UIPL26-85acc.pdf

ETA Advisory File Text

U.S. DEPARTMENT OF LABOR CORRESPONDENCE SYMBOL Employment and Training Administration TEUMI Washington D .C. 20213 June 24. 1985 DIRECTIVE UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 26-85 TO ALL STATE EMPLOYMENT SECURITY AGENCIES 452 U L-- FROM BARBARA ANN FARMER Acting Administrator for Regional Management Interest on Overpayment of Federal Claims 1. Purpose. To provide information pertaining to interest on overpayments of Federal claims UCFE UCX and FSC . 2. Background. Recently a SESA which charges interest on all unpaid balances on regular UI overpayments raised the following questions on Federal claim overpayments 1. Can the agency charge and collect interest on overpayments for Federal program claims on the same basis as it does for State UI 2. If yes may the agency retain these funds 3. Information. The collection of interest on the overpayment balances for Federal program claims is not only permissible but required by statute. In addition the interest collected cannot be retained by the State agency but must be paid into the fund from which the benefits were paid together with the principal recovered. Federal laws 5 U.S.C. Section 8502 b 5 U.S.C. Section 8521 b and Section 602 d 2 of the Federal Supplemental Compensation Act of 1982 require equal treatment of claimants under the Federal benefit programs UCFE UCX and FSC. Under the equal treatment rule if a State agency imposes on claimants an interest charge on overpayment balances under the regular Federal-State unemployment compensation program the charge must be imposed on overpayment balances due under the Federal programs 20 CFR Section 609.11 f 614.11 f . Federal law requires no minimum or Standard interest rate. t RESCISSIONS 4 EXPIRATION DATE A July 31 1986 . DISTRIBUTION Therefore whatever interest rate that applies to regular State unemployment insurance also applies to Federal program funds. Under the applicable Federal statutes and regulations a State is not authorized to retain the interest collected on Federal program overpayments. In the UCFE and UCX programs an overpayment that results from a knowing misrepresentation or failure to disclose material facts must be repaid. 5 U.S.C. Section 8507 a . Section 8507 b 1 provides that a n amount repaid under subsection a shall be deposited in the fund from which payment was made if the repayment was to a State agency. Emphasis supplied . - See e.g. 20 C.F.R. Section 609.11 j 1 . The term an amount repaid includes both the overpayment principal recovered and any interest charge assessed. Therefore both the principal and the interest charge must be deposited in the account from which the payment was made. Retention of interest by the State is invalid as applied to Federal programs for an additional reason it would amount to an unauthorized appropriation of Federal property. Although authority for assessment of an interest charge is vested in State law the imposition of the charge does not entitle the State to assume ownership of the interest. Interest on interpleaded or deposited private property funds generally follows the principal and is a protected property right that may not be appropriated by the State without just compensation. Therefore if the State retains interest on Federal funds it essentially appropriates Federal property. 4. Action Required. SESAs are requested to provide the above information to appropriate staff members. 5. Inquiries. Direct inquiries to the appropriate regional office.