INSIGHTi
Unemployment Insurance Overpayment and
Fraud Recovery
March 24, 2023
The federal-state Unemployment Insurance (UI) system has faced long-standing program integrity
challenges. The temporary, augmented, and expanded UI benefits created by Congress in response to the
COVID-19 pandemic exacerbated program integrity concerns related to overpayments and fraud. For an
overview of these UI program integrity issues, see CRS In Focus IF12243, Unemployment Insurance
Program Integrity: Recent Developments.
Recently, there has been heightened congressional attention to UI overpayments, including the scope of
fraudulent overpayments and policy proposals to prevent and recover UI overpayments and fraud. For
example, on February 28, 2023, the House Committee on Ways and Means ordered to be reported an
amendment in the nature of a substitute to H.R. 1163, the Protecting Taxpayers and Victims of
Unemployment Fraud Act.
This Insight summarizes existing state and federal authorities for the recovery of UI overpayments,
including fraudulent payments. It also discusses authorities to waive overpayments in cases of non-fraud
and non-fault. Finally, it provides examples of proposals to enhance or extend methods for UI
overpayment recovery.
State Procedures to Recover Regular UI Overpayments
Although there are broad requirements under federal law regarding UI benefits and financing, the
specifics are set out under each state’s laws. All state UI laws provide for the recovery of benefit
overpayments. Federal law requires that states recover non-fraud and fraud overpayments by offsetting
future payments of UI benefits. States may also offset overpayments with state tax refunds or lottery
winnings. States can compel repayment by pursuing civil action in state court. In some states, UI laws
also authorize denial or suspension of the professional licenses of individuals who owe an overpayment of
UI benefits. Under federal law, states must recover overpayments due to fraud and overpayments due to
misreported work from an individual’s federal income tax refund through the Treasury Offset Program.
Some states also assess interest on outstanding overpayment balances in cases of both fraud and non-
fraud. In some situations, states apply fines and civil penalties when fraud is involved. States also have
criteria for when overpayments are written off or cancelled (e.g., death, age of overpayment).
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Authorities Related to COVID-19 UI Overpayment Recovery
The Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), as amended, includes
authority for recovery of COVID-19 UI payments through benefit offsets. These offsets are limited to no
more than 50% of future UI benefits and are subject to a time limit of three years, except for benefit
offsets of Pandemic Unemployment Assistance (PUA), which is not subject to a time limit. Additionally,
all COVID-19 UI payments determined to be fraudulent are subject to a 15% penalty assessment.
Waivers from UI Non-fraud Overpayment Recovery
Many state UI laws include provisions to waive the overpayment of non-fraud overpayments in certain
cases. Most, but not all, states waive repayment in certain circumstances. For example, states may waive
non-fraud overpayments due to agency error or employer error. States may also waive non-fraud
overpayments in situations in which the overpayment is made without fault and in which recovery would
be against equity and good conscience or involves a financial hardship. According to the U.S. Department
of Labor (DOL), the following 11 jurisdictions do not have waivers from overpayment recovery:
Delaware, Kentucky, Mississippi, Missouri, Nebraska, New Mexico, New York, Oklahoma, Puerto Rico,
Texas, and West Virginia.
The CARES Act, as amended, provides authority for all states to opt to waive certain overpayments of
COVID-19 UI benefits in cases of non-fraud hardship. Additionally, there are limited circumstances in
which states may use blanket waivers of certain categories of non-fraud overpayments. To waive COVID-
19 UI benefit overpayments, states must determine that the individual is not at fault and that overpayment
repayment would be contrary to equity and good conscience as determined under state law. Blanket
waivers for groups of individuals who received COVID-19 UI non-fraud overpayments may occur in
seven, specific circumstances; in all other circumstances, states must make individual waiver
determinations based on the facts and circumstances of the specific overpayment.
Proposals to Enhance or Extend UI Overpayment Recovery
As ordered to be reported, H.R. 1163, the Protecting Taxpayers and Victims of Unemployment Fraud Act,
includes several proposals that would enhance or extend UI overpayment recovery, among other UI
program integrity measures. (The Congressional Budget Office released a cost estimate for H.R. 1163 on
March 21, 2023.) Section 2 of H.R. 1163 would extend the time limit for benefit offsets for recovery of
COVID-19 UI overpayments from 3 years to 10 years (and it would impose the same 10-year time limit
on benefit offset recovery for PUA overpayments). Section 2 would also allow states to retain 25% of
recovered COVID-19 UI overpayments, which could then be used for certain program integrity purposes.
This latter proposal was also included in several bills in the 117th Congress (S. 1699, S. 4507, H.R. 3268,
and H.R. 8000).
Under Section 3 of H.R. 1163, states would also be authorized to retain up to 5% of recovered
overpayments of permanent-law UI benefits and use those retained amounts for certain program integrity
purposes. (Under current law, states are not permitted to retain recovered overpayments.) This proposal is
also included in DOL’s Office of Inspector General’s “OIG Recommendations to Congress” and was
included in several bills in the 117th Congress (S. 4507, H.R. 8000, and H.R. 8661).
Section 6 of H.R. 1163 would extend the statute of limitations for criminal prosecution of COVID-19 UI
fraud to 10 years (from 5 years currently). This proposal is also included in DOL’s Office of Inspector
General’s “OIG Recommendations to Congress.”
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Additional Resources
CRS Report R47079, Unemployment Insurance: Program Integrity and Fraud Concerns Related to the
COVID-19 Pandemic Response
DOL-OIG, “OIG Oversight of the Unemployment Insurance Program,” https://www.oig.dol.gov/
doloiguioversightwork.htm
DOL, 2022 Comparison of State Unemployment Insurance Laws, Chapter 6, “Overpayments,”
https://oui.doleta.gov/unemploy/pdf/uilawcompar/2022/overpayments.pdf
Author Information
Katelin P. Isaacs
Julie M. Whittaker
Specialist in Income Security
Specialist in Income Security
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
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as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
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