Federal-State Unemployment Insurance (UI) Program; Data Exchange Standardization as Required by Section 2104 of the Middle Class Tax Relief and Job Creation Act of 2012, 12655-12664 [2013-04332]

Agencies

• Employment and Training Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 78, Number 37 (Monday, February 25, 2013)]
[Proposed Rules]
[Pages 12655-12664]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04332]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 619

RIN 1205-AB64


Federal-State Unemployment Insurance (UI) Program; Data Exchange 
Standardization as Required by Section 2104 of the Middle Class Tax 
Relief and Job Creation Act of 2012

AGENCY: Employment and Training Administration, Labor.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Labor's (Department's) Employment and 
Training Administration proposes to designate in regulation data 
exchange standards, developed in consultation with an interagency work 
group established by the Office of Management and Budget (OMB), for 
Unemployment Insurance (UI) administration as required by amendments to 
Title IX of the Social Security Act (SSA) made by the Middle Class Tax 
Relief and Job Creation Act of 2012 (the Act). This proposed regulation 
would establish data exchange standards for three categories of 
information: real-time applications on the Interstate Connection 
Network (ICON); the State Information Data Exchange System (SIDES); and 
implementation of the standards identified for ICON and SIDES in major 
Information Technology (IT) modernization projects to upgrade UI 
Benefits and Tax systems by State Workforce Agencies (SWAs) using 
Federal funds.

DATES: Submit comments on or before April 26, 2013.

ADDRESSES: You may submit comments, identified by Regulatory 
Information Number (RIN) 1205-AB64, by one of the following methods:
    Federal e-Rulemaking Portal: https://www.regulations.gov. Follow the 
Web site instructions for submitting comments.
    Mail and hand delivery/courier: Written comments, disk, and CD-ROM 
submissions may be mailed to Michael S. Jones, Acting Administrator, 
Office of Policy Development and Research, U.S. Department of Labor, 
200 Constitution Avenue NW., Room N-5641, and Washington, DC 20210.
    Instructions: Label all submissions with ``RIN 1205-AB64.''
    Please submit your comments by only one method. Please be advised 
that the Department will post all comments received that relate to the 
proposed data exchange standardization on https://www.regulations.gov 
without making any change to the comments or redacting any information. 
The https://www.regulations.gov Web site is the Federal e-rulemaking 
portal and all comments posted there are available and accessible to 
the public. Therefore, the Department recommends that commenters remove 
personal information such as Social Security Numbers, personal 
addresses, telephone numbers, and email addresses included in their 
comments as such information may become easily available to the public 
via the https://www.regulations.gov Web site. It is the responsibility 
of the commenter to safeguard personal information.
    Also, please note that due to security concerns, postal mail 
delivery in Washington, DC may be delayed. Therefore, the Department 
encourages the public to submit comments on https://www.regulations.gov.
    Docket: All comments on this proposed rule will be available on the 
https://www.regulations.gov Web site and can be found using RIN 1205-
AB64. The Department also will make all the comments it receives 
available for public inspection by appointment during normal business 
hours at the above address. If you need assistance to review the 
comments, the Department will provide appropriate aids such as readers 
or print magnifiers. The Department will make copies of this proposed 
rule available, upon request, in large print and electronic file on 
computer disk. To schedule an appointment to review the comments and/or 
obtain the proposed rule in an alternative format, contact the Office 
of Policy Development and Research at (202) 693-3700 (this is not a 
toll-free number). You may also contact this office at the address 
listed below.
    Instructions for Submitting Comments on Paperwork Burden: Submit 
any comments that concern the information collection request to the 
Office of Information and Regulatory Affairs, Attn: OMB Desk Officer 
for DOL-ETA, Office of Management and Budget, Room 10235, 725 17th 
Street NW., Washington, DC 20503, Fax: 202-395-6881 (this is not a 
toll-free number), email: OIRA_submission@omb.eop.gov. OMB recommends 
that comments on the information collection requirements be submitted 
within 30 days of publication of this NPRM. Comments on the information 
collections may also be submitted to the ETA in the same manner as any 
other issue addressed in this NPRM.

FOR FURTHER INFORMATION CONTACT: Michael S. Jones, Acting 
Administrator, Office of Policy Development and Research, U.S. 
Department of Labor, 200 Constitution Avenue NW., Room N-5641, 
Washington, DC 20210; telephone (202) 693-3700 (this is not a toll-free 
number).
    Individuals with hearing or speech impairments may access the 
telephone number above via TTY by calling the toll-free Federal 
Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: The preamble to this proposed rule is 
organized as follows:

I. Background--provides a brief description of the development of 
the proposed rule.

[[Page 12656]]

II. Section-by-Section Review--summarizes and discusses the proposed 
regulations.
III. Administrative Information--sets forth the applicable 
regulatory requirements.

