UIPL_19-21_acc.pdf

ETA Advisory File Text

EMPLOYMENT AND TRAINING ADMINISTRATION ADVISORY SYSTEM U.S. DEPARTMENT OF LABOR Washington D.C. 20210 CLASSIFICATION Unemployment Insurance CORRESPONDENCE SYMBOL OUI DPM DATE May 4 2021 RESCISSIONS None EXPIRATION DATE Continuing ADVISORY UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 19-21 TO STATE WORKFORCE AGENCIES FROM SUZAN G. LEVINE s Principal Deputy Assistant Secretary SUBJECT Benefits Held by Banks and Financial Institutions as a Result of Suspicious and or Potentially Fraudulent Activity and the Proportional Distribution Methodology Required for Recovering Returning Federally Funded U nemployment Compensation UC Program Funds 1. Purpose. To provide guidance to states on the proportional distribution methodology for recovering federally funded UC benefits which are held by banks and financial institutions as a result of suspicious and or potentially fraudulent activity. 2. Action Requested. The U.S. Department of Labor s Department Employment and Training Administration ETA requests that State Administrators provide the information contained in this Unemployment Insurance Program Letter UIPL to appropriate state staff working with banks and financial institutions to recover improperly paid UC funds. 3. Summary and Background.a.Summary With the tremendous increase in unemployment claims during the COVID- 19 pandemic the volume of UC deposits to banks and financial institutions initiated by sta tes is in the hundreds of billions of dollars. A significant amount of this funding goes to direct deposit accounts. Importantly a substantial number of fraudulent att acks have been perpetrated on UC programs. There are incidences of organized criminal operations that have used false and stolen identities to obtain UC benefits fraudulently . Banks and financial institutions are on alert using their own fraud prevention data analytics to identify suspicious bank account activity. Banks and financial institutions have recently identified fraudulent claims filed in multiple states with respect to the same account Social Security number or Internet Protocol IP address. Upon identification of suspicious activity banks and financial institutions are stopping payments and holding funds from such accounts. However in many cases some of the suspicious or potentially fraudulently obtained UC benefits that were held by the bank have been withdrawn and there are not sufficient funds left for the bank to repay the states in full. 2 ETA strongly encourages states to work proactively and collaboratively with banks and financial institutions to detect suspicious activity ensure that accounts are not unduly suspended and recover overpayments. Although there are various ways for the banks to distribute the funds back to the states the Department has determined that funds should be returned to states in proportion to the amount each state paid into the account. As described below states must request banks and financial institutions to return held funds paid by multiple states into the same bank account with respect to the federally funded UC programs listed below in an amount proportionate to what the state contributed. States are also encouraged to make this request of banks with respect to state-funded UC programs. Receiving what remains of returned funds in an amount that is proportionate to what the state contributed ensures that states are treated equally with respect to these challenging circumstances. States are also reminded that a bank or financial institution s decision to stop payment of UC benefits or return UC benefit payment s to the state is not sufficient by itself to determine that benefits have been overpaid or that fraudulent activity occurred. See UIPL Nos. 01-16 and 16-21 for additional details. This guidance applies only to the programs discussed below in Section 4.a. of this UIPL. It does not apply to program funds from any other state or federally-funded government benefit programs including but not limited to the Federal Emergency Management Agency FEMA Lost Wages Assistance LWA program Small Business Administration SBA Economic Injury Disaster Loans EIDL program or the SBA Paycheck Protection Program PPP . b. Background Addressing improper payments and fraud is a top priority for the Department and the entire unemployment insurance UI