Unemployment Insurance Program Integrity: Recent Developments

Unemployment Insurance Program Integrity: Recent Developments

November 2, 2022
Unemployment Insurance Program Integrity: Recent
Developments
Program integrity activities are designed to prevent fraud,
P.L. 116-260 also authorized a smaller COVID-19 UI
waste, and abuse of government resources. The federal-
benefit: Mixed Earner Unemployment Compensation
state Unemployment Insurance (UI) system has faced long-
(MEUC), which provided a $100 per week benefit
standing program integrity challenges. The enhanced UI
augmentation for unemployed workers with income from
benefits created by Congress in response to the COVID-19
both wage-and-salary jobs and self-employment who were
pandemic exacerbated program integrity concerns related to
not currently receiving PUA. MEUC totaled $62.9 million.
improper payments and fraud.
Administration
Background: UI Programs and Benefits
All UI programs and benefits (including temporary
Under permanent law, the UI system has two components:
benefits) are administered by states with oversight provided
by the Employment and Training Administration (ETA) of
 Unemployment Compensation (UC) programs in 53
the U.S. Department of Labor (DOL). For more details on
states (including DC, Puerto Rico, and the U.S. Virgin
permanent-law UI benefits and expired COVID-19 UI
Islands), which provide state-financed weekly UC
benefits, see CRS Report R46687, Unemployment
benefits to eligible unemployed workers; and
Insurance (UI) Benefits: Permanent-Law Programs and the
COVID-19 Pandemic Response.
 the Extended Benefit (EB) program, which may provide
additional weeks of unemployment benefits depending
UI Program Integrity
on state law, additional federal eligibility requirements,
An improper payment is any payment that should not have
and state economic conditions.
been made or was made in an incorrect amount under
statutory, administrative, or other legally applicable
COVID-19 UI Programs
requirements. This includes any payment to an ineligible
In response to unemployment caused by the COVID-19
recipient. Improper payments include both overpayments
pandemic, Congress created three temporary, now-expired
and underpayments. UI overpayments are identified when a
UI benefits through the Coronavirus Aid, Relief, and
state determines that the individual received a payment, or a
Economic Security (CARES) Act (P.L. 116-136). These
portion of a payment, to which the individual is not entitled.
benefits were extended through the Continued Assistance
Fraud—a subset of overpayments—is defined under each
for Unemployed Workers Act of 2020 (Division N, Title II,
state’s UC laws, and, thus, what constitutes fraud varies
Subtitle A of P.L. 116-260) and Title IX, Subtitle A, of the
from state to state. In general, fraud involves a knowing and
American Rescue Plan Act of 2021 (ARPA; P.L. 117-2):
willful act or concealment of material facts to obtain or
increase benefits. Fraud determinations often include
 Federal Pandemic Unemployment Compensation
identifying a pattern of action or the claimant’s certification
(FPUC), which supplemented weekly UI benefits (by
of erroneous information under the penalty of perjury.
$600 from March 29, 2020, through July 25, 2020; and
Regular UC benefits do not employ one federal definition
$300 from December 27, 2020, through September 4,
of fraud, yet several of the COVID-19 UI benefits did
2021). FPUC payments totaled $448.6 billion.
include statutory language related to fraud.
 Pandemic Emergency Unemployment Compensation
UI Program Integrity Challenges
(PEUC), which provided additional weeks of UI
Program integrity issues related to permanent-law UI
benefits for individuals who exhausted other UI benefits
programs have long been of concern. The improper
and were able to work, available for work, and actively
payment estimate for the UI system has been above 10% for
seeking work, subject to COVID-19-related flexibilities.
14 of the past 18 years. The Office of Management and
PEUC payments totaled $85.1 billion.
Budget (OMB) continues to designate UI as a “high-
priority” program (i.e., a program with estimated improper
 Pandemic Unemployment Assistance (PUA), which
payments of more than $100 million a year). The COVID-
provided UI benefits to individuals who were not
19 UI benefits heightened program integrity concerns.
otherwise eligible for UI benefits (e.g., self-employed,
According to the most recent estimate, the UI improper
independent contractors, gig economy workers);
payment rate for FY2021 was 17.9%, with a total of $73.8
unemployed, partially unemployed, or unable to work
billion in improper payments. (This estimate includes UC,
due to a specific COVID-19-related reason; and not able
EB, FPUC, and PEUC benefits.)
to telework and not receiving any paid leave. PUA
payments totaled $131.2 billion.
Recent UI program integrity challenges can be grouped into
three categories. First, there are preexisting, administrative
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Unemployment Insurance Program Integrity: Recent Developments
challenges related to the permanent-law structure of the UI
As described below, DOL-OIG and the Government
system. For example, states are required to certify the
Accountability Office (GAO) have estimated or reported
ongoing eligibility status of each claimant on a weekly
COVID-19 UI improper payments and fraud. Thus, there
basis, which is unique among income security programs.
are several sources of existing program data as well as
Adding to this administrative burden, federal requirements
estimates on COVID-19 UI improper payments. Yet,
prioritize the timeliness of UI benefit payments in order to
