SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Unemployment Compensation Amendment 
of 1998''.

SEC. 2. AMENDMENTS TO EXTENDED BENEFIT PROGRAM.

    (a) Repeal of Certain State Law Requirements.--
            (1) Section 202(a) of the Federal-State Extended 
        Unemployment Compensation Act of 1970 (26 U.S.C. 3304 note) is 
        amended by striking paragraphs (3), (4), (5), (6), and (7).
            (2) Subsection (c) of section 202 of such Act is repealed.
    (b) Establishment of Mandatory Triggers Based on Total 
Unemployment.--
            (1) Section 203(d) of such Act is amended to read as 
        follows:
    ``(d) For purposes of this section--
            ``(1) There is a State `on' indicator for a week if--
                    ``(A)(i) the average rate of total unemployment in 
                such State (seasonally adjusted) for the period 
                consisting of the most recent three months for which 
                data for all States are published before the close of 
                the week equals or exceeds 7.5 percent, and
                    ``(ii) the average rate of total unemployment in 
                such State (seasonally adjusted) for the 3-month period 
                referred to in clause (i) equals or exceeds (110 
                percent of such average for either (or both) of the 
                corresponding 3-month periods ending in the two 
                preceding calendar years; or
                    ``(B) the average rate of total unemployment for 
                such State (seasonally adjusted) for the period 
                consisting of the most recent 3 months for which data 
                for all States are published before the close of the 
                week equals or exceeds 10 percent.
            ``(2) There is a State `off' indicator for a week unless 
        the requirements of subparagraphs (A) or (B) of paragraph (1) 
        are satisfied.''.
            (2) Section 203(e) of such Act is amended--
                    (A) by amending the heading to read ``Determination 
                of Rates of Total Unemployment and Insured 
                Unemployment'', and
                    (B) in paragraph (1) by--
                            (i) striking ``subsection (d)'' and 
                        inserting ``subsection (f)(2)'',
                            (ii) redesignating subparagraphs (A) and 
                        (B) as clauses (i) and (ii), and
                            (iii) redesignating paragraph (1) as 
                        paragraph (2)(B);
                    (C) in paragraph (2) by--
                            (i) by striking ``subsection (d)'' and 
                        inserting ``subsection (f)(2)'', and
                            (ii) by redesignating paragraph (2) as 
                        paragraph (2)(C); and
                    (D) by inserting the following new paragraphs (1) 
                and (2)(A):
            ``(1) For purposes of this Act, determinations of the rate 
        of total unemployment in any State for any period (and of any 
        seasonal adjustments) shall be made by the Secretary.
            ``(2)(A) For purposes of subsection (f)(2), the rate of 
        insured unemployment for any thirteen-week period shall be 
        determined by reference to the average monthly covered 
        employment under the State law for the first four of the most 
        recent six calendar quarters.''.
    (c) Requirements for Supplemental Benefits During High Unemployment 
Periods.--Section 202(b)(3)(B) of such Act is amended to read as 
follows:
                    ``(B) For purposes of subparagraph (A), the term 
                `high unemployment period' means any period during 
                which an extended benefit period would be in effect 
                if--
                            ``(i) section 203(d)(1)(A)(i) was applied 
                        by substituting `10 percent' for `7.5 percent';
                            ``(ii) section 203(d)(1)(B) was applied by 
                        substituting `12.5 percent' for `10 percent'; 
                        or
                            ``(iii) in the event a State has enacted 
                        the indicator specified in section 203(f)(1), 
                        section 203(f)(1)(A)(i) was applied by 
                        substituting `8 percent' for `6.5 percent'.
    (d) Amendments to Alternative Trigger.--Section 203(f) of such Act 
is amended--
            (1) in paragraph (1), by striking ``Effective with respect 
        to compensation for weeks of employment beginning after March 
        6, 1993, the'' and inserting ``In lieu of applying the 
        indicator specified in subsection (d)(1)(A), a'';
            (2) by amending paragraph (2) to read as follows:
            ``(2) A State may by law provide for the purpose of 
        beginning or ending any extended period under this section 
        that, in addition to the indicators specified in subsection (d) 
        and paragraph (1) of this subsection, there is a State `on' 
        indicator for a week if the rate of insured unemployment under 
        State law for the period consisting of such week and the 
        immediately preceding twelve weeks equals or exceeds 6 
        percent.''.

