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>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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