NCPA - National Center for Policy Analysis

Unemployment Insurance Waste and Fraud

July 6, 2011

State and federal regulators are cracking down on waste and fraud in the unemployment insurance system, abuses that have hit record levels as jobless claims surge in a weak economy, says USA Today.

  • In the 12 months through March, the overpayment rate was 11.6 percent -- more than $1 for every $9 paid out, Labor Department figures show.
  • That's up from the 12 months ending in June 2010, when a record $16.5 billion, or 10.6 percent of the $156 billion in jobless benefits disbursed to Americans, should not have been paid.
  • The overpayment rate was 9.6 percent in fiscal 2009 and 9.2 percent in 2008.

The main reason for overpayments is that some workers continue to receive unemployment checks even after they land a new job.  Another problem is that many employers fail to adequately provide state officials the reason an employee left the company so the worker's eligibility can be determined.  Also, some workers receive benefits even when they don't comply with state job search requirements.

How state and federal officials are trying to reduce overpayments:

  • A national directory of new hires lets states identify workers still receiving benefits even after they get a new job.
  • A new computer system makes it easier for employers to report why workers left their jobs.
  • New rules let states recover improperly paid benefits from U.S. income tax refunds.
  • The Labor Department also has proposed legislation that would require states to impose penalties of at least 15 percent of excess payments on workers.

Source: Paul Davidson, "Regulators Combat Unemployment Insurance Waste and Fraud," USA Today, July 5, 2011.

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