I. Background

    On February 22, 2012, the President signed the Act. Section 2104 of 
the Act amends Title IX, SSA (42 U.S.C. 1101 et seq.) by adding a new 
section 911, which requires the Department to issue rules, developed in 
consultation with an interagency workgroup established by the Office of 
Management and Budget (OMB), that establish data exchange standards for 
certain functions related to administration of the Unemployment 
Insurance (UI) \1\ program. Before enactment of this requirement for 
data exchange standardization, the Department had been a proponent of 
and strong advocate for the use of open source technologies and data 
exchange standards in the development of IT systems supporting critical 
UI functions (such as ICON and SIDES), and of SWAs' overall UI 
information technology modernization efforts. Section 911, SSA, 
contains two major subsections (a) and (b), each of which requires data 
exchange standards; these requirements are discussed in detail below.
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    \1\ The Department's Office of Unemployment Insurance uses the 
term Unemployment Compensation (UC) when referring to UC benefits 
paid or UC laws and to use the term Unemployment Insurance (UI) to 
refer to the UI program, administration and operations.
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    Section 911(a)(1), SSA, requires that DOL ``shall, by rule, 
designate a data exchange standard for any category of information 
required under title III [42 U.S.C. 501 et seq.], title XII [42 U.S.C. 
1401 et seq.], or this title [IX].'' (Emphasis added.) This allows the 
Department to identify ``any'' category of information under the 
specified titles to require, by rule, for which to establish a data 
exchange standard. Section 911(b)(1), SSA, requires that DOL ``shall, 
by rule, designate data exchange standards to govern the reporting 
required under [the same specified titles].'' The Department has chosen 
to establish data exchange standards for information required under 
section 303(a)(1), SSA, that meet the requirements of both sections 
911(a)(1) and 911(b)(1), SSA.
    Section 303(a)(1), SSA, commonly known as the ``methods of 
administration'' requirement, provides that State law, as a condition 
of the State receiving UC administrative grants, must include ``such 
methods of administration[hellip]as are found by the Secretary of Labor 
to be reasonably calculated to insure full payment of unemployment 
compensation when due.'' Section 303(a)(1), SSA, was chosen because it 
is the foundational statutory authority for the Department's guidance 
to States on the administration of the UI program, including guidance 
on program operations and reporting requirements.
    The Department chose to establish data exchange standards for 
categories of information under Title III, SSA, because Titles IX and 
XII, SSA, provide fewer opportunities for establishment of data 
exchange standards that would benefit the UI system broadly, given that 
their focus is primarily on Unemployment Trust Fund (UTF) management 
issues. Title IX establishes the account structure for the UTF, and 
Title XII establishes the processes for States to obtain advances if 
their States' accounts in the UTF are depleted. While Titles IX and 
XII, SSA, relate to how money flows between accounts, there are no data 
exchange activities associated with these two titles.
    While developing this proposed rule for data exchange standards, 
the Department considered and determined that it is neither feasible 
nor practicable to set standards for all reports under the three titles 
listed in Section 911(b), SSA. Imposing data exchange standards for 
certain reporting for the UI program is, in fact, counter-productive 
and would interfere with the Department's ability to use and analyze 
the data. For example, State UI agencies currently send data, such as 
weekly UI claims data, to the Department in a format that enables the 
Department to store the data in a relational database for purposes of 
analysis and performance management. If data were instead required to 
be received in eXtensible Markup Language (XML) \2\ format, pre-
processing of the data would be required to store this information 
within a relational database, thus adding a layer of complexity for the 
analytical software. That approach would result in unnecessary 
inefficiency and there would be no benefit to any user of the data.
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    \2\ XML is a nonproprietary, searchable, computer-readable 
format, and has the capacity to be upgraded continually, as 
necessary. Interoperability helps information technology systems 
more readily interface to carry out shared functions and manage 
communications.
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    The Department did identify an area of reporting in which data 
exchange standardization is appropriate--SIDES. SIDES involves the type 
of data transactions that would benefit from a designated searchable, 
computer-readable and interoperable XML format standard. Therefore, the 
XML format is the designated data exchange standard for SIDES in this 
proposed rule. Nevertheless, we request comment on how the Department 
might apply the data exchange standards of Section 911(b), SSA, more 
broadly to the three listed titles.
    Sections 911(a)(1) and 911(b)(1), SSA, both require consultation 
with an interagency work group established by OMB. The Department has 
participated in a work group convened by OMB for this purpose. The 
consultation included discussion of the standards proposed in this 
rulemaking as well as other possible standards that might be 
established in the future that impact multiple Federal programs. The 
work group provided the opportunity for multiple agencies to share 
their approaches to data exchange standardization, but to date, no 
cross-agency data exchange functions have been identified as being 
feasible, efficient and cost effective to implement data exchange 
standards as required by section 911, SSA. The Department will continue 
to work with OMB and other Federal agencies to identify additional data 
exchange standards that support interagency data exchange activities. 
Additional standards identified will be the subject of future 
regulations promulgated through advance notice and opportunity for 
public comment as required by section 553 of the Administrative 
Procedure Act (APA).
    Sections 911(a)(1) and 911(b)(1), SSA, also both provide that the 
Department should consider State and employer perspectives. The 
Department consulted with States on the content of the rules required 
by section 911, SSA, through the National Association of State 
Workforce Agencies (NASWA), including NASWA's UI Committee and its 
Information Technology Support Center Steering Committee. The feedback 
provided from this consultation was that States continue to struggle 
with antiquated IT infrastructure and vary widely in their capacity to 
implement new technologies that support data exchange standardization. 
In addition, the limits of State IT capacity have been severely tested 
since the onset of the last recession through the present, as the 
economy slowly recovers. During this period, States experienced 
extraordinarily high claims loads and implemented a very complex 
Emergency Unemployment Compensation (EUC) program and extensions. EUC 
had multiple iterations over the course of the recession and during the 
recovery, requiring States to reprogram computers frequently to 
accommodate the changes to the program. In addition, the Act required 
implementation of a number of new

[[Page 12657]]

