UIPL_13-19_acc.pdf

ETA Advisory File Text

EMPLOYMENT AND TRAINING ADMINISTRATION ADVISORY SYSTEM U.S. DEPARTMENT OF LABOR Washington D.C. 20210 CLASSIFICATION UI CORRESPONDENCE SYMBOL OUI DPM DATE June 7 2019 RESCISSIONS None EXPIRATION DATE Continuing ADVISORY TO UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 13-19 STATE WORKFORCE AGENCIES FROM SUBJECT MOLLY E. CONWAY s Acting Assistant Secretary National Directory of New Hires NDNH and State Directory of New Hires SDNH Guidance and Best Practices 1. Purpose. To issue enhanced Recommended Operating Procedures ROPs for NDNH and SDNH Cross-Matching Activity that expand upon ROPs previously attached to Unemployment Insurance Program Letter UIPL No. 19-11 National Effort to Reduce Improper Payments in the Unemployment Insurance UI Program by providing additional guidance and updated best practices on the use of New Hires tools. 2. Action Requested. State Unemployment Insurance UI agency administrators are requested to provide the information in this UIPL and its attachment to UI staff and other appropriate staff involved in New Hires operations and are advised to 1 replace the ROPs attached to UIPL No. 19 -11 with the ROPs attached to this UIPL 2 immediately apply the enhanced guidance provided in this UIPL and the attached ROPs to improve New Hires cross-match operations and 3 use technical assistance opportunities offered by the UI Integrity Center https integrity.naswa.org contact-us to institute recommended New Hires practices. 3. Summary and Background.a.Summary This UIPL provides enhanced and updated ROPs that focus on targeted issues associated with New Hires operations that impede New Hires processes and outcomes in reducing UI improper payments. b. Background The UI program has been out of compliance with the Improper Payment Elimination and Recovery Act IPERA of 2010 reporting an improper payment rate that exceeds 10 percent. This designation triggers additional oversight by Congress the Office of Management and Budget OMB and the Office of the Inspector General OIG . For the 2018 annual reporting period the U.S. Department of Labor Department reported an estimated improper payment rate of 13.05 percent for the UI program. The Department is committed to bringing the UI program into compliance and has called on all states in this effort to reduce UI improper payments to achieve that goal. 2 The Department has partnered with states to implement a wide array of national integrity strategies and to develop tools and share best practices to prevent improper payments and reduce the improper payment rate. The Department expects states to continue implementing integrity strategies that focus on targeting the leading root causes of improper payments including payments to individuals who continue to claim benefits after they have returned to work and either fail to report or underreport their earnings which result in Benefit Year Earnings BYE errors. Overpayments resulting from BYE errors were the second leading cause of improper UI benefit payments in 2018. The Strategic Plan for Reducing the Improper Payment Rate discussed in UIPL No. 19-11 explains that the strategy of cross-matching with the NDNH and SDNH followed by immediate contact with the claimant and employer when there is a match is considered one of the most effective improper payment detection strategies for addressing BYE errors. In 2017 the OIG conducted an audit to verify the effectiveness of the NDNH cross-match by states. The OIG issued its audit report on September 27 2018 Improved Oversight of States Use of New Hire Tools Would Help Reduce Improper Payments https www.oig.dol.gov cgi-bin oa rpts-v4.cgi s y 2018 a all. The OIG cited weaknesses in New Hires cross-match operations and concluded that states were underutilizing New Hires cross-matches. The ROPs attached to UIPL No. 19-11 outlined best practices to detect and prevent improper payments using NDNH and SDNH cross-matches for the Benefit Accuracy Measurement BAM program which is used to estimate the UI improper payment rate and state UI Benefit Payment Control BPC programs which are responsible for preventing detecting and recovering improper payments and detecting and prosecuting fraud. 4. New Hires Directories. UIPL No. 3-07 Change 1 Use of National Directory of New Hires NDNH in Unemployment Insurance UI Benefit Accuracy Measurement BAM Audits mandated the use of NDNH for the BAM program beginning the week of December 30 2007 and UIPL No. 19-11 mandated the use of NDNH for BPC related work performed by BPC or other staff by December 11 2011. To strengthen the efficacy of New Hires cross-matches the Department strongly encourages states to implement processes and best practices included in this UIPL and the attached enhanced ROPs. We particularly encourage states to utilize the SDNH in addition to the NDNH for BPC programs given that SDNH data is more current and enables states to detect BYE errors more quickly thus preventing improper payments. State Directory of New Hires SDNH It is important for states to understand the advantages of cross-matching against both the NDNH and the SDNH. Since the SDNH is the state s internal data source there is no limit on the frequency for states to perform this cross-matching. SDNH cross-matching 3 can be conducted daily and on any day of the week while NDNH cross-matching occurs