Unemployment Insurance (UI) Improper Payments


The U.S. Department of Labor is implementing a number of strategies to help states address Unemployment Insurance (UI) improper payments. Reducing the improper payment rate requires strong federal-state collaboration and intense focus by the entire UI system. The Department announced a call to action to all states to ensure that payment integrity remains a top priority and to foster the development of state specific strategies to prevent improper payments. This call to action reinforced that "everyone owns integrity" across the UI system and provided the expectation that states continuously assess their root causes of improper payments and implement state-specific action plans to reduce their rates.

Core Strategies to Reduce Improper Payments

For Fiscal Year (FY) 2014, the Department is tracking state implementation of seven core strategies which can be used to effectively lower the rate of UI improper payments. Many states are already implementing these strategies, and the Department is working to highlight best practices, encourage states to replicate what works.

State Quality Service Plan (SQSP) / Strategic Plan Development — — The SQSP is intended to be a dynamic document states use not only to ensure strong program performance, but also to guide key management decisions, such as where to focus resources. The SQSP should focus state efforts to ensure well-balanced performance across the range of UI activities. The SQSP also is designed to be flexible so as to accommodate, among other things, multi-year planning and significant changes in circumstances during the planning cycle. States can use this flexibility to incorporate the elements from the program Integrity strategic plans developed by their Cross-Functional Task Forces into the SQSP to address improper payments.

Business Process Analysis (BPA) for Improper Payments — — Engage in a business process analysis to identify areas of weakness and to set the stage for reengineering processes that will improve program integrity performance. The review must be conducted collaboratively by state staff and a qualified independent third party contracted by the state, and recommendations from this review should be included in the state's strategic plan to the extent feasible. This strategy is required for those states with a Calendar Year (CY) 2012 improper payment rate above 10 percent that received FY 2013 SBRs.

Business Process Analysis (BPA) for "At Risk" States — — Engage in a business process analysis of the state benefit system to identify areas where changes in business processes will lead to performance improvement for first payment and/or first level appeals promptness. The review must be conducted collaboratively by state staff and a qualified independent third party contracted by the state, and recommendations from this review should be included in the state's strategic plan to the extent feasible. This strategy is required for those states designated "At Risk" that received FY 2013 SBRs.

State Information Data Exchange System (SIDES) Implementation —  SIDES is a web based system that allows electronic transmission of UI information requests from UI agencies to multi-state employers and/or Third Party Administrators, as well as transmission of replies containing the requested information back to the UI agencies. The current implementation of SIDES allows for the exchange of Separation and earnings verification information.

SIDES Expansion — States that implement SIDES must also commit to expand the program to a minimum threshold of employer participation for both SIDES Web Services and SIDES E-Response. Specifically, states commit to using SIDES to transmit requests to individual employers not using Third Party Administrators for information on separations and receive employer responses for at least 35 percent of all UI initial claims.

SIDES Messaging — Implementation of products and tools designed for use by state UI agencies to communicate with employers and third-party administrators (TPAs) about the offerings and benefits of SIDES. This strategy is required for those states that implemented SIDES and received FY 2013 SBRs.

State-Identified Prevention Strategies — — Implementing new strategies aimed at addressing the state-specific root causes of overpayments, the Department provided supplemental funding opportunities with incentives to accelerate state actions to reduce improper payments. This strategy is required for those states that received FY 2013 SBRs.

Treasury Offset Program (TOP) — — Implementing the U.S. Department of the Treasury's TOP to recover certain unemployment debts from Federal income tax refunds. This strategy is required for those states that received FY 2013 SBRs.

New Strategies and Pilot Projects

Also in FY 2014, the Department is working collaboratively with the UI system to develop and implement innovative new integrity strategies and pilot projects that may prove beneficial for adoption by all state UI programs. The Department will commence tracking state implementation of these initiatives if it is determined these strategies will be effective in identifying and preventing improper payments.

Work Search Pilot — Supplemental grant funding was provided to the New York State Department of Labor to build the necessary basic system linkages between the Workforce and UI systems to effectively capture, organize and share individual UI claimant work search record information.

Financial Data Pilot — — The Office of Management and Budget's Partnership Fund for Program Integrity Innovation provided funding to pilot the use of financial institutions' payroll deposit and payroll information to detect individuals receiving UI benefits who also have payroll payments or deposits to their bank accounts during the same period, allowing for timely follow-up by states with those individuals who may be newly employed. This project is being conducted in collaboration with National Association of State Workforce Agencies' Information Technology Support Center and volunteer states is a value test to determine if financial data can enable earlier detection of improper payments than the NDNH and if the "hits" from the cross-matching are quality "hits."

Value Test of The Work Number — During the first quarter of FY 2014, the Department began incorporating the use of The Work Number into existing state UI programs' business practices for the matching of claimant records as a value test for earlier detection of improper payments. The results of this effort may help the Department assess if these sources will enhance UI agency efforts to detect fraud or errors in weekly claimant certifications.

UI Integrity Center of Excellence —— Supplemental funding was provided to New York State for the development of a UI Integrity Center of Excellence, via a cooperative agreement with the Department, with the goal of promoting the development and implementation of innovative integrity strategies, including the prevention and detection of fraud, in the UI program. One of the key goals for the Center will be to actively explore the use of new technologies and new data sources to enable sophisticated data analytics and predictive modeling to improve prevention and detection of improper payments.