reforms to the EUC program, also requiring computer programming and 
rapid implementation. States also identified lack of sufficient funding 
as a challenge to modernizing their IT systems. States recommended 
leveraging work to implement data exchange standards as a desirable 
approach to meeting the data exchange requirements of section 911, SSA.
    The Department also considered employers' perspectives in the 
development of this regulation. The data exchange standards proposed in 
this rule to address the requirements of sections 911(a)(1) and 
911(b)(1), SSA, support processes that will reduce the burden employers 
have in providing required information to the SWAs. The first data 
exchange standard will apply to ICON, which facilitates the sharing of 
employer reported wage information among the States. Efficiently 
sharing routinely reported wage data among the States prevents SWAs 
from having to contact employers through manual processes to provide 
the wage information again. The second standard mandated by this rule 
relates to SIDES. The Department is currently working with States to 
automate and standardize the flow of data between SWAs and employers 
and/or employer third-party administrators (TPAs). TPAs are 
organizations that contract with employers to act on their behalf with 
SWAs for processing the employers' UC claims-related activities, such 
as filing quarterly wage and tax reports, responding to requests for 
separation information, and managing UC accounts and costs. The goal of 
SIDES is to effectively automate and streamline the data exchange that 
occurs between SWAs and employers or their TPA so as to enable 
efficiencies. Both employers and TPAs have been involved in the 
development of all SIDES data exchange modules, including the choice of 
XML as the data exchange standard for SIDES. Employers and TPAs are 
represented on the SIDES operations committee. SIDES provides a method 
for SWAs, employers, and TPAs to improve timeliness and accuracy of UC 
claims processing, and reduce costs by creating an electronic exchange 
of information using a standardized, secure format with data 
validations that are strictly enforced to prevent the transfer of 
incomplete or incorrectly formatted data. Both ICON and SIDES are 
discussed in more detail below.
    To meet the requirements of section 911, SSA, the Department is 
designating XML as the data exchange standard for two systems that 
support the reporting of data and information for two core UI 
administrative functions: (1) Employer reporting of information 
requested by SWAs to support eligibility determinations (SIDES); and 
(2) the reporting and exchange of wage information among the States 
that also supports determination of eligibility for benefits (ICON). 
XML is a markup language that defines a set of rules for encoding 
documents in a format designed to structure, store and transport data. 
XML data are stored in plain text format that is both human-readable 
and machine-readable. Use of XML also provides for a software- and 
hardware-independent method of exchanging data over incompatible 
applications or systems over the Internet.
    Section 911(a)(2), SSA, requires that the data exchange standard 
implemented in this rulemaking ``to the extent practicable, be 
nonproprietary and interoperable.'' Section 911(b)(2), SSA, also 
requires that the data exchange standards implemented in this 
rulemaking ``to the extent practicable incorporate a widely accepted, 
nonproprietary, searchable, computer-readable format,'' and ``be 
capable of being continually upgraded as necessary.'' Section 
911(b)(3), SSA, specifically requires that this rule, ``to the extent 
practicable, incorporate existing nonproprietary standards, such as the 
eXtensible Markup Language.'' The data exchange standards established 
in this proposed rule mandate the use of XML to meet the aforementioned 
requirements of sections 911(a) and (b), SSA.
    XML\3\ provides an interoperable standard framework using common 
computer languages and standard formats and protocols to manage certain 
functions or communications. Gaining interoperability among the 
Department and 53 States and territories with different IT 
infrastructure and different program parameters (State UI programs have 
differing eligibility requirements and processes for supporting those 
requirements) is challenging. Therefore, the Department is focusing on 
core functions and reporting requirements that are truly common among 
the States to codify data exchange standards.
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    \3\ The use of the term ``XML'' means XML and any XML-based 
markup language(s) that defines a set of rules for encoding 
documents and/or data in a format that is both human-readable and 
machine-readable. The term ``XML'' encapsulates the provisions 
specified in newly added section 911, SSA.
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    Finally, section 911(a)(3)(A), SSA, requires that for data exchange 
reporting standards, the rule, to the extent practicable, incorporate 
interoperable standards developed and maintained by an international 
voluntary consensus standards body. The XML standard herein designated 
meets this requirement as it is recognized by the World Wide Web 
Consortium, an international voluntary consensus standards body. The 
rule also meets the requirement of incorporating standards developed 
and maintained by intergovernmental partnerships like the National 
Informational Exchange Model (NIEM) referenced in section 911(a)(3)(B), 
SSA. XML is a data exchange standard recognized by NIEM. The standard 
to be considered under Section 911(a)(3)(C), SSA, requires 
incorporation, to the extent practicable, of ``interoperable standards 
developed and maintained by Federal entities with authority over 
contracting and financial assistance, such as the Federal Acquisition 
Regulations Council.'' This applies to contracting and procurement 
processes and is not applicable to UI processes.
    In accordance with these provisions, the Department proposes the 
following in this rulemaking:
     Under section 911(a), SSA, designating XML as the data 
exchange standard for the real-time applications \4\ of ICON;
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    \4\ ICON applications are available in real-time and batch mode. 
States vary in the use of real-time applications versus the batch 
mode. The batch mode allows for processing of multiple requests at a 
scheduled time instead of immediate ``real-time'' processing.
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     Under section 911(a), SSA, designating XML as the standard 
for the SIDES data exchange modules;
     Under section 911(b), SSA, designating XML as the data 
exchange standard to govern reporting of information shared through 
SIDES; and
     Under section 911(a), SSA, designating XML as the data 
exchange standard for real-time applications of ICON and SIDES data 
exchange modules in association with major IT modernization project 
using Federal funds.
    The Department is not ruling out the establishment of additional 
data exchange standards by regulation, promulgated through advance 
notice and opportunity for public comment, in the future. The 
Department intends to continue to explore other functions where data 
exchange standards would be valuable to the UI program and as it 
relates to shared data exchange with other Federal agencies.

ICON

    ICON is used to implement sections 3304(a)(9)(A) and (B) of the 
Federal Unemployment Tax Act (FUTA), providing for interstate and 
combined-

[[Page 12658]]

wage claims.\5\ ICON enables States to request, submit, and receive 
much of the information necessary to establish claims and determine 
eligibility. The requirement to pay UC ``when due'' under section 
303(a)(1), SSA, includes timeliness of these payments. Interstate and 
combined wage claims are more complex to administer since they require 
communication and transmission of information between States or between 
a State and a Federal agency. To ensure that these claims are paid 
``when due,'' the Department supports development and maintenance of 
ICON. ICON is a secure multi-purpose telecommunications network that 
supports the transfer of data among the SWAs needed for critical 
program functions, including:
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    \5\ Section 3304(a)(9)(A), (FUTA) requires, as a condition of 
the Secretary's certification of a State law under FUTA, that 
``compensation shall not be denied or reduced to an individual 
solely because he files a claim in another State * * * or because he 
resides in another State * * * at the time he files a claim for 
unemployment compensation.'' Section 3304(a)(9)(B), FUTA, also 
requires as a condition of the Secretary's certification that ``the 
State shall participate in any arrangements for the payment of 
compensation on the basis of combining an individual's wages and 
employment covered under the State law with his wages and employment 
covered under the State unemployment compensation law of other 
States* * *''
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     Interstate Benefits/Combined-Wage Claims;
     Unemployment Compensation for Federal Civilian Employees 
and Unemployment Compensation for Ex-Servicemembers programs;
     The Wage Record Interchange System, which allows SWAs to 
obtain wage data for program performance purposes of individuals who 
have participated in workforce investment programs in SWAs;
     The UI Inquiry data exchange with the Social Security 
Administration (Social Security) that enables SWAs to validate Social 
Security Numbers (SSNs) with Social Security; and
     The Health Coverage Tax Credit that enables a SWA to 
transmit information to the Internal Revenue Service about individuals 
eligible for help paying for their health insurance coverage.
    The Department proposes XML as the data exchange standard under 
section 911(a), SSA, for a subset of these functions due to both State 
and ICON capacity to adopt standards for some of these functions at 
this time. In relation to these chosen functions, ICON currently 
supports the following applications in real-time allowing for States to 
use XML standards for these functions. These are applications currently 
used by some SWAs to support the processing of all UC claims:
     Interstate Wages and Benefits Inquiries/Responses, which 
supports online transmission of interstate wages and benefits inquiries 
and responses between SWAs;
     Withdrawn/Invalid Claims, which allows for the posting and 
viewing of withdrawn or invalid claim information for SWAs; and
     State Identification Inquiry, which allows SWAs to inquire 
about wages reported to other SWAs by SSN.
    Currently, seven SWAs are involved in modernizing some of their 
ICON applications and it is not practical to require all States to 
comply with this standard immediately. The Department contemplates 
providing SWAs lead time to adopt and implement the new data exchange 
standard for these applications. Since States need time to implement 
the real-time ICON applications, it is not feasible to designate a data 
exchange standard to govern the reporting of this information under 
section 911(b), SSA, at this time. Accordingly, as explained below, the 
Department proposes that all SWA's using real-time ICON applications 
comply with the XML data exchange standard no later than September 30, 
2018. A SWA may request an extension of the September 2018 deadline if 
it demonstrates that resources are not available to meet this 
requirement. These requests must be submitted in writing to the 
Administrator of the Office of Unemployment Insurance no later than 6 
months before the deadline; requests will be reviewed and decided 
within 30 days.