SEC. 3. MODIFICATION IN FEDERAL UNEMPLOYMENT ACCOUNT CEILING.

    Section 902(a)(2) of the Social Security Act (42 U.S.C. 1102(a)(2)) 
is amended by inserting ``except that for the close of fiscal year 1998 
the amount shall be equal to the amount certified for the close of 
fiscal year 1997'' before the period.

SEC. 4. SPECIAL DISTRIBUTIONS TO THE STATES.

    (a) In General.--Section 903(a)(3) of the Social Security Act (42 
U.S.C. 1103(a)(3)) is amended--
            (1) in subparagraph (A)--
                    (A) by inserting ``1998,'' before ``1999'', and
                    (B) by amending clauses (i) and (ii) to read as 
                follows:
                            ``(i) be subject to subparagraphs (B) and 
                        (C) to the extent such amounts are not in 
                        excess of the sum of--
                                    ``(I) $20,000,000 (except that this 
                                subclause shall not be applicable to 
                                the close of fiscal year 2001), plus
                                    ``(II) the amount determined by the 
                                Secretary of Labor to be the difference 
                                between the amount necessary for the 
                                proper and efficient administration of 
                                the unemployment compensation program 
                                for the succeeding fiscal year (taking 
                                into account workload and other 
appropriate factors) and--
                                            ``(aa) in the case of the 
                                        close of fiscal year 1998, 
                                        $2,420,000,000;
                                            ``(bb) in the case of the 
                                        close of each of fiscal years 
                                        1999, 2000, and 2001, 
                                        $2,412,000,000;
                            ``(ii) be subject to subparagraph (D) to 
                        the extent such amounts are in excess of the 
                        sum of subclauses (I) and (II) of clause (i)'';
            (2) in subparagraph (B) by striking ``(A)((i)'' and 
        inserting ``(A)(i)(II)'';
            (3) by redesignating subparagraphs (B) and (C) as 
        subparagraphs (C) and (D), respectively; and
            (4) by inserting the following new subparagraph (B):
                    ``(B) The Secretary of Labor shall reserve the 
                amount specified in subparagraph (A)(i)(I) (at the 
                close of fiscal years 1998, 1999, and 2000) to award 
                grants to the States in fiscal years 1999, 2000, and 
                2001 to assist in the implementation of alternative 
                base periods for determining the eligibility of 
                claimants. Such alternative base periods shall reduce 
                the period of time between the end of the base period 
                for a claimant and the filing of a claim for 
                compensation. The amounts reserved pursuant to this 
                subparagraph shall be available to the Secretary of 
                Labor for obligation through fiscal year 2001.''.
    (b) Conforming Amendment.--Section 903(c)(2) of the Social Security 
Act (42 U.S.C. 1103(c)(2)) is amended in the last sentence by inserting 
``1999,'' before ``2000''.

SEC. 5. SOLVENCY REQUIREMENTS.

