U.S. Department of Labor announces funding to help states modernize unemployment insurance system

Funding aims to combat fraud, promote equity, ensure timely benefits

Washington – The U.S. Department of Labor (DOL) has announced a series of actions to modernize and reform the unemployment insurance system. Over the last year alone, the unemployment insurance (UI) system has helped nearly 53 million workers stay afloat during a pandemic and economic crisis and put nearly $800 billion into the economy – staving off an even deeper recession.

But the crisis also exposed longstanding challenges in the UI system requiring comprehensive reform.

The Labor Department will start by using the $2 billion allocated as a part of the American Rescue Plan Act to address the most acute challenges states have faced over the last year.

“The pandemic underscored the need for modernization of the 53 different systems that administer unemployment insurance benefits in the United States, and it exposed significant vulnerabilities in state technology to criminals looking for an opportunity,” said U.S. Secretary of Labor Marty Walsh. “The Biden-Harris Administration and Congress provided the means to reform this critical safety net for future crises, and our department is committed to executing that mission in a way that leaves no community behind.”

According to a statement announcing the effort, the DOL plans to award:

• $140 million in ARPA Fraud Grants to states for fraud prevention measures, including identification verification subscription costs, establishing and expanding data analytics and implementing cybersecurity defense strategies.
• $260 million in Equity Grants to improve claimant outreach and customer service processes, implement strategies to reduce backlog and improve access for lower-income claimants.

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.