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How To Settle The Overpayment Of Unemployment Benefits?

Updated : October 14th, 2021

repay unemployment benefits overpayment

Unemployment Insurance turned out to be a blessing for millions across the nation last year. For some, the weekly benefits and the subsequent extensions were the only means to afford basic necessities. However, even with the economy improving and people getting back to work, a recent conundrum emerged in the form of UI overpayments, making things harder for some.

Pandemic Unemployment Assistance Overpayment

The state governments of Florida, Ohio, Connecticut, Illinois, Colorado, among others, have taken to asking their residents for repayment of unemployment benefits. According to the Government Accountability Office, from April 2020 to early this year, state unemployment agencies have overpaid more than $12.9 billion in unemployment benefits. 

The state governments usually waive overpayments on regular unemployment insurance; the PUA’s (Pandemic Unemployment Assistance) rules, however, do not allow that to happen. And although the overpayments were an oversight by the states, the claimants need to pay or rather repay the price.

If you are facing this situation or a similar one with regards to regular UI overpayments and are looking to settle the overpaid benefits, you’ve come to the right place. Read on to find out what exactly you can do, if you should repay the overpaid amount, and more.

What Is Overpayment?

The states provide unemployment benefits to help the unemployed meet their financial needs temporarily. States use different formulas to calculate unemployment benefits. In general, the amount is determined by wages earned during the primary and alternate base period, and the amount given is half the wages. However, sometimes state unemployment agencies may end up paying you more than your eligible amount, which is termed as an overpayment.

In the case of PUA benefits, the overpayments are being chalked up to clearing the pile-up of claims and making sure that claimants in need receive the benefits. However, with the Department of Labor’s directive to review the past year’s claims to ensure that qualified claimants received the benefits, the state agencies are now trying to recover the overpaid unemployment benefits.

Why Does It Happen?

Overpayment of regular and PUA benefits can happen due to various reasons. Some of them are –

  1. You did not provide all details 
  2. You have knowingly given misleading or false information 
  3. You were not willing, ready, and able to work
  4. You did not submit the report of work search activities
  5. You have accidentally entered incorrect earnings
  6. The state has miscalculated the amount of the benefit
  7. You have not informed the state that you have begun a new job
  8. You could not be verified as a part of the labor force before applying
  9. You received regular UI benefits along with PUA benefits
  10. You declared dependent children who couldn’t be verified
  11. You requested to have your claim predated, making the agencies examine your earnings from a different period.

What Happens If You’re Overpaid?

If you are overpaid, the Department Of Labor (DOL) of your state will notify you about your state trying to recover the additional payments. The notice may also indicate that you were overpaid or get lower unemployment benefits or no benefits until the additional payments are recovered. The federal benefits demand repayment regardless of the type of overpayment, but it is different when it comes to regular UI overpayments. 

The consequences differ based on the type of overpayment; Non-Fraud and Fraud –

  1. Non-Fraud: This type of overpayment of unemployment benefits occurs if you receive an amount that you were not eligible for, but the subsequent overpayment was through no fault of your own. You don’t have to pay any penalty if you are overpaid in such situations but just repay the overpaid unemployment benefits.
  2. Fraud: It is fraud overpayment when you give incorrect details, make false statements, or withhold information to get benefits. Fraud overpayment of unemployment benefits will cause you to be ineligible from receiving benefits for one year.

    Fraud overpayment will require you to pay a penalty in addition to repaying the overpaid benefits. The penalty amount may vary with the state. Fraud overpayments exceeding $400 will be treated as a crime. 

    What is Considered as Fraud Overpayment?

    • Working a full-time, part-time or temporary job but not reporting earnings
    • Not submitting the record of your work search
    • Filing a claim without looking for a job
    • Providing fake or incorrect information when filing for benefits or a weekly certification
    • Not reporting severance and bonus pay

    What If The Overpayment Was Not Your Fault?

    Suppose you receive a notice from the DOL regarding the overpayment but do not agree with it. In that case, you have the right to determine if the Department believes you were overpaid or if your unemployment benefits will change. This can be done through a fact-finding interview.  