    (a) Solvency Target.--Section 903(b) of the Social Security Act (42 
U.S.C. 1103(b)) is amended by adding the following new paragraph:
            ``(3)(A) If the Secretary of Labor finds that on December 
        31, 2001, a State has not achieved, or made substantial 
        progress toward achieving, the solvency target established 
        pursuant to subparagraph (B), then the amount available under 
        this section for transfer to such State account for the 
        succeeding fiscal year shall, in lieu of being so transferred, 
        be transferred to the States meeting the requirements of this 
        subsection. The transfers shall be made to such States based on 
        the share of funds of each such State under subsection (a)(2), 
        except that for purposes of this subparagraph the ratio under 
        subsection (a)(2) shall be adjusted by excluding the wages 
        attributable to the States failing to meet the requirements of 
        this subparagraph.
            ``(B)(i) For December 31, 2001, the solvency target shall 
        be an average high cost multiple of 1.0. For purposes of this 
        subparagraph, the average high cost multiple represents the 
        number of years a State could pay unemployment compensation 
        (based on the reserve ratio of such State) if the State paid 
        such compensation at a rate equivalent to the average benefit 
        cost rate such State paid in the three calendar years during 
        the preceding 20 calendar years (or, if longer, during the 
        period consisting of the preceding three recessions as 
        determined by the National Bureau of Economic Research) that 
        the benefit cost rates were the highest. For purposes of making 
        this determination--
                    ``(I) the term `reserve ratio' means the ratio 
                determined by dividing the balance in the State account 
                at the end of the calendar year by the total covered 
                wages in the State for such year;
                    ``(II) the term `benefit cost rate' means the rate 
                determined by dividing the unemployment compensation 
                paid during a calendar year by the total covered wages 
                in the State for such year; and
                    ``(III) the ratio and rates determined under 
                subclauses (I) and (II) shall exclude the wages and 
                unemployment compensation paid by employers covered 
                under section 3309 of the Internal Revenue Code of 
                1986.
            ``(ii) For December 31, 2001, substantial progress towards 
        achieving the solvency target shall mean that a State has 
        reduced any difference between 1.0 and the average high cost 
        multiple of such State (if such multiple is less than 1.0) that 
        the Secretary found to exist on December 31, 1998, by an amount 
        equal to or exceeding 5 percent of such difference.
            ``(iii) The Secretary may adjust the solvency target 
        specified in clause (i), or the criteria for determining 
        whether there is substantial progress towards achieving the 
        solvency target specified in clause (ii), for States that 
        experience significant increases in unemployment during the 
        period between December 31, 1998 and December 31, 2001. The 
        Secretary shall establish objective criteria for making such 
        adjustments.
            ``(iv) A State shall include, as part of the annual State 
        plan relating to the administration of grants under this title, 
        such information as the Secretary may request relating to the 
        manner in which the State intends to achieve the solvency 
        target established pursuant to this paragraph.''.
    (b) Distribution to the States for Fiscal Year 2003.--Section 
903(a)of the Social Security Act (42 U.S.C. 1103(a)) is amended by 
adding the following paragraph:
            ``(4) Notwithstanding any other provisions of this section, 
        with respect to any excess amount (referred to in paragraph 
        (1)) remaining in the employment security administration 
        account as of the close of fiscal year 2002, such amount 
        shall--
                    ``(A) to the extent of any amount not in excess of 
                $2,600,000,000 be subject to paragraphs (1) and (2), 
                and
                    ``(B) to the extent of any amount in excess of 
                $2,600,000,000 be retained in the employment security 
                administration account.''.

SEC. 6. EXTENSION OF SELF-EMPLOYMENT ASSISTANCE.

    Paragraph (2) of section 507(e) of the North American Free Trade 
Agreement Implementation Act (26 U.S.C. 3306 note) is amended by 
striking ``5 years after the date of enactment of this Act'' and 
inserting ``on December 8, 2008''.

SEC. 7. TREATMENT OF SHORT-TIME COMPENSATION PROGRAMS.