SIDES

    SIDES is necessary to effectuate the Standard for Claim 
Determinations--Separation Information, codified in regulation at 20 
CFR part 625 Appendix B. This standard is based significantly on the 
``methods of administration'' requirement in section 303(a)(1), SSA, 
and includes a requirement that a State promptly obtain information 
from the worker, employer, or other source that is sufficient to 
reasonably insure payment of UC when due. For this reason, the 
Department supports development and maintenance of SIDES, which enables 
States to exchange information with employers electronically, thereby 
markedly improving the timeliness and accuracy of the employer-provided 
information about the reasons individuals separated from employment.
    SIDES is an automated information exchange and reporting system to 
standardize SWAs' delivery of information to employers and collection 
of information by SWAs from employers and TPAs. In FY 2010, the first 
format of SIDES for exchange of employee separation information was 
implemented. This exchange of information with employers or their TPAs 
on the circumstances underlying individual UC claimants' job 
separations will reduce UC payments to ineligible claimants, yield 
administrative cost savings to both employers and taxpayers, and 
promote more timely benefit determinations. Currently, 29 SWAs and 3 
large TPAs are participating in the SIDES effort. In FY 2011, the SIDES 
exchange of data to verify claimant wages was implemented. The addition 
of the earnings verification exchange allows SWAs and employers to more 
quickly and accurately verify when UC claimants return to work, thus 
reducing the leading cause of UC overpayments: claimants' receipt of UC 
while employed.
    SIDES is managed by NASWA which contracts with a vendor for its 
maintenance, support, and operations. The Department has provided 
specific funding to State consortia and SWAs for development, 
maintenance, and operations of SIDES. State consortia are groups of 
States collaborating to jointly establish a project team to oversee the 
design, development and implementation of an IT solution that will be 
shared across the States. The Department recently funded a consortium 
of States to oversee the development of new SIDES data exchanges 
modules to allow SWAs to notify employers and TPAs of benefits charges 
to their accounts and of non-monetary determinations. SWAs, 
participating in the SIDES consortia, identify and help prioritize new 
SIDES modules to be developed and direct these funds to NASWA for the 
development of these modules. All SWAs using SIDES modules provide 
administrative funding to NASWA for the continued operations of SIDES.
    The Department continues to facilitate the expansion and 
enhancement of the functionality and use of SIDES as a vital tool for 
SWAs with respect to prevention and detection of improper payments, and 
has provided supplemental funding to a State consortium for the 
development of additional data exchange modules. These modules include:
     UC Benefit Charge Notices. This enhancement will make it 
possible for SWAs to provide employers notice of benefit charges to 
their accounts electronically rather than by paper and mail. This 
permits a quicker delivery and review by the employer and the ability 
to reply electronically if the

[[Page 12659]]

charges are questionable. This expedited information exchange can 
detect potential improper payments earlier, particularly those related 
to identity theft and employees that return to work and continue to 
collect benefits.
     Non-Monetary Determinations Exchange. This enhancement 
will notify employers electronically, rather than on paper, of SWA 
decisions on the eligibility of their former workers who quit or were 
let go for cause. This will improve the timeliness of employer appeals 
and allow for quicker appeal decisions, halting improper payments 
faster if the employer prevails in the appeal.

Additionally, several other data exchange modules are under 
consideration for the expansion of SIDES including Monetary and 
Potential Charges, and Appeals Decisions. The XML standard will apply 
to the development of these additional data exchange modules as well.
    The proposed rule designates a data exchange standard under section 
911(a), SSA, to apply to the SIDES data exchange modules and designates 
a standard under section 911(b), SSA, to govern reporting of 
information through SIDES data exchange modules.

Major IT Modernization of UI Benefits and Tax Systems

    For the purpose of this regulation, a major IT Modernization of UI 
Benefits and Tax systems includes conversion, re-engineering, 
rewriting, or transferring of an existing system to a modernized 
framework such as transferring a process from mainframe operations to 
web-based operations, converting to modern computer programming 
languages, or upgrading software libraries, protocols, or hardware 
platform and infrastructure. As the Department provides funding to 
States to modernize their information technology systems, the 
opportunity exists to use new data exchange standards that improve 
operations of the UI system as a whole and may further enable improved 
data exchanges with other States and Federal agencies.
    The Department facilitates SWAs' efforts to modernize IT systems 
supporting their UI programs by providing funding for administration 
and operations, and appropriate technical assistance. While the 
Federal-State structure of the UI program places primary responsibility 
for its administration on the States, the Department provides periodic 
supplemental funding opportunities for IT modernization activities. In 
addition, Congress periodically provides special distributions of 
administrative UI funding to States.
    Federal funds for UI modernization efforts come primarily from 
three sources: (1) Supplemental budget funds that are designated by the 
Department for State IT modernization efforts, (2) State UI 
administration funding, and (3) special distributions. State 
administration funding primarily consists of State UI operations funds 
(an administrative grant issued by the Department at the beginning of 
each fiscal year). Recent special distributions to States, pursuant to 
section 903, SSA, include those provided under the Job Creation and 
Worker Assistance Act of 2002 funds (distributed under the Reed Act, a 
mechanism by which the Federal government transfers surplus UI funds to 
States) and American Recovery and Reinvestment Act funds (an economic 
stimulus package enacted in February 2009). Also, since 2009, the 
Department has provided supplemental funding to State consortia to 
develop jointly functional requirements and development of modernized 
UI IT Benefits and/or Tax systems. One of the requirements was that the 
technology tools developed use open source components to the extent 
feasible, be transferable, and be capable of being shared by multiple 
SWAs. The goal is for multiple SWAs to share common systems/tools that 
accommodate each SWA's specific needs. Each of the consortia has its 
State leadership engaged in the process and soliciting vendors to 
assist with the system design and development efforts.
    This proposed rule will require SWAs, when using Federal funds to 
modernize their UI systems, to use XML as a data exchange standard when 
developing the functionality to interface with ICON, to implement SIDES 
and the reporting of information through SIDES. This requirement will 
potentially further accelerate State adoption of this standard for both 
functions. The Department strongly encourages SWAs, to the extent 
feasible, to begin conforming to the XML standard for any major UI IT 
modernization projects already underway.

Effective Date

    Section 2104(b)(1) of the Act requires that a proposed rule under 
section 911(a), SSA, be issued ``within 12 months after the date of the 
enactment of this section,'' and a final rule to be issued ``after 
public comment, within 24 months after such date of enactment.'' 
Section 2104(b)(2) of the Act requires that a proposed rule under 
section 911(b), SSA, will ``become effective with respect to reports 
required in the first reporting period, after the effective date of the 
final rule referred to in paragraph (1) of this subsection.''
    Accordingly, we propose that the data exchange standard for SIDES, 
under both sections 911(a) and (b), SSA, become effective 30 days after 
publication of the final rule, consistent with the APA as codified at 5 
U.S.C. 553(d). States implementing new data exchange modules after that 
date will utilize XML as the data exchange standard.
    Additionally, we propose that the date by which SWAs will be 
required to comply with the data exchange standard for ICON, proposed 
under section 911(a), SSA, to be September 30, 2018. This will allow 
States to begin implementing the standard as soon as practicable, while 
still providing enough advance time to account for the current 
technology capacity of States and the fact that many States will need 
to make substantial changes to their technology systems to implement 
XML for their ICON exchanges.
    Finally, the effective date of designation of XML as the data 
exchange standard for SIDES data exchange modules and for the real-time 
ICON applications, proposed under section 911(a), SSA, is 30 days after 
publication of the final rule, consistent with the APA as codified at 5 
U.S.C. 553(d).

