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Which states require people to return unemployment benefits that were wrongly claimed?

In the early days of the pandemic, a mix of inexperienced claimants and overwhelmed state unemployment agencies led to mistakes and a rash of overpayments.

In the early days of the pandemic, state unemployment agencies were overwhelmed and inexperienced claimants led to mistakes and a rash of overpayments.

There are a number of reasons you may receive more unemployment compensation than you were due and depending on the circumstances you may need to pay it back. The Labor Department has issued guidance to states that they will now need to refund federal jobless aid they clawed back in some cases.

When the US economy came to a screeching halt last fall due to lockdowns brought on by the covid-19 pandemic the federal government tried to provide a backstop for those that normally can’t receive unemployment compensation and beef up normally dismal state payouts. According to a Century Foundation report, around 40 million people took advantage of some form of unemployment benefit.

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A perfect storm hits state employment agencies

Over the decades, state unemployment agencies have seen a lack of investment as their systems aged. As well laws were put into place to delay the start of benefits on top of others to encourage people to go out and find a job or lose benefits. Add into the mix new measures passed by Congress to help shore up the finances off families around the country, either through topping up jobless assistance to providing new aid to those who normally can’t receive benefits.

These new programs needed to be quickly programmed into those antiquated computer systems, and in the best of times this caused delays in benefits going out, but when a tsunami of applicants began to file claims last spring the system collapsed. In addition, many of those millions of new applicants had never file an unemployment claim before. Mistakes were bound to be made all around, which led to overpayments of benefits.

Early on no measures were taken to stop states from clawing back overpayments

The CARES Act didn’t provide a mechanism for states to forgive overpayments from the new Federal Pandemic Unemployment Compensation, whether it was the recipient’s fault or the state’s. This left states with a no choice but to try to get the money back, that is until now. With the passing of the $900 billion covid-19 relief bill in December a provision was put in to allow states to waive “improper payments made at any time since the PUA program began.”

States only have the authority to waive PUA overpayments, along with the PEUC and MEUC, when the individual is not at fault for the payment or “repayment would be contrary to equity and good conscience.” With the newest guidance states that opt in to the forgiving overpayments, they will also have to refund any money that they have already reclaimed from federal unemployment aid recipients.

Reasons for overpayment of unemployment compensation

An overpayment of jobless aid occurs when you receive unemployment compensation you were not eligible for. You could have been overpaid because of an error or you claimed benefits you were not supposed to. This may be due to:

  • You made a mistake when claiming benefits.
  • A job separation issue
  • Correction of base period wages
  • An audit of your account
  • You did not complete the required work search activities.
  • Your former employer contested your claim and an appeal decision finds you ineligible for benefits you have already been paid
  • You committed fraud if you knowingly misrepresent or fail to disclose requested information, or by making false statements (whether intentional or not) to receive benefits.

In most cases, you will be required to repay the unemployment compensation that was overpaid. However, you may be able to appeal and get a waiver to avoid repaying all or some of the benefits you received by mistake.

How will I know if I’ve been overpaid?

You will typically receive in writing a letter from your unemployment office to notify you that you have been overpaid. The notice will state the reason you are getting the overpayment notice. It will also tell you how much you owe and any penalties, if any, and how to repay the amount you have been overpaid. The notice will also include information on how to appeal.

How can I appeal repayment of an unemployment compensation overpayment?

If you believe that the information in the notice is inaccurate, you can appeal the decision. You might be able to apply for a waiver to avoid repayment depending on the reason for the overpayment. In most states, you are entitled to a hearing to review your appeal.

You will have to act within the time granted that will be stated in the letter. You can check how to contact your state unemployment office to get instructions specific for your state.

The state may pursue a collection process if the money is not repaid

There are different ways that you might be able to repay any over payment. If you are able to pay the full amount you may be asked to send a check for the sum of the overpayment. But if you can’t make the whole payment all at once, you may be able to negotiate a payment plan.

If you do not make adequate arrangements for repayment, the state may seize the money you owe from lottery winnings or tax refunds. In some cases, the state may deduct the money from current unemployment compensation if you are still receiving benefits or garnish your paycheck if you have returned to work.

In the case of fraud, you may be charged a penalty and possibly charged with criminal fraud. Additionally, you may be banned from collecting future unemployment benefits for a certain amount of time depending on the type of fraud.


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