The "Upward Mobility Act of 2026" establishes a five-year pilot program designed to empower states to innovate in antipoverty efforts. Its core purposes are to streamline service delivery , reduce inconsistent eligibility requirements and "benefit cliffs," and promote upward mobility through improved employment outcomes for participants. The program aims to provide incentives for states to reduce dependence on per-capita direct assistance by enabling individuals to achieve greater self-sufficiency. Under this pilot, the Secretary of Health and Human Services may permit up to five states to carry out pilot projects, consolidating various federal antipoverty funds into "Upward Mobility Grants." States can also opt for limited-scope projects. These grants are calculated based on the total covered amounts a state received in the preceding fiscal year, adjusted for inflation, ensuring consistent funding for the five-year period. Participating states receive significant flexibility through waivers to statutory or regulatory requirements related to eligibility, program design, and funding use. However, certain provisions are explicitly excluded from waiver authority, including those concerning civil rights, health and safety, labor standards, environmental protection, and restrictions on benefits for non-citizens. Funds for housing programs must continue to be provided to the same eligible local entities as under existing law. States applying for the grants must detail how they will achieve antipoverty objectives, design benefit structures to limit Marginal Effective Tax Rates , and ensure program integrity, including data protection and fraud prevention. Applications must also describe how the state will apply a work requirement for direct assistance recipients, similar to existing SNAP requirements, and engage non-profit and local entities in service delivery. A crucial component is the requirement for states to contract with an independent, third-party evaluator for annual assessments of the pilot project. These evaluations will measure upward mobility outcomes, including changes in Marginal Effective Tax Rates, participant employment and earnings, reduction in per-capita direct assistance, and poverty reduction. The Secretary prioritizes applications that propose program designs limiting average Marginal Effective Tax Rates to not more than 50 percent and utilize rigorous experimental evaluation methodologies. States must also outline how they will use fiscal savings resulting from improved upward mobility measures. These savings can be used to establish a state reserve fund for emergencies, improve program management and compliance, renovate community facilities, enhance collaboration with local partners, or provide work supports for employed individuals. The bill also includes provisions for transferring administrative funding and certain functions from other federal agencies to the Administration for Children and Families to facilitate the program's administration.