system. States play a fundamental role in ensuring the integrity of this system. Overpayment recovery is critical to protect both state and federal UI trust funds and must be given the same priority as overpayment prevention and detection. A number of guidance documents address this priority. For example UIPL No. 05-13 advises states on overpayment recovery through offset as required by the Middle Class Tax Relief and Job Creation Act of 2012 Public Law Pub. L. 112-96 February 22 2012 . UIPL No. 23-20 advises states that certain overpayment recovery activities required for the regular UI program are also required for particular Coronavirus Aid Relief and Economic Security CARES Act of 2020 Pub. L. 116-136 March 27 2020 programs benefit offsets Treasury Offset Program cross program offsets and interstate reciprocal recoveries and recommends that additional overpayment activities be implemented where allowed by law. UIPL No. 28-20 reminds states of available integrity resources and describes funding available to states to prevent and detect fraud and identity theft and recover fraud overpayments in the CARES Act Pandemic Unemployment Assistance PUA and Pandemic Emergency Unemployment Compensation PEUC programs. UIPL No. 28- 20 Change 1 informs states about the availability of additional funding to states to support identity verification or validation of PUA claimants and to assist states with 3 efforts to prevent and detect fraud and to recover fraud overpayments in the PUA and PEUC programs. 4. Guidance. a. Federally funded UC programs. The programs at issue require the Secretary to fully reimburse the states for benefit payments either in advance or by way of reimbursement as determined by the Secretary in such amounts as the Secretary estimates the states will be entitled to receive. Because the Secretary has the same repayment obligation with respect to every state the Department has determined that states must follow a uniform recovery methodology when funds are held due to suspicious or potentially fraudulent activity but the bank is unable to return all of the funds paid by multiple states into the same bank account because some funds have already been withdrawn. Accordingly states are required to ask banks financial institutions to use the proportional distribution methodology described in Section 4.c. for returning benefit funds with respect to the following federally funded UC programs. i. Permanent federal programs Unemployment Compensation for Federal Employees UCFE 5 U.S.C. Chapter 85 subchapter I . See 5 U.S.C. 8505. Unemployment Compensation for Ex-Servicemembers UCX 5 U.S.C. Chapter 85 subchapter II . See 5 U.S.C. 8521 b which applies the UCFE provisions to the UCX program subject to modifications not relevant here. ii. Temporary programs created by the CARES Act1 PUA Section 2102 15 U.S.C. 9021 . See 15 U.S.C. 9021 f UIPL Nos. 16- 20 and 16-20 Changes 1-5. PEUC Section 2107 15 U.S.C. 9025 . See 15 U.S.C. 9025 c UIPL Nos. 17-20 and 17-20 Changes 1-3. 1 The CARES Act was amended on December 27 2020 by the Consolidated Appropriations Act 2021 Pub. L. 116-260 Division N Title II Subtitle A referred to as the Continued Assistance Act December 27 2020 and by the American Rescue Plan Act of 2021 ARPA Pub. L. 117-2 March 11 2021 . The CARES Act provides states with administrative funding to operate the program through an agreement with the Department. This agreement entitled Agreement Implementing the Relief for Workers Affected by Coronavirus Act Agreement was signed by each state in March 2020 remains in effect and incorporates by reference the modifications and extensions required by the Continued Assistance Act and ARPA. Benefits under the listed program are payable to weeks of unemployment ending on or before September 6 2021. See UIPL Nos. 14-20 09-21 and 14-21. 