only once a week. Daily SDNH cross-matching has the potential to prevent or reduce overpayments by one week or more. The SDNH database is dynamic. Cross-match information is available shortly after new or updated information is entered into the SDNH database. Employer-reported New Hires W-4 information Internal Revenue Service Form W-4 information regarding recently hired individuals will be available in the SDNH for cross-matching five or more days before it is available in the NDNH. The SDNH database may also contain additional data elements not found in the NDNH database that could expedite investigations such as the employer s phone number or the employer s email address. States can use this information to contact the employer when conducting NDNH investigations. Given these beneficial aspects states are strongly encouraged to cross-match with their state SDNH on a daily basis. National Directory of New Hires NDNH The NDNH cross-match has essential improper payment detection characteristics. Multi- state employers employers that have businesses in more than one state may report New Hires W-4 information to any one of the states where their business is located rather than in the specific state where the individual was hired. Further multi-state employers may elect to report New Hires information to only one state rather than in all states where their businesses are located. Since multi-state employers have these reporting options the state where the individual was hired may not have the New Hires W-4 information in their SDNH if the employer is reporting in a different state. NDNH provides states access to multi-state employer New Hires information that was reported in any and all states. Additionally NDNH contains New Hires information submitted by all states. If a claimant in one state goes to work in another state this information should be available through an NDNH cross-match. Finally NDNH also provides information on Federal employees because the Federal government reports new hires directly to NDNH. 5. Availability Accessibility and Quality of New Hires Data. A. Employer Compliance with New Hires Data Reporting. Employers are required to submit New Hires data to the SDNH by a deadline that each state designates. The Department of Health and Human Services Office of Child Support Enforcement HHS-OCSE is the Federal agency that manages the NDNH. Quarterly reports that are provided to states by HHS-OCSE contain information about employers that may not have reported new hires. States are strongly encouraged to review these reports and to remind those employers that appear to be noncompliant of the requirement to report new hires. In notifying employers of this requirement states are encouraged to also include information on how to correctly report New Hires data and its value in preventing UI improper payments which helps keep UI employer taxes low. 4 Additionally state UI agencies are encouraged to collaborate with the agency in their state responsible for the New Hires directories to promote greater employer compliance such as having laws or regulations in place to impose monetary or nonmonetary penalties on employers for failure to report new hires and ensuring enforcement of those penalties. The Department s data demonstrate that states that more actively promote and enforce employer compliance with New Hires reporting have more complete and accurate New Hires data and as a result have lower BYE overpayment rates. B. Data Quality. States designate various agencies to oversee the SDNH including receiving employer New Hires W-4 data and sending it to the NDNH. These agencies include child support agencies state workforce agencies SWAs i.e. the state UI agency state revenue departments and any other agency a state may choose to send and receive this data. Employers and the designated state agency managing the SDNH must follow specific data submission guidelines and reporting requirements to submit New Hires W-4 records successfully to the SDNH and to the NDNH. In some cases employers and state agencies managing the SDNH are failing to adhere to these requirements. The resulting data errors can affect the availability of and access to NDNH data for cross-matching. Each submitting state agency receives a notification report with information about the data supplied such as the total number of records the NDNH received and processed and any data errors. These reports can help states identify and resolve data quality issues. Another source of data quality issues is state UI agencies not meeting specific data requirements when requesting an NDNH cross-match. State UI agencies must follow the guidelines provided for record layout specifications otherwise data submission errors may occur. If data submission errors occur they should be corrected and the records resubmitted for cross-matching to ensure access to all available NDNH information. See Sections 4.1 through 4.3 Employer Input Records State Input Records and NDNH Output Records of the attached ROPs for guidance on submitting data. State UI agencies should coordinate with the state agency managing the SDNH to develop initiatives to conduct employer outreach provide technical assistance to employers and address issues relating to data preparation or processing that might impact data submission including the timeliness of submissions to the NDNH or data reporting accuracy. If the state UI agency manages the SDNH it should conduct these actions. 