that may potentially be imposed; (4) the timing in which the penalty will be imposed; (5) the permissible uses of any withheld amount made available to the State for corrective action pursuant to such paragraph (2)(A); and (6) any other requirements or guidance the Secretary of Labor deems appropriate to implement the amendments made by subsection (a). (c) Effective date The amendments made by subsection (a) shall apply with respect to fiscal years beginning on or after the date on which the regulations described in subsection (b) are finalized. 302. Setting and enforcing overall standards for equity, performance, and program integrity (a) In general Title III of the Social Security Act ( 42 U.S.C. 501 et seq. ) is amended by adding at the end the following: 307. Performance and administrative standards (a) Program performance standards (1) In general The Secretary of Labor shall, by regulation, establish program performance standards applicable to each State to which a payment is made under section 302(a) for a fiscal year. Such standards shall— (A) set forth categories that include measures addressing equity (including with respect to race, ethnicity, gender, and disability status), timeliness, access, program integrity, assistance in fraud recovery, and other performance areas as determined by the Secretary of Labor; (B) define each such measure and the minimum acceptable performance level with respect to such measure; and (C) require that States report such data as the Secretary of Labor may require and that such data— (i) include the total number of individuals receiving unemployment compensation in the State; (ii) as necessary, be disaggregated by race, ethnicity, gender, language, disability, and other demographic groups; and (iii) be stored and maintained as required by the use, disclosure, and storage requirements of section 308(b). (2) Inclusion of technology standards The program performance standards established under paragraph (1) shall include minimum standards for the technology used to administer the unemployment compensation program which ensure that the process of filing initial and continuing claims for unemployment compensation can be readily understood and accomplished by the vast majority of individuals, including those with limited English proficiency, individuals with disabilities (in compliance with section 508 of the Rehabilitation Act of 1973 ( 29 U.S.C. 794d )), older individuals, and individuals with literacy challenges. (b) State data reporting requirement Each State to which a payment is made under section 302(a) for a fiscal year shall provide to the Secretary of Labor such data as the Secretary of Labor may require related to the program performance standards issued pursuant to subsection (a). Any State that fails to provide such data shall be ineligible for a performance bonus under subsection (c) for that fiscal year and any subsequent fiscal year until such State has provided data for all fiscal years and may also be subject to any other penalty provided under this title. (c) Performance bonuses (1) In general In each fiscal year for which appropriations are made available for such purpose pursuant to paragraph (4), the Secretary of Labor shall award performance bonuses to States that the Secretary of Labor determines have demonstrated sustained excellent performance or substantial improvement with respect to program performance standards issued pursuant to subsection (a). (2) Timing of award The Secretary of Labor shall award a performance bonus under paragraph (1) to a State not later than the end of the year following the year in which the performance on which such award is based occurs. An award under this subsection shall remain available to a State for a period of 2 years following the date of award. (3) Amount of award The amount of a performance bonus under paragraph (1) for a fiscal year shall be determined on the basis of a formula to be prescribed by the Secretary of Labor taking into account each of the following: (A) The performance of the State in such fiscal year in comparison to its performance in prior years and to the performance of other States. (B) The rate of insured unemployment (as defined in Section 203(e)(1) of the Federal-State Extended Unemployment Compensation Act of 1970 ( 26 U.S.C. 3304 note (e)(1))) in the State for such fiscal year. (C) The volume of weekly claims expected to be filed in the State as determined by Secretary of Labor for such fiscal year. (4) Use of award funds Amounts received by a State as a performance bonus under this subsection shall— (A) be deposited by the State in State’s account in the Unemployment Trust Fund; (B) be used for costs of administering the unemployment compensation law of the State; or (C) be used for the State’s program of reemployment services and eligibility assessments in accordance with section 306. (5) Notification of eligiblity requirement No State shall be eligible for a performance bonus under paragraph (1) for a year unless the State— (A) has in effect during such year a requirement that employers notify workers when they