UIPL19-11.pdf

ETA Advisory File Text

2 On November 20 2009 President Obama issued E.O. 13520 Reducing Improper Payments. This E.O. requires significant efforts be made to reduce improper payments by intensifying activities to eliminate payment errors waste fraud and abuse in major programs administered by the federal government while continuing to ensure these programs serve and provide access to intended beneficiaries. The E.O. requires federal and state agencies to implement procedures and internal controls to ensure proper payments are made and to develop coordinated efforts in eliminating and reducing improper payments. Under the direction of OMB agencies that have programs susceptible to significant improper payments are expected to determine the estimated amount of improper payments and the root causes of these improper payments and prioritize resources so that corrective action plans can be thoughtfully developed and successfully carried out. Each year the Departm ent is required by law to report the rate and amount of UI improper payments to OMB. The UI Benefit Accuracy Measurement BAM program provides the basis for assessing the accuracy of UI payments. An estimated improper payment rate for the UI program nationally and for individual states is determined through BAM audit findings based on random samples of UI weekly benefit payments. For July 2009 to June 2010 the most recent period for which BAM data was available for 2010 IPIA reporting the est imated national improper payment rate for the UI program was 11.2 percent 10.6 percent overpayment rate plus a 0.6 percent underpayment rate which translates to over 17 billion in improper payments nationally. BAM results since the last reporting period show that the i mproper payment rate remains well above 10 percent and the Department will be considered to be out of compliance for the 2011 reporting period. A top priority of the Department is to work with states to take aggressive action to significantly reduce and prevent UI improper payments and to bring down the improper payment rate. The UI program is under intense scrutiny as a result of IPERA and the President s E .O. and since state workforce agencies administer the program state action is required to reduce the UI improper payment rate. Therefore the Department stands ready to partner with states to implement targeted strategies develop tools and share best practices that will p revent improper payments and reduce the improper payment rate. The Department recognizes this is a critical state issue as well in particular given the impact that improper payments have on states unemployment funds. Enhanced integrity efforts will help to preserve the UI trust fu nd s control UI tax rates and maintain the public trust that the program is being protected and administered properly. 4. Scope of the Problem . The entire UI system including federal and state partners responsible for administering the program has a longstanding commitment to program integrity. The system uses sophisticated sampling and audit methods as well as various tools to prevent detect and recover improper UI benefit payments however the UI improper payment rate has increased during the recession. The four main causes for UI improper payments include 1 payments made to claimants who continue to claim benefits after returning to work and fail to report or under-report their earnings often referred to as Benefit Year Earnings BYE 29.3 2 untimely and or incomplete job separation information for example states may receive important information about claimants separation from work after the issues have been adjudicated and the claims paid due to the failure of the employers or their third party administrators to provide timely and complete information on the reason for the individuals separation from employment 19.0 3 the state s inability to validate that claim ants have met the state s work search requirements 18.2 and 4 claimants failure to register with the state s Employment Service as required by state law or the agency s failure to process Employment Service registrations 11.7 . Other root causes of UI improper payments that are less controllable or that are cost prohibitive to prevent overpayments include Able and Available Requirem ents 5.4 payments made to claimants who are unable to work or unavailable for work for example an individual who is in the hospital or in jail which would disqualify them from receiving UI benefits Base Period Wages 5.3 payments made that are based on incorrect base period wages for example wages may be over-reported or under-reported due to employer error s or automation error s causing claimants to be determined eligible for more or fewer benefits than they were entitled to receive. This UIPL focuses primarily on approaches to reducing improper payments caused by benefit year earnings separations and employment service registration numbers 1 2 and 4 above . 