6. Enhanced ROPs. The Department identified several practices at various stages in the New Hires process that maximize the value of the New Hires information and potentially reduce the number of successive improper payments over the course of a claim. The enhanced ROPs being provided with this UIPL expand upon the ROPs originally issued on June 10 2011 as an attachment to UIPL No. 19-11 highlight these practices and provide guidance and instruction about their use. States should use these enhanced ROPs to assess their current New Hires procedures to improve their New Hires detection performance and to prevent more UI improper payments. State UI agencies needing to reduce BYE errors are strongly 5 encouraged to include the implementation of these enhanced ROPs as part of the Integrity Action Plan submitted as part of their State Quality Service Plan. A. New Strategies to Maximize New Hires Cross-Match Outcomes to Bring Down the UI Improper Payment Rate Establishing Date Parameters to Target NDNH Claimant Populations for Cross - matching As states prepare to cross-match against the NDNH they should take steps to determine which UI benefit records should be selected to request NDNH data by parsing claimant data using specific date parameters. Date parameters allow states to designate specific periods to compare UI benefits weeks to a reasonable period when the employer may have submitted W-4 information. The Department recommends states use date parameters to match BPC records against New Hires files that are 40 days old to compare the most comprehensive data. By requesting a match of BPC records against New Hires records that extend 40 days prior to the date of the match states can optimize the management of BPC New Hires workloads. The 40- day period was established by taking into account the timeframes permitted for employers Federal agencies the SDNH and the NDNH to report information that ultimately populates the NDNH. See Section 4.7 Understanding New Hires Timeframes in the attached ROPs. These permitted timeframes isolate the date of hire and provides a reasonable period within which hits when there is a date of hire during the same period as UI benefit payments will potentially occur and are more likely to be detected. States that set date parameters that extend further such as 60 days prior or starting from the benefit year beginning date as is required for BAM for BPC may find that this is a factor that contributes to backlogs and delays in processing New Hires cases by generating additional and unnecessary workload. States should consider the 40-day period as a starting point for matching new claims. If a claimant received UI benefits and was hired during the 40-day or 6-week period the first 6 weeks for the claim there would be a hit when compared against the NDNH database. Using a date parameter that extends further back would be unnecessary and as long as the claimant is receiving UI benefits and a date of hire has not been identified the state may continue to include the claimant record in the group of records sent to NDNH for cross-matching. Using a Case Management System to Prioritize Cross-Match Results Once the population of selected records is sent to the NDNH workload hits are returned to the state. The hits identify claimants who are potentially working and receiving UI benefits. An automated case management system can help states manage and organize cross-match workloads by using data analytics to prioritize hits. In addition to setting the priority of hits a case management system may have other features that improve the efficiency of the cross-match process including comparing hit information with benefit claim information and electronically generating documents for outreach with claimants and employers. To achieve better outcomes on hits case management systems allow states to set parameters that can prioritize hits to escalate prevention and detection of overpayments with a greater impact such as those with large dollar amounts or involving an excessive number of weeks. 6 Another valuable feature in some case management systems used to support state integrity activities is the identification of duplicate records. Duplication occurs when New Hires comparisons result in multiple hits that contain the same characteristics. Section 4.5 Using Parameters for Workload Management in the attached ROPs contains additional guidance on the detection of duplicate records. Using the SIDES Earnings Verification to Independently Verify Cross-Match Results States should make efforts to independently verify New Hires information with claimants and employers. For the employer states request an earnings verification to obtain specific information on days worked and dollars earned. Some states use electronic systems to allow employers to respond to earnings verification requests. Electronic systems such as the State Information Data Exchange System SIDES Earnings Verification module provide employers the ability to respond instantaneously and in a standardized format where employers can apply wage information in a configuration necessary to compute the overpayment amount. States are encouraged to have a program system that upon receipt will automatically compare weekly earning amounts reported by the