II. Section-by-Section

Definitions (Sec.  619.1)

    This section proposes definitions of terms used in this rule. Most 
are self-explanatory; however, of particular note is paragraph (c), 
which defines XML, the standard we propose to use for data exchange. 
XML data are stored in plain text format that is both human-readable 
and machine-readable and provides for a software- and hardware-
independent method of exchanging data over incompatible applications or 
systems over the internet. This definition includes any future 
upgrades, iterations, or releases of XML-based language.

Data Exchange Standardization for ICON (Sec.  619.2)

    Proposed paragraph (a) designates XML as the data exchange standard 
for the real-time ICON applications. These applications are: Interstate 
Wages and Benefits Inquiries/Responses; Withdrawn/Invalid Claims; and 
State Identification Inquiry. These applications, used by States, are 
currently supported by ICON in real-time using two data exchange 
formats--Extended Binary Coded Decimal Interchange Code (EBCDIC) and 
Web

[[Page 12660]]

Services Description Language (WSDL), which is a XML-based language. As 
stated previously, the Department has selected this sub-set of the 
applications supported on ICON for applying a data exchange standards 
because they represent the applications which both ICON and States 
currently have capacity to implement. The Department will continue to 
consider ways to apply data exchange standards to the other ICON 
functions, but the technology solutions are currently not available. It 
may be over five years before these new technology solutions can be 
effectively applied in the ICON environment.
    Proposed paragraph (b) requires that all SWAs using real-time ICON 
applications conform to the XML data exchange standard no later than 
September 30, 2018. The rule provides that a SWA may request an 
extension of this deadline if it demonstrates that resources are not 
available to meet the requirements. The request must be submitted to 
the Administrator of the Office of Unemployment Insurance no later than 
6 months before the deadline and the request will be approved or denied 
within 30 days.
    ICON is funded by a cooperative agreement between the Department 
and State of Maryland. The Maryland Department of Labor, Licensing and 
Regulation acts as the Department's agent to contract with a vendor for 
the maintenance, support, and operations of ICON. Beginning in FY 2007, 
the Department facilitated and later provided funding for the 
conversion of data exchange formats from EBCDIC to WSDL. EBCDIC is a 
format specifically used for mainframes and is not an interoperable 
standard. However, the migration of SWAs from EBCDIC to WSDL is still 
in its infancy requiring ICON to support a dual environment (Web 
Services and Mainframe).
    A few SWAs currently are in the process of implementing some of the 
modernized, XML-based real-time applications in conjunction with their 
efforts to modernize their IT systems or replace outdated systems. The 
goal of this proposed section is to accelerate State adoption of XML-
based real time applications in order to eventually eliminate the need 
for ICON to manage mainframe applications in addition to the XML-based 
applications.
    The Department will continue to support SWAs' transition to 
modernized XML-based real-time ICON applications and expects that the 
proposed data exchange standard will accelerate SWAs' adoption of the 
XML exchange standard. The development of a single environment will 
result in improved efficiencies and cost savings and allow the 
Department to more effectively manage the development of future data 
exchanges and maintenance of resources.

Data Exchange Standardization for SIDES (Sec.  619.3)

    Proposed paragraph (a) designates XML as the data exchange standard 
for SIDES. Proposed paragraph (b) requires that this standard apply to 
any Federally-funded SIDES consortium, and any future agents of the 
Department providing vendor services for the development, maintenance, 
support and operations of the SIDES. Paragraph (c) designates XML as 
the data exchange standard to govern the reporting of information 
through the SIDES data exchange modules. Paragraph (d) denotes when the 
standard set in paragraph (c) becomes effective.
    SIDES uses Web services and the XML data format for the information 
exchange between the SWAs and employers. The Department is requiring 
that all SIDES exchanges (current and future), which are developed in 
whole or part with Department funds, continue to conform to the XML 
data exchange standard. Additionally, as States, employers, and TPAs 
chose to implement SIDES or new data exchange modules of SIDES, they 
must conform to this data exchange standard by application design.
    SIDES offers two options for implementation for SWAs and employers: 
SIDES web services, and SIDES E-Response. Both systems are designed to 
meet the unique needs of businesses, large and small. For employers 
with a limited number of UC claims, the SIDES E-Response Web site 
provides an easy and efficient way to respond to information requests 
from SWAs. For employers and TPAs that handle a large volume of UC 
claims information requests, SIDES web services provides an automated, 
computer-to-computer interface between employers' and TPAs' IT systems 
and SWA networks.

Data Exchange Standardization for the UI Benefits and Tax Systems 
(Sec.  619.4)

    Proposed paragraph (a) designates XML as the data exchange standard 
for the real-time ICON applications and SIDES data exchange modules 
associated with major IT modernization projects to upgrade UI Benefits 
and Tax Systems by SWAs using Federal funds. This proposed standard 
would improve the interoperability of State, Federal, and employer 
systems that collect and exchange information for UI administrative 
purposes. Linking data between these systems at the State level will 
allow for better service delivery and faster eligibility 
determinations, and should facilitate program integrity efforts.
    Proposed paragraph (b) requires that, beginning on the effective 
date of this regulation, major IT modernization efforts funded by the 
Department must conform to the proposed XML data exchange standard for 
the implementation of the real-time ICON applications and the SIDES 
exchange modules.

III. Administrative Information

Executive Orders 12866 and 13563: Regulatory Planning and Review

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action'' because, although not economically significant under section 
3(f) of Executive Order 12866, it raises novel issues of law and 
policy. Therefore, the Department had the rule reviewed by OMB.
    The Department anticipates that the changes in this NPRM would have 
limited, if any, direct impact on employers above and beyond any impact 
that would occur in the absence of the proposed rule. There will be an 
impact on SWAs in adopting the real-time ICON applications, but this 
impact may be mitigated because many States are likely to modernize 
their IT operations in any event, which will require implementing these 
interoperable real-time applications. This proposed rule also would 
result in several benefits that are discussed below. The Department is 
requesting comment on the benefits and costs of these policies.

1. Need for Regulation

    Section 2104(b) of the Middle Class Tax Relief and Job Creation Act 
of 2012; (Pub. L. 112-96) requires the Department to issue a rule 
establishing data exchange standards for certain information-sharing 
and reporting processes. The Department is issuing this NPRM to fulfill 
its responsibility under the Act. As discussed earlier in this notice, 
these standards will

[[Page 12661]]

improve the interoperability of certain State, Federal, and employer-
operated systems that collect and exchange information for UI 
administrative purposes.

