Labor Department Mobilizes New Arm to Improve Unemployment Insurance System

A new office within the Department of Labor will lead efforts to modernize unemployment insurance systems, which have traditionally been delivered through over 50 distinct systems at the state level. 

The Office of Unemployment Insurance Modernization‘s marching orders are to support UI modernization and manage the $2 billion already earmarked for the purpose through the American Rescue Plan Act, FCW reported Tuesday.

FCW said the new office was born out of Labor Secretary Marty Walsh’s emphasis on solving chronic problems in the UI space, which intensified after the onset of the COVID-19 pandemic. The new office will be housed in the Office of the Secretary, but it will also work with the Employment and Training Administration and other relevant DOL units.

While some states are facing a surge in fraud claims, many states are still administering the program with legacy technology, it was also reported. 

Because of the new challenges, the new office will be implementing a UI modernization plan that splits the $2 billion investment from the American Rescue Plan into different types of grants for states.

Of the total amount, $260 million will be marked as “equity grants,” meant to be used to improve customer service and claimant outreach, reduce claims backlogs and improve access for low-income claimants. 

Additionally, $140 million will be given as “fraud grants” administered by the Labor Department’s Employment and Training Administration, to cover the subscription costs for identity verification tools, the establishment and expansion of data analytics and the implementation of cybersecurity defense strategies.

To better counter fraud, the department will also be working with state authorities on identity verification through a blanket purchase agreement with three vendors, providing cross-matching technology to verify the identity of applicants when they file for unemployment insurance.