claimant with the earnings information reported by the employer. This comparison and the list of potential weeks affected by potential overpayments or underpayments should be generated and stored electronically in the claimant s case file. The BPC staff can use this information to determine whether an issue exists and conduct further investigation as needed. The Department recommends that states implement the SIDES Earnings Verification module to enhance employer information and to augment New Hires cross-match investigations. The SIDES Earnings Verification module is managed by the National Association of State Workforce Agencies NASWA . The SIDES NASWA team is available to assist with implementation and technical assistance http www.itsc.org Pages sidescontact.aspx. Using the Continued Claims Process to Independently Verify Cross-Match Results To bolster states efforts to independently verify New Hires information with the claimant the Department recommends integrating identified New Hires hits with the continued claims process. This practice can be effective in improving the prevention and detection of improper payment outcomes. While claimants are in continued claims status they certify their eligibility for UI benefits. If a claimant is the subject of a New Hires hit the date of hire reported by the employer employer name address and account number are automatically added to the individual s claim. When the claimant contacts the agency s Interactive Voice Response IVR system or files on-line to attempt to certify a questionnaire is generated. The claimant must complete the questionnaire prior to certification. Once completed the claimant may receive payment and continue to certify for future weeks while the agency concludes its investigation. This practice helps address nonresponsive claimants by allowing staff to obtain information prior to claimants certifying to receive additional weeks of benefits. This practice is most effective when applied to the next continued claim 7 certification that is due immediately following a New Hires hit. To achieve this the state must establish automated business processes for handling continued claim filing exceptions related to New Hires hits. Additionally the UI agency should document the claimant s case to indicate that wage information was obtained and they should identify and address any other issues such as a separation or suitable work. Staff and or the system should also promptly establish any improper payments or remove any barriers that were applied to the continued claim process and release any payments due. B. Recommended Practices for Immediate Notification Timely Determinations and Investigation Follow-up. The most important thing that states can do to prevent improper payments related to BYE errors is to take immediate steps when there is a New Hires cross-match hit to ensure that the claimant is made aware that the state UI agency has received information indicating that s he has returned to work and or has earnings and for the state to commence fact-finding and to adjudicate the issue as quickly as possible. As in the case with the ROPs issued in 2011 attached to UIPL No. 19-11 the enhanced ROPs provided with this UIPL instruct states to immediately contact no later than the next business day claimants and employers once a New Hires cross-match hit is flagged for investigation. When data identifying a cross-match hit is received states should immediately send a letter notice to the claimant and employer identified by the match and provide a deadline for all parties to respond to the cross-match investigation. ETA continues to encourage states to adopt these processes. The notices the state sends to the claimants and to the employers who are identified by the cross-match results should communicate the relevant claimant and employer responsibilities. The notice should instruct claimants to report or respond and provide information by a specific deadline date and the notice to the employer should clearly indicate the earnings verification information to be provided by a specific deadline date. A party s failure to timely respond and to provide the needed information hinders the state s ability to complete an overpayment determination at the earliest point possible. Therefore it is important to provide clear instructions and specific deadlines. If the claimant fails to respond to the notice within the allowed response time then the BPC unit must treat the failure to report in accordance with state law or policy. State law or policy may provide for an open or indefinite denial period or a closed denial period for the failure to report and or failure to provide information when directed. If the state law or policy allows for such a determination then it must be applied. The reporting issue is a separate determination from the question of earnings and any denial based on reporting may not begin any sooner than the week in which the claimant failed to report or provide information. Therefore after the claimant has been given an opportunity to respond the reporting requirement issue may be used to stop payment of benefits for failure to report or failure to contact the agency for any week until such time that the individual reports or contacts the agency as directed. The Department reminds states that the failure to report is not sufficient to make a finding