5. Improper Payment Prevention . Reducing the improper payment rate requires the UI system to focus on preventing improper payments before they occur. Detection and collection activities continue to be critical core integrity activities but the best way to e ffectively reduce the improper payment rate is to prevent improper payments before they occur. To accomplish that goal ALL state UI staff responsible for the operation of the program must be engaged in a coordinated effort to address improper payments at all levels of the program. Agency staff must be aware of the causes of improper payments and what their role is regarding overpayment prevention. Integrity programs must be designed to discourage fraud and uncover potential 3 4 issues of fraud at the earliest possible time. Essentially everyone owns program integrity and everyone must help to create and cultivate a culture of integrity throughout the en tire UI system. Workforce system partners also have a responsibility to help in the effort to lower the UI improper payment rate by working collaboratively with UI program staff. Workforce system partners help UI claimants meet Employment Se rvice registration requirements. Claimants are provided comprehensive services upon reporting to One-Stop Career Centers when they are referred to services through the Worker Profiling and Reemployment Services program after being determined likely to exhaust their benefits or when they are referred to ser vices through the Reemployment and Eligibility Assessment programs. Good communication between UI and One-Stop Career Center staff is needed to ensure the integrity and effec tiveness of these programs. 6. Strategic Plan for Reducing the Improper Payment Rate . The Department is focusing on three specific improper payment root causes for immediate action and overpayment reduction. These three types of overpayments result in the highest dollar amounts and lend themselves to targeted prevention efforts. Benefit Year Earnings - The primary cause of overpayments is due to unreported or under- reported earnings by claimants while they claim benefits. Cross-matching with State Directories of New Hires SDNH and National Directories of New Hires NDNH followed by immediate contact with the claimant when there is a match to let the claimant know there is a potential overpayment is considered to be one of the most effective strategies for addressing this root cause. Separation Issues - Overpayments attributable to separation issues are the second leading cause of overpayments. To address this issue the Department worked collaboratively with states to develop the technology solution called the State Information Data Exchange System SIDES which enables more rapid and accurate communications between state agencies and employers or employers third party administrators. The timely exchange of accurate claimant separation information should result in better determinations and is expected to reduce the number of improper payments to claimants who are determined to be ineligible for UI due to disqualifying job separations such as quitting a job without good cause or being disch arged for misconduct under the state UI law. A number of states are in varying phases of SIDES implementation and rapidly getting all states to use SIDES is a high priority for the Depar tment. Similarly the Department is developing outreach and marketing tools for states use with employers and their third party administrators to gain their participation in SIDES. Employment Service Registration - Improper payment errors due to a claimant s failure to meet Employment Service registration requirements are a significant root cause of improper payments in some states. Efforts are underway in many of these states to correct these types of improper payments and the Department continues to closely work with these states and provides technical assistance where appropriate. The Department has collaborated with the National Association of State Workforce Agencies to form a federal-state Integrity Workgroup to develop and implement a national action agenda for reducing overpayments. Through collaborative efforts with states including the members of the federal-state Integrity Workgroup the Department has developed a strategic plan to reduce the 5 UI improper payment rate. The strategic plan s action items are designed to focus primarily on prevention of the three root causes of improper payments previously discussed. Over the course of the coming year the Department will undertake a number of new strategies as part of the overall plan to reduce UI overpayments. These include Mandating the use of NDNH in state BPC operations and dissemination of a recommended operating procedure to ensure optimal results see Section 7 and the attachment to this UIPL Implementing a campaign to target messages to claimants designed to prevent improper reporting of work earnings while filing for UI and to promote compliance with state work search requirements Collaborating with high impact states which are essentially big states to pilot implementation of UI improper payment cross-functional task forces to develop and implement state specific action plans to reduce improper payments and to provide some leadership nationally with other states to support reduction of improper payments Encouraging all states to implement cross-functional task forces to develop and implement state specific action plans to reduce UI improper payments Offering states the opportunity to apply for Supplemental Budget Requests SBR targeted to the specific root causes and strategies discussed in this UI PL Implementing a new improper