2. Economic Analysis

a. Baseline and Overview
    The baseline for the analysis reflects the conditions that exist 
(or that would exist) in the absence of a standard.
    Twenty-nine States already have implemented the SIDES Separation 
Information data exchange, and some have begun implementation of the 
SIDES Earning Verification exchanges with employers. Another 16 have 
agreed to implement SIDES. The Department has also provided funding for 
the development of other SIDES formats, including Benefit Charge 
Notices and Nonmonetary Determinations Exchange. Subject to the 
availability of funds, the Department intends to provide additional 
funding opportunities for States that have not yet committed to 
implementing SIDES. Existing SIDES formats were developed using an XML-
based interface, and thus, there will be no incremental cost or benefit 
to current users. Furthermore, while additional States may adopt SIDES 
in the future, this proposed rule would not require them to do so. With 
respect to ICON, seven SWAs are in the process of implementing 
modernized, XML-based real-time applications. These SWAs are adopting 
the XML-based real-time ICON applications due to the need for 
modernizing their IT systems to replace outdated systems. The 
Department estimates that all SWAs would transition to the XML-based 
real-time in about 10 years. However, this proposed rule will require 
the SWAs to accelerate the transition to the XML-based real-time 
applications by September 30, 2018. A 6-year acceleration could 
increase the present value cost of the project by approximately 15-to-
40 percent (depending on the assumed discount rate and on how far in 
the future the acceleration occurs, e.g., from 2024 to 2018). The 
Department also expects the conversion to the XML-based real-time 
applications by all SWAs will be a significant step to consolidating 
ICON applications to a single environment and realizing cost savings in 
ICON operations. To facilitate this transition, subject to the 
availability of funds, the Department plans to provide funding 
opportunities for SWAs to modernize to using the real-time ICON 
applications.
    For the IT modernization of UI Benefits and Tax systems, the 
Department expects many SWAs to begin re-engineering their IT systems 
with modern technologies to replace existing systems that have ceased 
to function cost effectively, subject to the availability of resources 
and expected availability of Federal funding to support their migration 
to newer systems.
b. Benefits
    As a result of the proposed rule, SWAs will adopt the XML standard 
as they implement the current and future data exchange modules of SIDES 
and adapt to XML-based real-time ICON applications, and will integrate 
these standards as they pursue overall modernization of their UI 
benefits and tax systems with Federal funds. The standardization of 
these systems is expected to result in a reduction in erroneous or 
fraudulent unemployment insurance payments. Economically, this 
reduction is properly classified as an economic ``transfer'' and 
consequently is discussed later (in Section d).
    The proposed rule will improve the interoperability of State, 
Federal, and employer systems that collect and enhance information for 
UI administrative purposes by:
     Improving the efficiency and quality of the communications 
between SWAs and employers and/or their TPAs that are required to 
determine UC eligibility through the elimination of the need to create 
and mail hard copy documents;
     Increasing accuracy and reducing errors (in both 
directions), thereby enhancing program integrity (i.e., transparency, 
consistency) and customer satisfaction (accuracy, flexibility);
     Improving the timeliness of information transferred 
between States, employers, TPAs and Federal agencies; and
     Helping large TPAs that serve employers in multiple States 
to train their employers in using uniform system interfaces, thereby 
improving efficiency, timeliness, and accuracy.

As discussed above, there are tangible program administration 
efficiencies for SWAs and employers in the implementation of this 
standard. However, implementation of these systems is still in its 
infancy and currently the Department does not have adequate data to 
support a formal cost-benefit analysis.
c. Costs
    Costs to the Department

    SIDES and real-time ICON applications using XML and XML-based 
languages have already been developed and implemented (though not by 
all SWAs). Consequently, the Department does not anticipate incurring 
any significant incremental costs as a result of the proposed rule when 
it is finalized. Any future data exchanges planned for SIDES or for 
ICON will conform to the standard proposed. However, there is no 
dedicated funding stream associated with assisting States with their IT 
modernization efforts. On occasion, when the economy is expanding and 
workloads fall below levels funded by the budget, remaining funds have 
been made available to States to support automation projects. (The 
Department expects to provide some funding, if available, to SWAs to 
help implement this proposed rule when it is finalized, as discussed in 
Section d.)
    Costs to States

    SIDES uses an XML-based interface. SWAs, employers and TPAs will 
incur one-time costs for the implementation of SIDES. Once a SWA, 
employer or TPA has implemented SIDES, they automatically conform to 
the XML data exchange standard. Therefore, there is no incremental cost 
to users for the implementation of the XML standard. SIDES is designed 
to offer two options for employers and TPAs, depending on their size. 
Large employers and TPAs can implement a version of SIDES that requires 
them to program their own systems to enable the communication with the 
SIDES applications. Large employers have an incentive to do this 
because it creates efficiencies in their processing of requests for 
information from SWAs creating a cost savings. Smaller employers who do 
not have sufficient numbers of claims to warrant reprogramming their 
computers have access to a web-based SIDES option that is also more 
efficient that paper processing, which also creates efficiencies and 
cost savings. SWAs are the users of ICON. Employers do not use ICON and 
so do not incur any incremental costs related to ICON.
d. Transfers
    As noted above, the Department estimates that the proposed rule 
when finalized will lead States to adopt the modernized XML-based real-
time applications of ICON approximately 6 years sooner than they would 
in the absence of the proposed rule. This accelerated use of the 
modernized ICON applications results in up to 6 years' worth of 
improved performance with respect to erroneous or fraudulent 
unemployment insurance payments. This is properly referred to as an 
economic ``transfer'' from individual

[[Page 12662]]

recipients of payments to the States. The Department has estimated the 
total UC overpayments in 2011 alone to be $13 billion (Annual Report 
Rate \6\) and overpayments that SWAs should be expected to detect and 
establish for recovery to be $7 billion (Operational Rate \7\) (https://oui.doleta.gov/unemploy/improp_payrate.asp#). Therefore, any actions 
that reasonably can be expected to reduce the rate of erroneous or 
fraudulent payments, such as the expanded use of SIDES, which is 
expected to result from this proposed rule, could lead to a significant 
dollar-value reduction in UC payments.
---------------------------------------------------------------------------

    \6\ The Annual Report rate includes fraud, nonfraud recoverable 
overpayments, and nonfraud non-recoverable overpayments. All causes 
and responsible parties are included in this rate.
    \7\ The Operational rate includes those overpayments that the 
States are reasonably expected to detect and establish for 
recovery--fraud and nonfraud recoverable overpayments, excluding 
work search, employment service registration, base period wage 
issues and miscellaneous causes, such as benefits paid during a 
period of disqualification, redeterminations, and back pay awards.
---------------------------------------------------------------------------

    In addition, subject to availability, the Department expects to 
provide supplemental funding opportunities to States to support 
implementation of the data exchange standards required by the rule when 
it is finalized.

