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US Department of Labor to Fund State Modernization of Unemployment Insurance Systems

The U.S. Department of Labor announced a series of actions to modernize and reform, the unemployment insurance system.  The department will start with the $2 billion allocated as a part of the American Rescue Plan Act, aimed specifically at addressing the most acute challenges states have faced over the last year.

ARPA Fraud Grants totaling $140 million will be awarded to states for fraud prevention measures, including identification verification subscription costs, establishing and expanding data analytics and implementing cybersecurity defense strategies.

Another $260 million in Equity Grants will be awarded to improve claimant outreach and customer service processes, implement strategies to reduce backlog and improve access for lower-income claimants. These first-of-their-kind grants will provide funding for states to improve public awareness and service delivery as the department seeks to address potential racial and ethnic disparities in the administration and delivery of UI benefits in some states.

The department will also allocate $100 million in previously unobligated CARES Act funds to combat fraud and implement cybersecurity measures in the Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation programs beyond the expiration of benefits.

Additional strategies include:

Direct technical assistance through tiger teams

Multi-disciplinary tiger teams, composed of experts across many disciplines including fraud specialists, equity and customer service experience specialists, UI program specialists, behavioral insights specialists, business intelligence analysts, computer systems engineers/architects and project managers, will deploy to states to conduct intensive discovery assessments, provide resources for identification verification and propose solutions to address fraud and equitable access.

Tools to address immediate fraud concerns

Identity verification is a critical tool in paying unemployment benefits to eligible individuals. Yet too few states have the resources, expertise, and capacity needed to effectively work with vendors to address the wide-ranging attacks that the UI system has experienced from organized criminal enterprises. The department issued a blanket purchase agreement to work with three vendors to employ cross-matching technology to verify applicants’ identities at the time of filing for unemployment programs and tools to identify suspicious attributes after claims are filed. LexisNexis, TransUnion and V3Gate partnering with ID.Me are all compliant with the National Institute of Standards’ Identity Assurance Level 2 and Authenticator Assurance Level 2, and these vendors will work with states to: develop identification verification options that do not require computer access, offer customer service in claimants’ native languages and provide accessibility standards to serve the disability community.

Modernizing antiquated state technology

The pandemic has only underscored states’ desperate need for technological support and improvements. Many state systems are operating on outdated technology, which made it difficult for them to rapidly respond to changes in law and economic conditions. The department has partnered with the U.S. Digital Service to start the transformative project of centrally developing open, modular technology solutions that states may adopt as part of ongoing modernization and improvement efforts. Additional plans included shared IT solutions designed to integrate with state systems and provide software to support end-to-end administration of UI, including benefit delivery, employer tools and appeals and working with states’ IT staff to develop and implement plans that build resilience in UI systems across the country.

Read more on the UI Modernization plan.