H.R. 7847 — Stop Unemployment Fraud Act

This section establishes identity verification requirements for unemployment compensation claimants as a condition for the Secretary of Labor to certify payments to a state under the Social Security Act. (As background, 42 U.S.C. 503(a) lists required state law provisions for such certification, including methods to ensure full payment of unemployment compensation when due.) States must implement procedures requiring claimants to provide (1) at least one currently valid federal or state government-issued identification document and (2) one or more supporting documents (e.g., utility bills, lease agreements, voter registration cards, vehicle registration, or insurance documents) deemed sufficient by the state or approved by the Secretary of Labor. The Secretary must promulgate regulations within 12 months of enactment governing these procedures, addressing administrative costs, due process, accuracy, safeguards against bias or delays (including compliance with civil rights laws), privacy, cybersecurity, and continuous improvement. The requirements apply to initial unemployment compensation applications received by a state on or after two years from enactment.

This section conditions a state's eligibility to implement the exceptions to the unemployment tax credit withdrawal standard described in IRC §3304(a)(4)(H) and (I) on the state certifying to the Secretary of Labor that (1) it uses the Integrity Data Hub (or another designated system) for cross-matching unemployment compensation claimants to prevent and detect fraud and improper payments; and (2) it has established procedures to (A) use the National Directory of New Hires to identify employed claimants, verify employment, deny or reduce payments, and recover overpayments; (B) use the State Information Data Exchange System (or equivalent) to facilitate employer responses to state workforce agency requests for wage and separation information; (C) access Social Security Administration data (or other sources) on incarcerated individuals to deny benefits to those ineligible under state law; and (D) cross-check claimant data against Social Security Administration records of deceased individuals.

This section revises certification requirements under SSA §303(a) for states to receive federal payments for unemployment insurance (UI) administration—previously requiring "full payment of unemployment compensation when due" without specifying timing—by (1) redefining such payments as due only after a claimant establishes initial eligibility for a benefit year or period, files a weekly claim, meets specified weekly eligibility requirements under state law, and completes identity verification (as cross-referenced to new subsection (n)); (2) directing the Secretary of Labor to issue a regulation within 180 days of enactment establishing maximum time frames for UI payments following initial eligibility determinations, including during high-volume claim periods; and (3) prohibiting a claimant's self-attestation or self-certification as the sole proof of weekly UI eligibility. (Thus, states must fully verify eligibility prior to payment rather than issuing benefits based on self-reporting and recovering overpayments later, ending the "pay and chase" model.) The amendments apply to certifications for payments made after two years from enactment.

This section requires the Secretary of Labor to monitor each state's compliance with subsection (r) of this section. For noncompliance with subsections (n) or (o), it authorizes the Secretary, after reasonable notice and hearing, to withhold 5% of funds appropriated pursuant to SSA §901(c)(1)(A)—federal grants to states for unemployment insurance administration—and to implement a corrective action plan.

This section amends the requirement in state unemployment compensation laws that claimants be actively seeking work by specifying that such claimants must (1) register for employment services as prescribed by the state agency, (2) maintain a record of work search including employers contacted, method of contact, and date contacted, and (3) provide the record to the state agency each week benefits are received. It requires states to verify these records, directs the Secretary of Labor to issue guidance on standards for employment service registration and record verification within six months of enactment, and applies the amendments to regular unemployment compensation beginning two years after enactment.

This section authorizes states to deposit, immediately upon receipt, up to 5% of recovered unemployment compensation overpayments (excluding those due to agency error) and up to 5% of contributions or payments in lieu of contributions collected via state agency investigation and assessment into a dedicated state fund—provided required certifications are in effect—for the following purposes: (1) deterring, detecting, and preventing improper payments; (2) ensuring proper classification of individuals as employees, independent contractors, or employers, including implementation of SSA §303(k); (3) payments to the Secretary of the Treasury for credit to the state's account in the Unemployment Trust Fund; (4) modernizing the state's unemployment insurance technology infrastructure; or (5) improving timely and accurate administration of the state's unemployment compensation law. It amends IRC §§3304(a)(3)-(4), 3306(f) and SSA §§303(a)(4)-(5) to permit such deposits as exceptions to requirements for immediate deposit of all unemployment funds into the Unemployment Trust Fund (thus allowing states to retain these funds for UI program integrity rather than full transfer); requires the same treatment for recoveries from federal unemployment programs; and applies to amounts collected after the 2-year period beginning on the date of enactment (though states may amend laws earlier).