Survey of State Unemployment Laws Concerning the Collection of Interest on Overpayments

On Point Technology and the National Foundation for Unemployment Compensation & Workers' Compensation release “Survey of State Unemployment Laws Concerning the Collection of Interest on Overpayments”

UWC is pleased to announce the results of a survey entitled State Unemployment Laws Concerning the Collection of Interest on Overpayments. The survey was conducted jointly by On Point Technology and UWC's National Foundation for Unemployment Compensation & Workers' Compensation. This survey reports which states collect interest on benefit overpayments, and how any such interest is used. The complete survey is available on request. The major results are summarized as follows:

Only twenty-two of forty-five jurisdictions who responded (the fifty states, the District of Columbia, Puerto Rico, and the Virgin Islands were surveyed) have laws allowing for the collection of interest on some or all benefit overpayments. Twenty of these laws are currently in force, with two scheduled to become effective in July of 2005. Five of the twenty-two jurisdictions only collect interest on benefit overpayments in cases involving fraud.

Five of the remaining twenty-three jurisdictions are considering whether to enact a law allowing them to collect interest on benefit overpayments. Those states are Alaska, Idaho, New Mexico, Utah, and Vermont. (Nevada has no such specific law but does collect interest on a case by case basis for benefit overpayments involving fraud.)

The disposition of any interest collected varies greatly by jurisdiction. Nine jurisdictions deposit any interest in the state UI trust account, six deposit it into a state-held Penalty and Interest Fund, two dedicate the funds to fraud and overpayment collection, one uses the money for information technology initiatives, one uses it to hire additional staff, one deposits it into a safe fund, and two place it in a “General State or Other” fund. UWC advocates that states collect interest on all types of benefit overpayments. Bob Yokavonus of On Point Technology stressed how important this is because “States currently have very few resources available to combat UI fraud. Interest collected on benefit overpayments could all of them to generate as much as they need.”

Mr. Yokavonus also cited the June 24 Unemployment Insurance Program Letter (UIPL) 26-04 as a reason why more states need to start collecting interest on benefit overpayment. The UIPL is at http://workforcesecurity.doleta.gov/XDMS/indexfrm.xml, and lists the state Government Performance Results Act (GPRA) goals for fiscal year 2004. These goals are part of a five year Department of Labor (DOL) “Strategic Plan” which helps ETA identify “problem areas that warrant special attention.” One of the goals is to have states detect at least 59% of all overpayments. Mr. Yokavonus predicted that DOL will eventually require states to not only detect, but also recover, a certain percentage of overpayments. “And when they do, the federal government will probably provide little, if any, money to the states to help them recover the required percentage. Interest collected on benefit overpayments would provide an excellent source of money to meet any required goal.” Mr. Yokavonus also encouraged states to adopt the Washington state “model,” which has used interest collected on benefit overpayments to pay for personnel specifically devoted to preventing UI fraud, as well as many successful UI fraud investigations.