payment performance measure aimed at reducing fraud overpayments due to claimants who continue to file for benefits generally for five weeks or more after they have returned to work Reintroducing to Congress the federal Unemployment Compensation Integrity Act of 2011 with additional provisions aimed at reducing the overpayment rate Aggressively promoting increased state and employer participation in the use of SIDES to reduce improper payments due to untimely and or inaccurate or incomplete information used to adjudicate job separation issues Developing outreach and marketing tools for states to use with businesses and their third party administrators to promote their participation in SIDES Modifying the State Quality Service Plan process to add a section for states to describe their efforts to reduce improper payment rates Identifying and disseminating integrity best practices Exploring methods to ensure sufficient state resources will be targeted toward inte grity activities 6 Exploring and piloting new data sources such as banking information to identify when claimants may have returned to work and Planning a National Integrity Summit in the spring of 2012. 7. Mandatory Use of NDNH . For several years the Department has encouraged states to use the NDNH to reduce improper payments in the UI program. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 mandated the development of the State and National Directories of New Hires. These new hire directories originally created for the purpose of child support enforcement have allowed UI agencies improved access to wage data and new hire information that was previously unavailable. NDNH also contains data on federal civilian and military wages and new hires reported by multi-state employers to a state other than the state conducting a match. These data may also be used for skip-tracing to locate individuals who may have relocated and have outstanding overpayments. Studies of the use of NDNH have concluded that use of this tool results in earlier detection of improper payments thus preventing future overpayments and increasing the likelihood of overpayment recovery. The use of NDNH for BAM was mandated beginning the week of December 30 2007 See UIPL No. 3-07 Change 1 . The mandatory use of NDNH is based on the Department s authority granted under Section 303 a 1 of the Social Security Act and Sections 3306 h and 3304 a 4 of the Internal Revenue Code. To achieve an overpayment rate below 10 percent it is critical that NDNH be used by the states to quickly detect BYE overpayments. All states will be required to conduct NDNH cross-matches by December 2011. States are encouraged to begin matching sooner if possible. Recommended Operating Procedures ROP are attached to this UIPL which outli ne best practices in conducting NDNH and SDNH cross-matches including procedures reported by states to be effective for both detecting as well as preventing overpaym ents. We strongly encourage states to implement these procedures immediately. As additional effective procedures and best practices are identified and documented an enhanced ROP will be disseminated to states. 8. Next Steps . All states are strongly encouraged to take action immediately to reduce the state s improper payment rate. States are requested to take the following steps Conduct weekly and daily cross-matches with NDNH and SDNH respectively . When cross matches result in a match states should have automated processes to immediately notify UI claimants that the state has received information indicating they have returned to work and that an overpayment may exist. The appropriate employer s should also be immediately contacted to verify the employment and wage information. Review the wording of the state s continued claim s certification form or telephone script to assess whether any questions or language should be made clearer to ensure claimants understand what is being asked . For example o If the certification form or script contains a two-part question such as Did you work and earned wages during the week o Two separate questions could be asked instead such as Did you perform any work during the week 7 If you worked what was the amount of wages you earned during the week report wages earned whether or not these wages have been paid Implement SIDES as quickly as feasible . The Department will continue to provide technical assistance to states in implementing SIDES including providing funding opportunities. When the SIDES earnings verification application becomes available technical assistance will also be provided for its implementation. Implement a cross-functional integrity task force. The Department will be working with the high impact states to pilot the use of a task force in effectively reducing improper payments and developing effective overpayment prevention methods and tools however all states are encouraged to form a cross-functional task force. States are asked to think broadly about the types of UI functions and staff that need to be represented on a state task force including front line claims takers adjudicators BPC and BAM staff information technology staff appeals staff and tax staff. The goal is to develop a system-wide approach to bringing down the state s UI improper payment rate. The focus in the short term of this task force should be the three root causes discussed as priorit ies in this UIPL. The Department will continue to engage with states as the strategies described in t his UIPL are implemented and it is anticipated that there will be opportunities to offer a wide array of technical assistance including webinars and newly developed tools to support state efforts. 