Unemployment Insurance Systems Modernization Act of 2021
This bill expands the list of requirements a state unemployment compensation system must meet for the state to receive federal funds for administration of the system.
Specifically the bill requires the unemployment law of each state to include various provisions to promote adaptability, including provisions for (1) handling surges in claims, (2) processing disaster unemployment assistance claims, (3) processing claims under temporary federal benefits programs, and (4) automating claims for short-time compensation.
The bill also requires states to utilize databases and other systems in an effort to prevent fraudulent and improper unemployment compensation payments. Specifically, states must use (1) a system selected by the Department of Labor for cross-matching unemployment claimants against available databases, (2) an automated system developed and approved by Labor for exchanging unemployment compensation information, and (3) the existing National Directory of New Hires for identifying individuals who have become employed.
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.

    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 ``Unemployment Insurance Systems 
Modernization Act of 2021''.

SEC. 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.''.
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Unemployment Insurance Systems Modernization Act of 2021
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.
Unemployment Insurance Systems Modernization Act of 2021
Sen. Young, Todd