are potentially eligible for unemployment compensation; and (B) provides information to the Secretary of Labor describing the State’s process for enforcing the requirement described in subparagraph (A). (6) Authorization of appropriations There is authorized to be appropriated to the Secretary of Labor to carry out this subsection $280,000,000 for each fiscal year beginning with fiscal year 2024. (7) Holdover funds In any fiscal year for which an insufficient number of States qualify for a performance bonus under the criteria established for such purpose by the Secretary of Labor, the Secretary may withhold a portion of the funds appropriated pursuant to paragraph (5) for such fiscal year. Any funds so withheld shall remain available to the Secretary of Labor for the purposes of paragraph (1) for subsequent fiscal years. (d) Requirement To conduct analysis and take corrective actions regarding equity relating to race and ethnicity (1) In general The Secretary of Labor shall conduct an analysis of the data reported by each State to which a payment is made under section 302(a) as such data measures equity related to race and ethnicity in the unemployment compensation program of the State. Such analysis shall be conducted in the 4th fiscal year beginning after the date of enactment of this section and every 2 fiscal years thereafter, shall assess the State during the period of the 2 most recent fiscal years (or, in the case of the 1st such analysis, the most recent fiscal year), and shall include the following: (A) An assessment of equity related to race and ethnicity measures in each of the following categories: (i) Access to benefits, including with respect to— (I) how information about eligibility and benefits are provided to potentially eligible workers, including any targeted outreach to specific groups or categories of workers and any requirement that employers provide notification of the availability of unemployment compensation to employees at the time of separation from employment; (II) administrative procedures, including documentation and notice requirements, for filing new and continuing claims; and (III) what specific steps the State takes to ensure that individuals with limited English proficiency have access to translated information and application materials or free language assistance in order to provide meaningful access to program benefits, including claims filing, recertification, program compliance, and appeals. (ii) Eligibility for benefits, including with respect to— (I) eligibility conditions; and (II) how information about requirements relating to eligibility for continuing benefits is provided, including requirements relating to the documentation of work search. (iii) Timeliness and accuracy of claims processing, payment, and appeals, including information about reasons for denial. (iv) Adequacy of benefits, including with respect to wage replacement and benefit exhaustion. (B) A description of any equity-focused training provided to employees of the State agency charged with the administration of the State unemployment compensation law, and the frequency and content of such training. (C) A descriptive analysis of the impact of the State’s policies with respect to each of the categories described in subparagraph (A) on the State’s performance. (D) Other relevant information or analysis as determined by the Secretary of Labor. (2) State participation required Each State to which a payment is made under section 302(a) shall provide any data not already required under Section 303 or regulations implementing Section 303, and all other information requested by the Secretary of Labor for the purpose of conducting the analysis under paragraph (1). Such data and information is to be reported in a manner prescribed by the Secretary of Labor and, as necessary, be disaggregated by race and ethnicity. The Secretary of Labor shall ensure the data is stored and maintained as required by the use, disclosure, and storage requirements of section 308(b). (3) Corrective action and continuous improvement plans In any case in which the Secretary of Labor finds that an analysis conducted under this paragraph demonstrates that a State does not meet the performance metrics defined by the Secretary of Labor pursuant to subsection (a) related to equitable treatment by race and ethnicity, the Secretary of Labor shall negotiate specific good faith efforts the State will make to improve equity related to race and ethnicity in the unemployment compensation program and shall set specific milestones or performance targets for future improvement. (4) Publication and reporting (A) In general Not later than 180 days after the beginning of the 4th fiscal year beginning after the date of enactment of this section, and every 2 fiscal years thereafter, the Secretary of Labor shall post on a publicly accessible website of the Department of Labor the results of the most recent equity analyses conducted pursuant to paragraph (1). (B) Report to Congress Whenever the Secretary of Labor publishes the results described in subparagraph (A), the Secretary