    During the interview process, you will have to give all the information and evidence that supports your claim to the Deputy. The Deputy will review your case and send the judgment in writing. 

    If you were overpaid due to no fault of your own or incorrect information you submitted mistakenly, you could consider filing an overpayment waiver. 

    For federal benefits, it was mostly the fault of state unemployment agencies. You could file an appeal within 30 days of receiving the overpayment notice. You could also be entitled to filing an overpayment waiver (only applicable if the overpayment was not your fault). 

    How To File For Overpayment Waiver?

    File to waive the overpayments if the overpaid unemployment amount was not your fault. You can request an overpayment waiver by filing the Social Security Administration (SSA) form. 

    After filing the form, do any of the following to prove that you have requested the waiver in writing. 

    1. Get two copies of the form to the SSA office and request them to date stamp the copies. Give them one copy for records and another to keep for yourself. 
    2. Fax the form to the Social Security office. Keep the fax confirmation printout. Also, make sure that Social Security has received the fax.  

     SSA will receive your form and decide if the overpayment was due to your fault or not. It will also determine if you promptly informed them about your income and your present financial situation. If SSA determines that you have been receiving additional payments but haven’t informed the authorities, it will consider the overpayment was due to your fault. 

    What Happens If You Don’t Get A Waiver?

    If your waiver gets rejected, you will have to repay the overpaid amount to the state. The overpayment collection process varies from one state to another. While some states like Illinois recover the overpaid amount by asking the individuals to allow the state to keep up 25% of the future unemployment benefits, states like North Carolina let individuals repay the amount by credit, debit card, or money order. 

    Determine how your state’s overpayment collection process works and negotiate a payment plan. If you fail to repay or make a payment plan, the Labor Department may issue a civil warrant to recover the payment. Your lottery winnings or state income tax refund can also be used to repay the overpayment. 

    File An Appeal 

    If you still believe that you are eligible for a waiver, you can file an appeal in Superior Court (80C appeal) but within ten days from the date of receiving the waiver rejection. 

    The Superior Court will examine the facts and evidence (if any) submitted by the Department. If the Court finds the Department’s decision unconstitutional, it may change the Department’s decision regarding your waiver appeal. 

    You can file an appeal in case of PUA benefits too. You need to follow the instructions specified in the determination notice. If you file an appeal, collection actions will be on hold until after the appeal has been decided.

    What To Do If You Don’t File For A Waiver?

    If you don’t request a waiver or appeal, the authorities at your state unemployment department will recover the overpaid amount from your unemployment benefits, provided you are still receiving them. During the process, you will receive lesser amounts. Once they recover all the overpayment, you will receive the benefits you are entitled to get. 

    If you are not receiving the benefits, then the authorities will recover the overpayment by collecting the money from your tax refund. If they cannot recover all the overpayment, for the time being, it will collect the money from your future benefits if you file for any. 

    If the overpayment was a mistake, you would be required to pay 1% monthly interest, starting one year following the overpayment. You can repay the extra unemployment benefits by sending a check to the unemployment office. If you are unable to pay at once, you can negotiate a payment plan. 

    How To Avoid Overpayment Of Unemployment Benefits?

    While the PUA overpayment phenomenon is not likely to be repeated again, it is best to adhere to the rules and regulations of the authorities to avoid regular UI overpayment.

    When the authorities find out that you have been overpaid, they may carry out an investigation and disqualify you from receiving unemployment benefits if proven guilty. Therefore, it is wise to take the necessary steps to avoid overpayment. Some of them include – 

    • Actively look for job opportunities
    • Provide accurate and complete information to DES when you file for benefits and weekly certifications
    • Maintain and submit your work search record
    • Report gross wages 
    • Report all income earned for all the weeks you work 

    Final Thoughts

    Overpayment of unemployment benefits is generally a rare occurrence. However, the sheer number of claims and the outdated methods of most state unemployment agencies have made for this turn of events. 

    The state of affairs doesn’t seem hopeless everywhere. Missouri has introduced a process to clear the overpaid amount. Missouri claimants can reach out to the Division of Employment Security (DES) for waiving the benefits. Lawmakers of other states are also rallying to waive the overpaid benefits. It remains to be seen if they’d be successful or not.

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