9. Action Requested . State Administrators are requested to provide the information contained in this UIPL to the appropriate staff. Outreach efforts should be made to inform all UI and workforce staff employers and the general public of the strategic plan to ensure everyone understands the importance of maintaining program integrity and protecting UI funds. 10. Inquiries . Questions should be addressed to the Department s appropriate Regional Office. 11. Attachment . Recommended Operating Procedures for Cross-Matching Activity National and State Directories of New Hires Recommended Operating Procedures For Cross-Matching Activity National and State Directories of New Hires 2 Table of Contents 1. PURPOSE ........................................................................ ................................................................ 3 2. SCOPE ........................................................................ ..................................................................... 3 3. RESPONSIBILITIES ........................................................................ ............................................. 3 4. PROCEDURE ........................................................................ ......................................................3-6 4.1 PROCESS FLOW 4.2 FREQUENCY AND TIMING OF CROSS-MATCHES 4.3 KEY ACTIONS 4.4 DATA SOURCE AND STATE ACTIONS 3 1. PURPOSE These Recommended Operating Procedures ROP for benefit cross-matching with the National Directory of New Hires NDNH and the State Directory of New Hires SDNH contain key guidelines and procedures designed to successfully operate e ffective cross-matching programs that prevent deter and detect improper payments. The U.S. Department of Labor strongly encourages states to consider and utilize the proc esses and procedures outlined in this ROP in conducting NDNH and SDNH cross-matches. 2. SCOPE This ROP is not definitive and all-inclusive. However the minimum expectation is for states to use the recommendations provided herein as a starting point for results-oriented cross-matching activities. States may add or incorporate other successful practices not covered in this ROP. 3. RESPONSIBILITIES In most states the Benefit Payment Control BPC unit is generally responsible for conducting benefit payment cross-matches against wage data and would be responsible for implementing procedures contained in this ROP. States should consider the tasks contained in this ROP and determine the appropriate BPC or other staff to carry out these tasks and functions. 4. PROCEDURE This section outlines recommended actions and timelines identified as being key activities in a state s cross-matching program. 4.1 Process Flow The following chart is a functional diagram with a recommended work flow to optimize and implement a successful cross-match program. NATIO NAL NEW HIRE STATE NEW HIRE Input Data Input Data G ENERAT E Em ployer MA IL EVF RECEIV E CRO SSMA TCH RESULT S CLAIM ANT CO NTACT REQ UIRED TO RE PO RT LET TER PRO CESS RE SPO NSES FO RM S INQ UIRY MAIN TENA NCE SCREEN S M ANAG EM EN T REPOR TING NO ISSUE CO NDUCT FRAUD IN VESTIG ATI O N Con current P rocessing S EL ECT DETERM INATIO N TYP E Various edits Incomplete Employer Address Duplicates Prior Fraud Prior Earnings Adjustments Set Issu e or Earnin g Ver ification Ide ntify We eks Identif y Claim ants for NDN H or SDNH Cr ossm atching G ene rate Individu al Clai m ant Reques t Records New Hir e data return ed is based on input dat a file param eters Ba sed on wee k s certif ication respo nses to wo rk and earn ings CO NDUC T EARNING S VERIFIC ATIO N ADJU STM ENT CO NDUCT NO N-FRAUD INVE STIG ATION IS SUE DETERM INATIO N AND ADJUST BEN EFITS Figure 1 Process Flow 4 5 4.2 Frequency and Timing of Cross-Matches - SDNH m atches are generally expected to be run on a daily basis since these files are updated daily. NDNH matches are generally expected to be run on a weekly basis. 4.3 Key Actions The following actions should be im plemented immediately Process data from SDNH and NDNH as soon as it is received which is daily for SDNH and weekly generally Mondays for NDNH . Effective autom ation and innovative workload management should allow the state to prioritize the work and screen out those matches that do not require immediate action. An immediate and critical action is to send a letter notice on the same day or no later than the next business day to those claim ants and employers identified by the NDNH or SDNH match. Sample Notice for Claimants IMPORTANT NOTICE ABOUT YOUR UNEMPLOYMENT BENEFITS Agency records indicate that you have filed a continued claim s and or received unemployment insurance benefits for a period of time during which you ma y have also been employed. This agency has received employer information that indica tes you are working or have worked and earned wages. We are contacting this employer for a breakdown