significant limitations and gaps in data exist. For example,
respond quickly to unexpected periods of unemployment.
establishing that fraud has occurred may require
Yet decreased administrative funding and staffing over time
investigation by relevant law enforcement agencies. Thus,
as well as increased reliance on automated systems—often
the full scope of UI improper payments and fraud may not
outdated and inadequately performing—make accurate
be known for some time.
eligibility determinations and benefit payments difficult.
Recent DOL-OIG Work
Second, UI program integrity challenges regularly increase
DOL-OIG performs oversight of UI programs, including
during recessionary periods as permanent-law UI benefits
COVID-19 UI programs. DOL-OIG has characterized the
automatically expand as unemployment rises during
program integrity challenges faced by the UI system in
recessions. At the same time, temporary UI benefits created
responding to the COVID-19 pandemic as “a perfect
in response to recessions add to the administrative burden
storm.” DOL-OIG estimated that, applying ETA’s 18.7%
of state UI agencies. Thus, state UI agencies not only make
improper payment rate for FPUC and PEUC, as much as
more eligibility determinations due to an increased volume
$163 billion in COVID-19 UI benefits could have been paid
of UI claims during recessions; they may also be
improperly. In a September 2022 memorandum, DOL-OIG
administering new UI programs that may require different
identified $45.6 billion of potentially fraudulent UI benefits
rules and structures than permanent-law programs do.
paid from March 2020 to April 2022. In another September
States may also face challenges in increasing staffing
2022 report, DOL-OIG estimated the amount of PUA
during recessionary periods that are preceded by years of
improper payments based on samples from four states
low unemployment and low UI claims.
selected for being high risk (California, Georgia, Kentucky,
and Michigan). DOL-OIG estimated that from March 28,
Third, there were program integrity challenges specific to
2020, through September 30, 2020, $30.4 billion of the
the COVID-19 UI response. For example, PUA provided
$71.7 billion in PUA and FPUC benefits were paid
unemployment benefits to a new population of workers not
improperly (42.4%) and an estimated $9.9 billion was paid
previously covered by the UI system. States struggled with
to likely fraudsters (13.8%). This estimate was not designed
identity verification for PUA claimants, as they did not
to be representative of PUA fraud nationally. ETA has not
have information on the prior work and earnings of these
yet released its own estimated PUA improper payment rate
individuals. Additionally, the magnitude of the FPUC
(scheduled for later in 2022), but it provided guidance to
benefit ($600 a week or $300 a week) overwhelmed
states in July 2022 on the methodology for doing so.
previous recession responses ($25 a week in 2009 and
Recent GAO Work
2010) and may have provided incentives for UI fraud. For a
GAO has also analyzed COVID-19 UI program integrity
full discussion of the factors underlying UI program
issues in a series of reports. In June 2022, GAO reported
integrity challenges, see CRS Report R47079,
the following UI overpayments from ETA data as of March
Unemployment Insurance: Program Integrity and Fraud
29, 2022: $35.1 billion in actual overpayments from April
Concerns Related to the COVID-19 Pandemic Response.
2020 to December 2021, including $8.1 billion in UC and
UI Improper Payment Reporting
EB overpayments; $11.8 billion in FPUC overpayments;
$2.0 billion in PEUC overpayments; and $13.3 billion in
UI improper payment reporting is required as part of the
PUA overpayments. Also in June 2022, GAO added the UI
regular administration of UC benefits conducted by states,
system to its “High Risk List … for waste, fraud, abuse, and
with oversight performed by ETA. UI improper payment
mismanagement, or in need of broad-based transformation.”
data are estimated using the DOL Benefit Accuracy
Measurement (BAM) survey. BAM estimates include
Recent Congressional Interest
regular state UC benefits, UC for federal employees, and
On September 21, 2022, the House Education and Labor
UC for military servicemembers. BAM estimates do not
Subcommittee held a hearing on “Examining the
include EB payments or the temporary COVID-19 UI
Administration of the Unemployment Insurance System,”
benefits. DOL provides BAM-generated UI improper
which addressed the administrative challenges—including
payment data to OMB for publication on
program integrity issues—that the UI system faced in
PaymentAccuracy.gov.
response to the COVID-19 pandemic. Additionally, UI
program integrity issues have been legislatively active.
DOL’s Office of Inspector General (DOL-OIG)
There have been a number of bills introduced in the 117th
recommended that ETA estimate an improper payment rate
Congress that would address UI program integrity issues,
for COVID-19 UI benefits. ETA reported an improper
including S. 490/H.R. 1458, S. 1699/H.R. 3268, S. 2742, S.
payment rate for FPUC and PEUC in FY2021 of 18.7% and
2898, S. 4507/H.R. 8000, H.R. 723, H.R. 3268, H.R. 4190,
stated that it plans to report the PUA improper payment rate
H.R. 6224, and H.R. 8661.
later in 2022. ETA also requires that states make monthly
reports of COVID-19 UI overpayments, but not all states
Katelin P. Isaacs, Specialist in Income Security
have provided these reports or have reported accurate data.
Julie M. Whittaker, Specialist in Income Security
IF12243
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Unemployment Insurance Program Integrity: Recent Developments

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