Paperwork Reduction Act

    The purposes of the Paperwork Reduction Act of 1995 (PRA), 44 
U.S.C. 3501 et seq., include minimizing the paperwork burden on 
affected entities. The PRA requires certain actions before an agency 
can adopt or revise a collection of information, including publishing a 
summary of the collection of information and a brief description of the 
need for and proposed use of the information.
    A Federal agency may not conduct or sponsor a collection of 
information unless it is approved by OMB under the PRA, and displays a 
currently valid OMB control number, and the public is not required to 
respond to a collection of information unless it displays a currently 
valid OMB control number. Also, notwithstanding any other provisions of 
law, no person shall be subject to penalty for failing to comply with a 
collection of information if the collection of information does not 
display a currently valid OMB control number (44 U.S.C. 3512).
    While this NPRM is not imposing new information collections, 
Sec. Sec.  619.2-619.4 would impose formatting requirements for the 
data exchanges of various UI applications that may impose a burden 
under the PRA.
    The Department is filing an Information Collection Request with OMB 
to support the format changes. SIDES and ICON were developed by and for 
the use of the States through collaboration with States and NASWA, and 
with funding from the Department. SIDES interfaces have been designed 
using XML and the States and employers participating in SIDES 
automatically comply with the data exchange standard proposed. 
Therefore, there is no additional cost burden for SIDES due to this 
proposed regulation. However, for States currently using the EBCDIC 
format for ICON, there may be costs incurred to comply with this 
proposed regulation. The explanation of substantive provisions 
regarding these data exchange standards for information sharing can be 
found in the preamble discussion of Sec. Sec.  619.2-619.4 of this 
proposed rule.
    The Department estimates that the one-time added burden for States 
to conform to the new data exchange standards for ICON will be minimal. 
States differ considerably in terms of hardware platforms and software 
used to develop their ICON applications. Additionally, the Department 
estimates that some States may use in-house IT staff while others may 
contract with IT vendors to implement the proposed data exchange 
standard. The estimated costs associated with this burden, includes 
assessing current system status, planning and implementation of 
changes, and any necessary hardware and software needed to implement 
the proposed data exchange standard for the real-time ICON 
applications.
    The burden for the information collection exchange can be 
summarized as follows:
    Agency: DOL-ETA.
    Title of Collection: Federal-State Unemployment Insurance Program 
Data Exchange Standardization.
    OMB ICR Reference Number Control Number: 201302-1205-003.
    Affected Public: State Governments.
    Total Estimated Number of Respondents: 53.
    Total Estimated Number of Responses: 53.
    Total Estimated Annual Burden Hours: 6,360.
    Total Estimated Annual Other Costs Burden: $1,057,329.

Executive Order 13132: Federalism

    Section 6 of Executive Order 13132 requires Federal agencies to 
consult with State entities when a regulation or policy may have a 
substantial direct effect on the States or the relationship between the 
National Government and the States, or the distribution of power and 
responsibilities among the various levels of government, within the 
meaning of the Executive Order.
    Section 3(b) of the Executive Order further provides that Federal 
agencies must implement regulations that have a substantial direct 
effect only if statutory authority permits the regulation and it is of 
national significance. This proposed regulation is specifically 
required by the Middle Class Tax Relief and Job Creation Act of 2012.
    The proposed rule does not have a substantial direct effect on the 
current nature of the relationship between the National Government and 
the States, or the distribution of power and responsibilities among the 
various levels of Government, within the meaning of the Executive 
Order. The Department is exercising its existing authority to interpret 
Federal statutes with regard to States' administration of UI programs. 
In the Federal-State UI system, States have a great deal of flexibility 
to design their UC laws and operations as long as they comply with the 
broad Federal requirements in FUTA and the SSA. This regulation 
implements a new statutory requirement for a uniform data exchange and 
reporting standard and thus is no different from other UC regulations 
that interpret Federal law with regard to State requirements. It simply 
sets a new standard for data exchanges of information used in the 
administration of the UI program under Title III of the SSA. The 
Department consulted with the National Association of State Workforce 
Agencies' (NASWA) Information Technology Support Center (ITSC) and 
NASWA's UI Committee to discuss the impacts of this enactment and 
identify State application interfaces which will benefit by the 
implementation of the XML data exchange standard. NASWA agreed with the 
Department's approach to implement uniform data exchange standards in 
areas already identified as valuable to the UI system and for 
applications developed collaboratively with the States.

Unfunded Mandates Reform Act of 1995

    This regulatory action has been reviewed in accordance with the 
Unfunded Mandates Reform Act of 1995. Under the Act, a Federal agency 
must determine whether a regulation proposes a Federal mandate that 
would result in the increased expenditures by State, local, or tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any single year. The Department has determined this 
rule does not include any Federal mandate that may result in increased

[[Page 12663]]

expenditure by State, local, and Tribal governments in the aggregate of 
more than $100 million, or increased expenditures by the private sector 
of more than $100 million. Most if not all of the costs of implementing 
this regulation will be covered by Federal funding.

Plain Language

    The Department drafted this proposed rule in plain language.

Effect on Family Life

    The Department certifies that this proposed rule has been assessed 
under section 654 of the Treasury and General Government Appropriations 
Act, enacted as part of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 
2681) for its effect on family well-being. This provision will not 
adversely affect the well-being of the nation's families. Therefore, 
the Department certifies that this rule does not adversely impact 
family well-being as discussed under section 654 of the Treasury and 
General Government Appropriations Act of 1999.

Regulatory Flexibility Act/Small Business Regulatory Enforcement 
Fairness Act

    We have notified the Chief Counsel for Advocacy, Small Business 
Administration, and made the certification according to the Regulatory 
Flexibility Act (RFA) at 5 U.S.C. 605(b), that this NPRM will not have 
a significant economic impact on a substantial number of small 
entities. Under the RFA, no regulatory flexibility analysis is required 
where the rule ``will not * * * have a significant economic impact on a 
substantial number of small entities.'' 5 U.S.C. 605(b). A small entity 
is defined as a small business, small not-for-profit organization, or 
small governmental jurisdiction. 5 U.S.C. 601(3)-(5).
    This proposed rule establishes a data exchange standard that would 
be used in SIDES and ICON. ICON is used only by States and Federal 
entities, neither of which qualifies as small entities under the RFA. 
SIDES, however, is used by States and by employers, including TPAs, in 
the private sector. However, because SIDES already uses an XML-based 
interface, there is no incremental cost to current users. Furthermore, 
while additional employers and TPAs may adopt SIDES in the future, the 
rule would not require them to do so, nor would the rule affect their 
costs if they did. Consequently, the rule will not have a significant 
economic impact on a substantial number of small entities, and a 
Regulatory Flexibility Analysis is not required under the RFA.
    In addition, this rule does not require review by the Congress 
under the Small Business Regulatory Enforcement Fairness Act of 1996 
because it will not result in (1) an annual effect on the economy of 
$100,000,000 or more; (2) a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions; or (3) significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.
    As discussed above, the most significant effect of the rule will be 
to accelerate action (e.g., the adoption of the real-time XML-based 
ICON applications) that the Department expects to occur even in the 
absence of the proposed rule. The noteworthy cost of the proposed rule 
is the cost of this acceleration. That is, the rule would change the 
timing--and therefore the present value--of nominal costs that would 
have been incurred even in the absence of the rule. These costs will be 
borne by the State and Federal governments, not by small entities.

