Vermont to replace 55-year-old unemployment insurance mainframe; $30 million vendor contract underway

On Feb. 25 the House Energy and Digital Infrastructure Committee heard from the Vermont Department of Labor and the Agency of Digital Services (ADS) about a multi‑year project to replace the state’s 1970‑era unemployment insurance mainframe.

The modernization is funded primarily from a legislative appropriation and state IT modernization accounts. "It was a $30,000,000 project," Michael Harrington, commissioner for the Vermont Department of Labor, told the committee, adding the vendor contract is "slightly under $30,000,000" while the five‑year lifecycle cost rises to about $42,000,000 when ongoing maintenance and staff costs are included.

The project replaces two core functions: employer tax collection (the tax side) and benefit adjudication and payment (the benefit side). The department said the current mainframe, first deployed in 1970, has frequent outages and relies on multiple disparate systems for functions such as appeals, adjudications and identity proofing. Harrington said the state is "very excited" about the modernization and expects the system to be live in "late spring, early summer of 2026." He said the project began after the state completed contract negotiations and that work kicked off in September 2024.

ADS deputy secretary Andrea de Labriere described ADS’s role as embedded project management, technical resources and security oversight. The department has an embedded team working with the vendor, Fast Enterprises, which Harrington said has deployed similar products for other states and for state tax and DMV systems.

Committee members pressed for funding and testing details. Harrington said the appropriation originated as state general fund money and sits in the UI modernization fund; he noted some earlier budget buckets and ARPA planning had been used in prior years but confirmed the current funding is state money. The department said it retains about $3,000,000 in its base budget for staff augmentation and ongoing costs beyond the vendor contract.

On deployment strategy, department officials said they evaluated a staged approach (tax first, benefits later) but concluded the risk of running a modern tax system with an old benefits system was too high; the state therefore plans a single cutover with an extended testing and training phase. Harrington said the rollout will likely include dual maintenance and parallel entry during verification testing to ensure data integrity before full cutover.

Officials also described federal interfaces and compliance needs. ADS and the department said the UI system must meet federal requirements and work securely with the IRS, Social Security Administration and the U.S. Department of Labor, and that the new system will enable participation in federal programs (for example, enhanced tax offset functions) that the older mainframe could not support.

Committee members asked about stress testing and security. Department staff said Fast Enterprise systems have handled large claim volumes in other states and that the project will include vendor‑led test plans, security work with the state chief information security officer, and a period of parallel operations and training.

The committee took no formal votes. Staff said they would return with additional budget details and further updates as testing and deployment progress.

The committee scheduled follow‑up briefings and the department said it will provide more granular cost and testing documentation as the project advances.