of actual wages for each week in question. We need to resolve any issues arising from this information and any additional information if wages were earned during the same period tha t is the same week s that you certified for benefits. During each week that you are claiming benefits you are required to inf orm this agency of your employment status and if you are working you must repor t any and all wages earned. Please note Wages must be reported for the week s in which such wages are earned not when the wages are paid. Working earning wages a nd failing to report such work wages while filing for unemployment insurance benefi ts may constitute FRAUD. Individuals may be criminally prosecuted fined and or imprisoned for committing fraud and will be required to repay any benefits determin ed to be overpaid. To respond to this notice please contact this agency by calling xxx xxx-xxxx. Notify affected claimants that they are required to report to or required to contact the agency preferably before the date of the next continued claim certification in order to resolve the issue. It is also recommended that the continued claim filing system be programmed to allow a claims representative to intervene to speak to claimants who have been identified as potentially working based on NDNH SDNH matches to attempt to conduct necessary fact-finding and resolve the issue with the claim ants at the time they file their next weekly claim certification . Notify appropriate employers and require responses within a specified period of time for example within seven business days . 6 Issue appropriate determination s based on the response s or lack of response s af ter the allotted time has lapsed. Determinations may include denials for failure to contact the agency as required under the state s UI law lack of re sponses from both parties prevents a determination based on NDNH matches since these are generally needed for independent verification of the NDNH data . 4.4 Data Source and Activities Activity Timeframe Employers report W-4 New Hire data to the SDNH Required to be made no later than 20 days after the date the employer hires the employee or in the case of an employer transmitting reports magnetically or electronically by 2 monthly transmissions if necessary no less than 12 days no more than 16 days apart. New Hire data received from employers entered into SDNH Within 5 business days of receiving reports from employers the new hire reports must be entered into the SDNH database. SDNHs transmit New Hire data to the NDNH Within 3 business days after the new hire data is entered into the SDNH the new hire data must be furnished to the NDNH. New Hire data from Federal agencies and SDNHs entered into the NDNH New Hire data must be entered into the NDNH within 2 business days upon receiving the data. State constructs and submits its cross-match request daily to SDNH The state requests a cross-match for all claimants who have received payment within the past 40 days. This allows for the business steps shown above and takes into consideration the biweekly certification processes. State requests the return of all new hires reported to SDNH from 47 days prior to the cross-match date for each individual social security number SSN . State constructs and submits its cross-match request every week to NDNH The state requests a cross-match for all claimants who have received payment within the past 40 days. This allows for the business steps shown above and takes into consideration the biweekly certification processes. State requests the return of all new hires reported to NDNH from 47 days prior to the cross-match date for each individual SSN. NDNH returns summary and transmittal data including error reporting to the submitter NDNH sends transmittal summary and error data to the submitting Federal or state agency and or S DNH agency as appropriate within 4 business days of the system receiving the data. Report matches from the NDNH to the state NDNH matching information is transmitted to the state within 2 business days of the match. The earliest information would be available is on the following Sunday or Monday after the cross-match occurs. State processes the NDNH SDNH records that are returned State eliminates duplicate records fro m the dataset Same SSN employer and hire date on the date of receipt of the information from NDNH SDNH. State compares cross-match outcomes to compensated and weeks claimed and determines hits State software determines whether weeks are compensated and claimed after the hire date or W-4 date if hire date is null . If the claimant reports work in the weeks identified the state may verify earnings reported on the date of receipt of the NDNH SDNH information. State begins investigation State simultaneously sends a letter notice to the claimant and a request for earnings verification to the employer no later than the next business day following receipt of the information from NDNH SDNH. If feasible the state requires the claimant to contact the agency to resolve the issue prior to the date of filing the next continued claim for benefits. The employer is required to provide information within a specified time e.g. 7 business days . State concludes investigation A written determination is made and processed as appropriate.