List of Subjects in 20 CFR Part 619

    Employment and Training Administration, Labor, and Unemployment 
Compensation.

    For the reasons stated in the preamble, the Department proposes to 
amend 20 CFR chapter V by adding part 619 as set forth below:

PART 619--UNEMPLOYMENT COMPENSATION DATA EXCHANGE STANDARDIZATION 
FOR IMPROVED INTEROPERABILITY

Sec.
619.1 Definitions.
619.2 Data exchange standardization for ICON.
619.3 Data exchange standardization for SIDES.
619.4 Data exchange standardization for the UI Benefits and Tax 
Systems.

    Authority:  42 U.S.C. 1111; Section 2104(b) of Pub. L. 112-96; 
42 U.S.C. 1302(a).


Sec.  619.1  Definitions.

    As used in this part--
    Administrator of the Office of Unemployment Insurance means the 
Department's Employment and Training Administration's chief 
administrative officer directly responsible for the operation of the 
Unemployment Insurance (UI) program and oversight of the Unemployment 
Compensation (UC) program and UC laws.
    Department means the United States Department of Labor.
    Extensible Markup Language or XML means a markup language that 
defines a set of rules for encoding documents in a format designed to 
structure, store and transport data between applications or systems 
over the Internet. This term includes any future upgrades, iterations, 
or releases of XML-based language.
    Federal funds or Federally-funded means funds that include, but are 
not limited to:
    (1) Supplemental budget funds that are designated by the Department 
for State IT modernization efforts;
    (2) General State UI administration funding for State program 
operations (an administrative grant issued by the Department at the 
beginning of each fiscal year); and
    (3) Special UI funding distributions.
    Interstate Connection Network or ICON means a secure multi-purpose 
telecommunications network that supports the transfer of data among the 
SWAs.
    Interstate Wages and Benefits Inquiries/Responses means the ICON 
application which supports online transmission of interstate wages and 
benefits inquiries and responses between SWAs.
    Major IT Modernization Project means conversion, re-engineering, 
rewriting, or transferring of an existing system to a modernized 
framework such as transferring a process from mainframe operations to 
web-based operations, converting to modern computer programming 
languages, or upgrading software libraries, protocols, or hardware 
platform and infrastructure. These are projects to upgrade UI Benefits 
and Tax Systems by SWAs using Federal funds.
    National Association of State Workforce Agencies or NASWA means the 
organization of State administrators of unemployment insurance laws 
(SWAs), employment services, training programs, employment statistics 
and labor market information and other programs and services provided 
through the publicly-funded State workforce system, or its successor 
organization.
    State or States refers to, individually or collectively, the 50 
States of the United States of America, the District of Columbia, the 
Commonwealth of Puerto Rico, and the United States Virgin Islands.
    State Identification Inquiry means the ICON application which 
allows SWAs to inquire about wages reported to other SWAs by Social 
Security Number.

[[Page 12664]]

    State Information Data Exchange System or SIDES means an automated 
response system used by SWAs to collect claim-related information from 
employers and third-party administrators.
    State unemployment compensation law or UC law means the law of a 
State approved under Section 3304(a) of the Internal Revenue Code of 
1986 (26 U.S.C. 3304(a)).
    State Workforce Agency or SWA means the agency of the State charged 
with the administration of the State's Unemployment Compensation (UC) 
law.
    Unemployment compensation or UC means cash benefits payable to 
individuals with respect to their unemployment, as defined in 26 U.S.C. 
3306(h).
    Unemployment Insurance or UI means the Federal-State system and 
operations administering and implementing UC law.
    Withdrawn/Invalid Claims means the ICON application which allows 
for the posting and viewing of withdrawn or invalid claim information 
for SWAs.


Sec.  619.2  Data exchange standardization for ICON.

    (a) XML is the data exchange standard for the real-time ICON 
applications. These applications are: Interstate Wages and Benefits 
Inquiries/Responses; Withdrawn/Invalid Claims; and State Identification 
Inquiry.
    (b) All SWAs using real-time ICON applications must comply with 
this XML data exchange standard no later than September 30, 2018. A SWA 
may request an extension of this deadline if it demonstrates that 
resources are not available to meet this requirement. These requests 
must be submitted in writing to the Administrator of the Office of 
Unemployment Insurance no later than 6 months before the deadline; 
requests will be approved or denied within 30 days.


Sec.  619.3  Data exchange standardization for SIDES.

    (a) XML is the data exchange standard for SIDES.
    (b) This standard applies to any Federally-funded SIDES consortium, 
and any future agents of the Department providing vendor services for 
the development, maintenance, support, and operations of the SIDES, and 
for any State that adopts SIDES. A SIDES consortium involves a group of 
two or more States jointly establishing a project team to oversee the 
design, development, and implementation of a new SIDES data exchange 
module. As States implement SIDES or new data exchange modules of 
SIDES, they must conform to this data exchange standard by application 
design.
    (c) XML is designated as the data exchange standard to govern the 
reporting of information through SIDES data exchange modules. The 
regulation applies to current SIDES data exchange modules and any 
future SIDES data exchange modules developed with Federal funds.
    (d) The standard designated in paragraphs (a), (b), and (c) of this 
section is effective [date 30 days after publication of the Final Rule 
in the Federal Register].


Sec.  619.4  Data exchange standardization for the UI Benefits and Tax 
Systems.

    (a) XML is the data exchange standard for the real time ICON 
applications set out in Sec.  619.2 and for the SIDES exchanges set out 
in Sec.  619.3 associated with major IT modernization projects, to 
upgrade UI Benefits and Tax Systems by SWAs using Federal funds.
    (b) The standard designated in paragraph (a) of this section is 
effective [date 30 days after publication of the Final Rule in the 
Federal Register].

    Signed at Washington, DC, this 20th day of February, 2013.
Jane Oates,
Assistant Secretary, Employment and Training Administration, Labor.
[FR Doc. 2013-04332 Filed 2-22-13; 8:45 am]
BILLING CODE 4510-FN-P