of Labor shall prepare a comprehensive report summarizing the results of all State data used in the preparation of such publication, including a State-by-State comparison with respect to information described in paragraph (1) and an analysis of key factors driving disparities in eligibility, access, or benefit levels for workers on the basis of race or ethnicity, and any penalties or corrective action plans applicable to the State based on the analysis. Such report shall be publicly displayed on the website described in subparagraph (A) and shall be submitted to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate. (e) Authority not affected Nothing in this section shall limit the authority otherwise provided to the Secretary of Labor regarding program administration under this title. . (b) Regulations Not later than 18 months after the date of enactment of this Act, the Secretary of Labor shall issue regulations to implement the amendments made by subsection (a), including with respect to the program performance standards and performance bonuses. (c) Effective date The amendment made by subsection (a) shall apply with respect to fiscal years beginning 2 or more years after the date of enactment of this Act. IV General Provisions 401. Centralized support and technical assistance for State program improvement Title III of the Social Security Act ( 42 U.S.C. 501 et seq. ), as amended by section 302, is further amended by adding at the end the following: 308. Centralized support and technical assistance for State program improvement (a) Centralized support and technical assistance for State program improvement (1) In general Subject to the availability of the appropriations made available by section 403 of the GUARD Act , the Secretary of Labor shall make available to each State administering an unemployment compensation program central supportive services and direct technical assistance to assist the State in— (A) promoting equitable access to such unemployment compensation program; (B) preventing and identifying fraud and supporting law enforcement in the recovery of payments made due to fraud; and (C) improving timely payments and reducing workload backlogs. (2) Scope of assistance The assistance provided by the Secretary of Labor under subsection (a) may include the following: (A) Response teams that provide consultative assessments. (B) Prototyping and piloting technology solutions and conducting feasibility studies. (C) Sustaining technology solutions and supporting State process changes to improve access and efficiency. (b) Administrative database (1) In general The Secretary of Labor may establish and maintain a database for the purposes of administering the requirements of sections 303 and 307. (2) Use The Secretary of Labor may use data contained in the database established under paragraph (1) only— (A) for purposes of program administration, including research, evaluation, and performance assessment, of State and Federal unemployment compensation programs, including reemployment services and eligibility assessments in accordance with section 306; and (B) to address identity theft within such unemployment compensation programs. (3) Storage The Secretary of Labor shall comply with appropriate industry safeguards with respect to the storage of such data. (4) Disclosure (A) In general Such data may be disclosed by the Secretary of Labor to Federal or State government officials, or their contractors, only to the extent necessary to carry out the purposes described in paragraph (2) and only under the terms of a written agreement with the Federal or State government official providing for appropriate measures to protect the confidentiality of such data, including oversight of their contractors. The Secretary of Labor may not disclose such data to any other person or entity, and no Federal or State government official, or their contractor, may redisclose such data to any person or entity, except as provided in this subparagraph. (B) Exemption from disclosure Such data shall be exempt from disclosure under 552(b)(3) of title 5, United States Code. . 402. Implementation (a) Non-Application of the Paperwork Reduction Act Chapter 35 of title 44, United States Code (commonly referred to as the Paperwork Reduction Act of 1995 ), shall not apply to the provisions of, and the amendments made by, this Act. (b) Operating instructions or other guidance Notwithstanding any other provision of law, the Secretary of Labor may issue any regulations, operating instructions, or other guidance necessary to carry out the provisions of, or the amendments made by, this Act. 403. Authorization of appropriations There is authorized to be appropriated to the Secretary of Labor to carry out this Act and the amendments made by this Act, including maintaining staffing levels, hiring new staff, extending grants and contracts, and entering into grants and contracts— (1) any unobligated balance of funds appropriated under section 2118 of the CARES Act ( 15 U.S.C. 9034 ); and (2) for each fiscal year beginning with fiscal year 2024, such sums as may be necessary.