NCPA - National Center for Policy Analysis

Overpaid Unemployment Benefits Top $14 Billion

July 26, 2012

Overpayments are a rampant problem in the unemployment insurance system.  The program boasts the second highest rate for "improper payments" of any federal program, behind the National School Lunch Program, and is now targeted for significant efforts to prevent fraud, both intentional and unintentional, says CNN Money.

Officials for unemployment insurance are quick to emphasize that the majority of improper payments are the result of clerical error and not malicious activity. With the employee, employer and government workers each filling out substantial amounts of paperwork, it's easy for a mistake to be made. Nevertheless, numerous cases of deliberate fraud have been uncovered.

  • The federal government and states overpaid an estimated $14 billion in benefits in fiscal 2011, or roughly 11 percent of all the jobless benefits paid out, according to reports from the U.S. Labor Department.
  • Of the overpaid funds, most end up in the hands of three types of people: those who aren't actively searching for a job, those who were fired or quit voluntarily, and those who continue to file claims even though they've returned to work.
  • A smaller fraction goes to those who are intentionally scamming the system: common cases often involve prison inmates, illegal immigrants or even the deceased.

Addressing such problems is a difficult task. The system supports some 3.2 million Americans, meaning that even a small incidence of improper payments results in numerous cases.

  • The Labor Department estimates that roughly half of its overpayments are recoverable, but has fallen far short of recouping that much in the past.
  • Historically, only about a quarter of the estimated "recoverable" overpayments have actually been recovered, says an administrator in the Labor Department's Office of Unemployment Insurance.
  • This poor track record persists despite the number of tools available to government agencies to recoup funds, including setting up payment plans, garnishing wages or deducting funds from federal income tax returns.
  • This is in addition to criminal sanctions: in fiscal 2011, there were roughly 2,700 convictions for fraud related to unemployment insurance.

Source: Annalyn Censky, "Overpaid Unemployment Benefits Top $14 Billion," CNN Money, July 9, 2012.

For text:


Browse more articles on Tax and Spending Issues