4 Federal Pandemic Unemployment Compensation FPUC Section 2104 15 U.S.C. 9023 . See 15 U.S.C. 9023 d UIPL Nos. 15-20 and 15-20 Changes 1-4. Mixed Earners Unemployment Compensation MEUC Section 2104 15 U.S.C. 9023 .2 See 15 U.S.C. 9023 d and UIPL Nos. 15-20 Changes 3-4. iii. Programs temporarily funded by federal benefits under the CARES Act First Waiting Week CARES Act Section 2105 15 U.S.C. 9024 . See 15 U.S.C. 9024 c and UIPL No. 20-20. The CARES Act provides temporary 100 percent federal funding for the first week of compensable regular unemployment for states with no waiting week. This guidance applies to only first waiting week benefits that are fully federally funded. Short-Time Compensation STC 26 U.S.C 3306 v CARES Act Section 2108 15 U.S.C. 9026 . See 15 U.S.C. 9026 a and UIPL No. 21-20. STC programs are funded by states. However Section 2108 of the CARES Act 15 U.S.C 9026 authorizes temporary full federal financing of STC payments in states with an existing STC program in state law through weeks of unemployment ending on or before September 6 2021. This guidance applies to only STC benefits that are fully federally funded. iv. Program temporarily funded by federal benefits under the Families First Coronavirus Response Act Division D Emergency Unemployment Insurance Stabilization and Access Act EUISAA of 2020 Pub. L. 116-127 March 18 2020 Extended Benefits EB Federal-State Extended Unemployment Compensation Act of 1970 EUCA 26 U.S.C. 3304 note . See EUCA Section 204 UIPL Nos. 13-20 and 13-20 Change 1 UIPL Nos. 24-20 and 24- 20 Changes 1-2. EB is 50 percent federally funded and 50 percent state- funded. However EUISAA Section 4105 a authorized temporary 100 percent federal funding of sharable EB costs for weeks of unemployment beginning after March 18 2020 and before December 31 2020. This was extended by ARPA Section 9022 to weeks of unemployment beginning before September 6 2021. The proportional distribution requirement applies only to EB payments that are 100 percent federally funded. b. Banks and Financial Institutions Returning UC Funds. States are encouraged to work closely with their Originating Depository Financial Institution ODFI with respect to the return of UC funds. The ODFI is the state UI agency s partner bank. State UI agencies initiate the payment of unemployment benefits when they send a payment transaction file 2 The MEUC program was created by the Continued Assistance Act. 5 to their ODFI. The ODFI sends payment entries into the ACH Network3 on behalf of the state UI agency. Only banks can initiate ACH transactions. The ODFI sends ACH transactions to a Receiving Depository Financial Institution RDFI . The RDFI is the bank of the claimant receiving the UC benefit payment s . The RDFI is responsible for posting the ACH transaction to the claimant s bank account. In a situation where the recipient of the UC benefit payment s has a bank account at the state UI agency s partner bank the ODFI and RDFI are the same. Banks and financial institutions have fraud prevention data analytics to identify suspicious account activity and both ODFIs and RDFIs have been stopping payments and holding UC funds they have identified as potentially fraudulent. It is critical that state UI programs are in regular communication with their ODFI and the RDFIs that are attempting to return funds to ensure an efficient and expeditious recovery return of any UC funds when appropriate. The proportional distribution method applies to recovery of funds from both ODFIs and RDFIs. The Department reminds states that a bank or financial institution s decision to suspend restrict stop or return UC benefit payments is not sufficient by itself to stop UC benefit payments make a determination of fraud or establish an overpayment. The state must follow the adjudication standards outlined in Sections 303 a 1 and 303 a 3 of the Social Security Act SSA 42 U.S.C. 503 a 1 and 3 and the Standard for Claim Determination CD 20 C.F.R. Part 614 Appendix B . See UIPL Nos. 01-16 and 16-21 for additional details. c. Required instructions to banks for returning funds. States must request banks and financial institutions to return funds paid with respect to any of the above-listed federal UC programs into a single account by multiple states in an amount proportional to what the state contributed if the bank is holding an amount that is insufficient to allow full reimbursements to all states. For example consider a situation where a bank holds 20 000 in total deposits from three different states States A B and C in a single account. State A had deposited 10 000 and States B and C had each deposited 5 000. Fraudsters withdraw 10 000 from the account. States A B and C would request the bank to distribute the 10 000 of benefits remaining in the bank account proportionally to what each state paid. This means that 50 percent or 5 000 of the remaining 10 000 would be returned to State A and 25 percent of the remaining 10 000 or 2 500 would be returned to both State B and State C. 3 The ACH Network is the national automated clearing house for electronic funds transfers. It processes electronic financial transactions such as direct deposit and direct payments for consumers businesses and federal state and local governments. 