    (a) General Rule.--Section 3306 of the Internal Revenue Code of 
1986 (26 U.S.C. 3306) is amended by adding at the end thereof the 
following new subsection:
    ``(u) Short-Time Compensation Program.--For purposes of this 
chapter, the term `short-time compensation program' means a program 
under which--
            ``(1) the participation of an employer is voluntary;
            ``(2) an employer reduces the number of hours worked by 
        employees in lieu of temporary layoffs;
            ``(3) such employees whose workweeks have been reduced by 
        at least 10 percent are eligible for unemployment compensation;
            ``(4) the amount of unemployment compensation payable to 
        any such employee is a pro rata portion of the unemployment 
        compensation which would be payable to the employee if such 
        employee were totally unemployed;
            ``(5) such employees are not required to meet the 
        availability for work or work search test requirements while 
        collecting short-time compensation benefits, but are required 
        to be available for their normal workweek;
            ``(6) eligible employees may participate in an employer-
        sponsored training program to enhance job skills if such 
        program has been approved by the State agency;
            ``(7) the State agency may require an employer to continue 
        to provide health benefits, and retirement benefits under a 
        defined benefit pension plan (as defined in section 414(j)) to 
        any employee whose workweek is reduced pursuant to the program 
        as though the workweek of such employee had not been reduced;
            ``(8) the State agency may require an employers' (or an 
        employer's association which is party to a collective 
        bargaining agreement) to submit a written plan describing the 
        manner in which the requirements of this subsection will be 
        implemented and containing such other information as the 
        Secretary of Labor determines is appropriate; and
            ``(9) the program meets such other requirements as the 
        Secretary of Labor determines are appropriate.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (E) of section 3304(a)(4) of such Code (26 
        U.S.C. 3304(a)(4)(E)) is amended to read as follows:
                    ``(E) amounts may be withdrawn for the payment of 
                short-time compensation under a short-time compensation 
                program (as defined under section 3306(u));''.
            (2) Paragraph (4) of section 3306(f) of such Code (26 
        U.S.C. 3306(f)(4)) is amended to read as follows:
            ``(4) amounts may be withdrawn for the payment of short-
        time compensation under a short-time compensation program (as 
        defined under subsection (u));''.
            (3) Section 303(a)(5) of the Social Security Act (42 U.S.C. 
        503(a)(5)) is amended by striking ``the payment of short-time 
        compensation under a plan approved by the Secretary of Labor'' 
        and inserting ``the payment of short-time compensation under a 
        short-time compensation program (as defined in section 3306(u) 
        of the Internal Revenue Code of 1986).''.

SEC. 8. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), the 
provisions of this Act shall take effect on the date of enactment.
    (b) Extended Benefit Amendments.--
            (1) Except as provided in paragraph (2), the provisions of 
        section 2 of this Act shall take effect for the weeks beginning 
        after the date that is two years after the date of enactment of 
        this Act.
            (2) Pursuant to the enactment of appropriate provisions of 
        the State law the provisions of section 2 may take effect for 
        weeks which begin earlier than the weeks specified in paragraph 
        (1), but not earlier than 60 days after the enactment of this 
        Act.
Unemployment Compensation Amendment of 1998 - Amends the Federal-State Extended Unemployment Compensation Act of 1970 to:  (1) repeal certain State law requirements under the extended unemployment compensation benefit program; (2) establish certain mandatory triggers based on total unemployment; (3) revise requirements for supplemental benefits during high unemployment periods; and (4) modify provisions for alternative triggers that States may establish. 
Amends title IX (Employment Security Administrative Financing) of the Social Security Act (SSA) to modify the ceiling on the Federal Unemployment Account. 
Provides for special distributions of funds to the States under SSA title IX. 
Directs the Secretary of Labor to reserve specified amounts for grants to States to assist in implementing alternative base periods for determining the eligibility of claimants for unemployment compensation. 
Requires States to achieve or make substantial progress toward achieving certain solvency targets for their unemployment compensation accounts.  Directs the Secretary to transfer to other States' accounts the amount that would otherwise be transferred to the account of a State that violates such requirement under SSA title IX. 
Revises SSA title IX requirements for distribution to States of certain excess amounts in the Employment Security Administration Account as of the close of FY 2002. 
Amends the North American Free Trade Agreement Implementation Act to extend the self-employment assistance program. 
Amends the Federal Unemployment Tax Act (FUTA) under the Internal Revenue Code to set forth requirements for treatment of short-time compensation programs.
Unemployment Compensation Amendment of 1998