Unemployment Insurance Program Integrity: Recent Developments

Summary

A Congressional Research Service report, IF12243 version 2, dated November 2, 2022, on unemployment insurance program integrity. It describes how the temporary COVID-19 benefits increased improper payment and fraud concerns, with payments of $448.6 billion for Federal Pandemic Unemployment Compensation, $85.1 billion for Pandemic Emergency Unemployment Compensation and $131.2 billion for Pandemic Unemployment Assistance. It says the improper payment estimate has been above 10% in 14 of the past 18 years and was 17.9%, or $73.8 billion, for FY2021. It reports that the Labor Department's inspector general estimated as much as $163 billion could have been paid improperly and identified $45.6 billion of potentially fraudulent benefits in a September 2022 memorandum.

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Issuer: Congressional materials
Document type: Crs If12243 Ui Program Integrity Recent Developments
Case: Crs If12243 Ui Program Integrity Recent Developments

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“Unemployment Insurance Program Integrity: Recent Developments.” Original at crsreports.congress.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/crs-if12243-ui-program-integrity-recent-developments/, SHA-256 bae041ac35e9af41d9530e2c46367f26ab8ee8e4aefbb6600895c2d9959b3316.

Full text

November 2, 2022
Unemployment Insurance Program Integrity:
Recent Developments
Program integrity activities are designed to prevent fraud, (MEUC), which provided a $100 per week benefit
waste, and abuse of government resources. The federal- augmentation for unemployed workers with income from
state Unemployment Insurance (UI) system has faced long- both wage-and-salary jobs and self-employment who were
standing program integrity challenges. The enhanced UI not currently receiving PUA. MEUC totaled $62.9 million.
benefits created by Congress in response to the COVID-19
pandemic exacerbated program integrity concerns related to Administration
improper payments and fraud. All UI programs and benefits (including temporary
benefits) are administered by states with oversight provided
Background: UI Programs and Benefits by the Employment and Training Administration (ETA) of
Under permanent law, the UI system has two components: the U.S. Department of Labor (DOL). For more details on
permanent-law UI benefits and expired COVID-19 UI
 Unemployment Compensation (UC) programs in 53 benefits, see CRS Report R46687, Unemployment
states (including DC, Puerto Rico, and the U.S. Virgin Insurance (UI) Benefits: Permanent-Law Programs and the
Islands), which provide state-financed weekly UC COVID-19 Pandemic Response.
benefits to eligible unemployed workers; and
 the Extended Benefit (EB) program, which may provide UI Program Integrity
additional weeks of unemployment benefits depending An improper payment is any payment that should not have
on state law, additional federal eligibility requirements, been made or was made in an incorrect amount under
and state economic conditions. statutory, administrative, or other legally applicable
requirements. This includes any payment to an ineligible
COVID-19 UI Programs recipient. Improper payments include both overpayments
In response to unemployment caused by the COVID-19 and underpayments. UI overpayments are identified when a
pandemic, Congress created three temporary, now-expired state determines that the individual received a payment, or a
UI benefits through the Coronavirus Aid, Relief, and portion of a payment, to which the individual is not entitled.
Economic Security (CARES) Act (P.L. 116-136). These Fraud—a subset of overpayments—is defined under each
benefits were extended through the Continued Assistance state’s UC laws, and, thus, what constitutes fraud varies
for Unemployed Workers Act of 2020 (Division N, Title II, from state to state. In general, fraud involves a knowing and
Subtitle A of P.L. 116-260) and Title IX, Subtitle A, of the willful act or concealment of material facts to obtain or
American Rescue Plan Act of 2021 (ARPA; P.L. 117-2): increase benefits. Fraud determinations often include
identifying a pattern of action or the claimant’s certification
 Federal Pandemic Unemployment Compensation of erroneous information under the penalty of perjury.
(FPUC), which supplemented weekly UI benefits (by Regular UC benefits do not employ one federal definition
$600 from March 29, 2020, through July 25, 2020; and of fraud, yet several of the COVID-19 UI benefits did
$300 from December 27, 2020, through September 4, include statutory language related to fraud.
2021). FPUC payments totaled $448.6 billion.
 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
P.L. 116-260 also authorized a smaller COVID-19 UI challenges related to the permanent-law structure of the UI
benefit: Mixed Earner Unemployment Compensation system. For example, states are required to certify the
https://crsreports.congress.gov
Unemployment Insurance Program Integrity: Recent Developments

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
COVID-19 UI programs. DOL-OIG has characterized the
during recessionary periods as permanent-law UI benefits
program integrity challenges faced by the UI system in
automatically expand as unemployment rises during
recessions. At the same time, temporary UI benefits created responding to the COVID-19 pandemic as “a perfect
storm.” DOL-OIG estimated that, applying ETA’s 18.7%
in response to recessions add to the administrative burden
improper payment rate for FPUC and PEUC, as much as
of state UI agencies. Thus, state UI agencies not only make
more eligibility determinations due to an increased volume $163 billion in COVID-19 UI benefits could have been paid
improperly. In a September 2022 memorandum, DOL-OIG
of UI claims during recessions; they may also be
identified $45.6 billion of potentially fraudulent UI benefits
administering new UI programs that may require different
rules and structures than permanent-law programs do. paid from March 2020 to April 2022. In another September
2022 report, DOL-OIG estimated the amount of PUA
States may also face challenges in increasing staffing
improper payments based on samples from four states
during recessionary periods that are preceded by years of
low unemployment and low UI claims. selected for being high risk (California, Georgia, Kentucky,
and Michigan). DOL-OIG estimated that from March 28,
2020, through September 30, 2020, $30.4 billion of the
Third, there were program integrity challenges specific to
the COVID-19 UI response. For example, PUA provided $71.7 billion in PUA and FPUC benefits were paid
improperly (42.4%) and an estimated $9.9 billion was paid
unemployment benefits to a new population of workers not
to likely fraudsters (13.8%). This estimate was not designed
previously covered by the UI system. States struggled with
identity verification for PUA claimants, as they did not to be representative of PUA fraud nationally. ETA has not
yet released its own estimated PUA improper payment rate
have information on the prior work and earnings of these
(scheduled for later in 2022), but it provided guidance to
individuals. Additionally, the magnitude of the FPUC
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
EB overpayments; $11.8 billion in FPUC overpayments;
UI Improper Payment Reporting $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. 4190, H.R. 6224,
stated that it plans to report the PUA improper payment rate and H.R. 8661.
later in 2022. ETA also requires that states make monthly Katelin P. Isaacs, Specialist in Income Security
reports of COVID-19 UI overpayments, but not all states
have provided these reports or have reported accurate data. Julie M. Whittaker, Specialist in Income Security
IF12243
As described below, DOL-OIG and the Government
Accountability Office (GAO) have estimated or reported

https://crsreports.congress.gov
Unemployment Insurance Program Integrity: Recent Developments

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