States work to curb unemployment overpayments

The U.S. Department of Labor has released data on how much each state “overpays” in unemployment insurance benefits, or when a state sends unemployment checks to those who are not eligible. The Department also reports on the steps several states are taking to rein in improper payments.

According to the Department of Labor, almost $19 billion in state unemployment benefits were paid in error from June 2008 - June 2011, equal to about 10 percent of the $180 billion paid out over that time frame. That figure only includes state benefits, which are generally provided for up to 26 weeks and not for the federal benefits that can be received for up to 99 weeks.  Considering that 27 states are currently borrowing more than $37.4 billion from the federal government just to continue paying out unemployment benefits, that figure is nothing to be taken lightly.

The Department of Labor reports that Indiana, Louisiana and New Mexico are among the states with the highest improper payment rates (three-year average).  A few of the states with the lowest error rates include Kentucky, Vermont, Connecticut and Massachusetts.

Unemployment Insurance (UI) Improper Payments By State

Source: Department of Labor

However, Mark Everson, commissioner of the Indiana Department of Workforce Development, explains to the Wall Street Journal that differences in error rates across states can also be attributed to variations in state programs. Therefore, one should approach straight comparisons across states cautiously. For example, Mr. Everson tells the Wall Street Journal that in Indiana, benefit recipients are required to list three work searches. If a recipient fills out only two of the three searches correctly, they still might receive benefits but it counts as an error.

State efforts to improve error rates

Some of the most common causes of overpayments, according to the Department of Labor, include:

  • Recipients continuing to make claims even after returning to work (30% of all improper payments)
  • Failing to register with the state employment service (as dictated by state law) or meet state work search requirements (30% of all improper payments)
  • Untimely or inaccurate separation information from employers or third party administrators (20% of all improper payments)

Over the past few years the Department of Labor has worked closely with states to address some of these underlying causes of improper payment. Most recently the Department began working with the ten states with the highest overpayment rates to identify strategies that could reduce improper payments.  As a result, significant progress can already be seen, with a 23% reduction in improper payments to people who did not register with employment services agencies, including a more than 35% drop in eight states.

To deal with inaccurate or untimely information on separations, the Department of Labor assisted five states (Utah, Georgia, Colorado, New Jersey and Ohio) in implementing the State Information Data Exchange System (SIDES). This system allows UI information requests to be electronically transmitted from state agencies to multi-state employers and third party administrators.

The Department of Labor suggests a number of strategies, which can be found HERE, to prevent the overpayment of unemployment benefits.