on whether or not any prior weeks of benefits were 8 improperly paid. The state is required to make a separate determination based on the facts to determine whether an overpayment has occurred UIPL No. 01-16 Change 1 Q A 10 . Establishing a reporting requirements issue and completing a failure to report provide information determination are critical steps in New Hires cross-match operations to control investigations and ensure payment when due. In New Hires cross-match investigations it is essential that sufficient information is obtained and quickly followed by the immediate completion of a determination. Although the notice serves as an attempt to obtain information the Department recognizes that not all claimants and employers respond to the notice and that this failure to respond can result in lapses in relevant information. The Department reminds states that i t is the responsibility of the agency to take the initiative in the discovery of information. This responsibility may not be passed on to the claimant or the employer Employment Security Manual ESM Section 6012 Criteria for Review of State Law Conformity with Federal Requirements A. 1. . Because it is the responsibility of the state unemployment compensation UC agency to take the initiative to obtain information regarding an individual s claim independent verification of the information that is the basis of the overpayment such as an individual s return to work must be initiated by the state agency. State agency staff must independently verify the information through the normal required fact-finding process and make the determination of eligibility based upon that verification UIPL No. 01-16 . As such states must pursue the relevant and critical information when encountering non-responsive parties. To ensure that states are proactive in the discovery of the information critical to completing a determination on an overpayment the enhanced ROPs issued with this UIPL include a new recommendation as part of the New Hires cross-match investigations the Department instructs states to make another attempt to obtain information immediately in those cases where there is no response to the state s initial notice. The Department has determined that a second effort to obtain information is particularly helpful in augmenting investigation outcomes. This new recommendation set out in 4.6 of the ROPs is intended to enhance investigation outcomes and minimize BYE overpayments. Furthermore states should work to complete determinations immediately after deadlines have expired. UIPL No. 1145 Procedures for the Implementation of the JAVA Decision describes requirements imposed on UI agencies as a result of the U.S. Supreme Court ruling in California Dept. of Human Resources Development v. Java 402 U.S. 121 1971 regarding when UC is payable. UIPL No. 04-01 Payment of Compensation and Timeliness of Determinations during a Continued Claim Series addresses payment of UC and timeliness of determinations during a continued claim series. UIPL No. 04-01 explains that because individuals in a continued claim series have been determined to be eligible for UC benefit payments may not be suspended or delayed pending a determination on an eligibility issue. UIPL No. 01-16 Change 1 Federal Requirements to Protect Claimant Rights in State Unemployment Compensation Overpayment Prevention and Recovery Procedures Questions and Answers further explains If a 9 determination of ineligibility has not been made a benefit payment must be made by the end of the week fo llo wing the week in which an issue is detected. In practice that means that states would have at most 7 10 days to make a determination of ineligibility in order to not issue the benefit payment. The se directives furth er establish that it is critical that states complete overpayment determinations promptly since claimants can continue to draw UI benefit payments once the 7 10-day timeframe expires thereby increasing the duration and amount of improper payments . 7. Inte grity Resources . ETA encourages states to make use of the various integrity resources discussed in this section to address BYE errors. NASWA operates the UI Integrity Center a state -driven source of innovative program integrity strategies to prevent and detect impro per payments and reduce fraud. The Department strongly encourages states to actively use UI Integrity Center resources designed to reduce improper payments. The UI Integrity Center continues to develop new products and should be considered a technical assistance resource for states in addressing integrity -related matters. Among its offerings to states the Integrity Center compiles best -promising practices such as integrating the continued claims process into the NDNH cross -match provides a blueprint for state BPC operations using state best practices and provides training curriculum for state BPC and integrity staff through its National Integrity Academy. When identifying potential strategies to address improper payments states are also encouraged to use the Integrity tab on the UI Community of Practice CoP on the WorkforceGPS website which is populated with best -promising practices by the Integrity Center see https ui.workforcegps.org . States that require technical assistance with integrity -related matters may contact UI Integrity Center staff at https integrity.naswa.org contact -us. 8. Employment and Training Administration ETA 227 Overpayment Detection and Recovery Activities Repo rt. The Employment and Training Administration ETA 227 Overpayment Detection and Recovery Activities Report is the required quarterly report states use to record data on established overpayments recovered overpayments criminal and civil actions invo lving fraud overpayments and the age of overpayments. The ETA 227 report is vital because it provides information on the improper payment prevention detection recovery and prosecution activities conducted by the state as part of its BPC operations . ETA 227 data can be used by states to evaluate and monitor the work performed by examining fluctuations in quarterly data. ETA 227 data is also important because it is used in the computation of integrity -related UI performance measures therefore report ing accuracy is essential. The NDNH and the SDNH are considered methods of detecting potential overpayments for investigat ions that are reported on the ETA 227 report . In addition to reporting NDNH and SDNH investigations states report the number of ov erpayment s established using the new hire s detection method and associated overpayment amounts . ET Handbook No. 401 5 th Edition c ontains the ETA 227 reporting instructions. When states conclude investigations and report quarterly on the NDNH and SDNH out comes they must ensure that they are adhering to ETA 227 reporting instructions and definitions. 10 States report NDNH and SDNH data in Section B. Line 210 for NDNH and Line 204 for SDNH on the ETA 227 report. The Department reminds states that they must ensure that NDNH data and SDNH data 1 are reported on the appropriately designated line 2 are not combined 3 are not over or under reported and 4 properly depict the quarterly counts of NDNH and SDNH investigations and amounts of overpayment determinations and not quarterly counts of NDNH and SDNH cross-match hits. State are encouraged to program their systems to separate NDNH and SDNH data to ensure proper reporting. This automated process allows states to easily identify the source of the investigation and overpayment i.e. whether it was from NDNH or SDNH. Identifying the source should occur when the state receives the cross-match hit. By automating this activity BPC staff will not have to perform this task. Rather it will occur routinely as the state receives hits. However if states rely on staff to distinguish between the two New Hires cross-match sources they should ensure that staff are trained and can accurately identity and code each cross-match appropriately for proper accounting and reporting on the ETA 227 report. Section B of the ETA 227 report is subject to Data Validation. Data Validation is the program that compares the data on UI required reports and the data in benefit systems to ensure such data is consistent validating report counts and classification accuracy. States must use Data Validation results to reveal and investigate issues associated with ETA 227 reporting and work to resolve discovered issues. During FY 2019 the Department will provide interactive webinars to reinforce required reporting and share best practices. 9. Inquiries. Please direct inquiries to the appropriate ETA Regional Office. 10. References. Improper Payment Information Act IPIA of 2002 P.L. 107-300 Improper Payment Elimination and Recovery Act IPERA of 2010 P.L. 111-024 UIPL No. 1145 Procedures for Implementation of the Java Decision issued November 12 1971 UIPL No. 04-01 Payment of Compensation and Timeliness of Determinations during a Continued Claims Series issued October 27 2000 UIPL No. 3-07 Change 1 Use of National Directory of New Hires NDNH in Unemployment Insurance UI Benefit Accuracy Measurement BAM Audits issued October 31 2006 UIPL No. 19-11 National Effort to Reduce Improper Payments in the Unemployment Insurance UI Program issued June 10 2011 UIPL No. 2-12 Unemployment Compensation UC Program Integrity Amendments made by the Trade Adjustment Assistance Extension Act of 2011 TAAEA issued December 20 2011 11 UIPL No. 2-12 Change 1 Unemployment Compensation UC Program Integrity - Amendments made by the Trade Adjustment Assistance Extension Act of 2011 TAAEA -- Questions and Answers issued August 7 2012 UIPL No. 2-12 Change 2 Unemployment Compensation UC Program Integrity Provisions - Amendments made by the Trade Adjustment Assistance Extension Act of 2011 TAAEA - Combined Wage Claim CWC Program Questions and Answers issued October 15 2014 UIPL No. 8-12 Change 1 Consolidation of the Employment and Training Administration ETA 9000 and ETA 227 Reports issued July 27 2015 UIPL No. 1-16 Federal Requirements to Protect Individual Rights in State Unemployment Compensation Overpayment Prevention and Recovery Procedures issued October 1 2015 UIPL No. 1-16 Change 1 Federal Requirements to Protect Claimant Rights in State Unemployment Compensation Overpayment Prevention and Recovery Procedures Questions and Answers issued January 13 2017 Employment and Training ET Handbook No. 401 5th Edition ET Handbook No. 301 5th Edition and OIG Audit Report Report number 04-18-003-03-315 Improved Oversight of States Use of New Hire Tools Would Help Reduce Improper Payments September 27 2018 . 11. Attachment. I. Recommended Operating Procedures for Cross-Matching Activity National and State Directories of New Hires 2019 .