6 State Total Benefits Paid into Account Percent of Total Amount Returned by Bank State A 10 000 50 5 000 State B 5 000 25 2 500 State C 5 000 25 2 500 Total 20 000 100 10 000 d. Regular UC Programs. The Department defers to state law regarding the method of distribution for any regular state-funded UC programs including payments made under the Self-Employed Assistance SEA program . States should work with banks and financial institutions to differentiate between payments from the regular UC programs and payments from federally funded UC programs. However to simplify the recovery return process the Department strongly encourages states to apply the same proportionate distribution methodology to the recovery of regular UC funds. The Department also encourages states to work in partnership with each other and with banks and financial institutions to facilitate the expeditious recovery return of UC funds identified by the financial institutions as potentially fraudulent. 5. Inquiries. States should direct inquiries to covid-19 dol.gov and copy the appropriate ETA Regional Office. 6. References. American Rescue Plan Act of 2021 ARPA Pub. L. 117-2 Title IX Subtitle A Crisis Support for Unemployed Workers March 11 2021 Consolidated Appropriations Act 2021 Pub. L. 116-260 Division N Title II Subtitle A the Continued Assistance for Unemployed Workers Act of 2020 December 27 2020 Coronavirus Aid Relief and Economic Security CARES Act Pub. L. 116-136 Title II Subtitle A Relief for Workers Affected by Coronavirus Act Families First Coronavirus Response Act Pub. L. 116-127 Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 EUISAA March 18 2020 Section 204 of the Federal-State Extended Unemployment Compensation Act of 1970 EUCA 26 U.S.C. 3304 note Section 303 of the Social Security Act SSA 42 U.S.C. 503 Claim Determination CD Standards set forth at 20 C.F.R. 614 Appendix B Administrative Procedure Act 5 U.S.C. 553 5 U.S.C 8505 5 U.S.C 8521 19 U.S.C. 2291 42 U.S.C. 5177 a UIPL No. 16-21 Identity Verification for Unemployment Insurance UI Claims issued April 13 2021 https wdr.doleta.gov directives corr doc.cfm docn 9141 7 UIPL No. 14 -21 American Rescue Plan Act of 2021 ARPA - Key Unemployment Insurance UI Provisions issued March 15 2021 https wdr.doleta.gov directives corr doc.cfm docn 5669 UIPL No. 09 -21 Continued Assistance for Unemployed Workers Act of 2020 Continued Assistance Act - Summary of Key Unemployment Insurance UI Provisions issued December 30 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 3831 UIPL No. 28 -20 Change 1 Additional Funding for Identity Verification or Verification of Pandemic Unemployment Assistance PUA Cl aimants and Funding to Assist with Efforts to Prevent and Detect Fraud and Identity Theft as well as Recover Fraud Overpayments in the PUA and Pandemic Emergency Unemployment Compensation PEUC Programs issued January 15 2021 https wdr.doleta.gov directives corr doc.cfm DOCN 9897 UIPL No. 28 -20 Addressing Fraud in the Unemployment Insurance UI System and Providing States with Funding to Assist with Efforts to Prevent and Det ect Fraud and Identity Theft and Recover Fraud Overpayments in the Pandemic Unemployment Assistance PUA and Pandemic Emergency Unemployment Compensation PEUC Programs issued August 31 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 8044 UIPL No. 24 -20 Change 2 American Rescue Plan Act of 2021 ARPA - Provisions Affecting the Federal -State Extended Benefits EB Program issued April 07 2021 https wdr.doleta.gov directives corr doc.cfm DOCN 7443 UIPL No. 24 -20 Change 1 Continued Assistance for Unemployed Workers Act Continued Assistance Act of 2020 - Provisions Affecting the Federal -Sta te Extended Benefits Program issued December 31 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 7779 UIPL No. 24 -20 Temporary Changes to the Federal -State Extended Bene fits EB Program in Response to the Economic Impacts of the Coronavirus Disease 2019 COVID -19 Pandemic Emergency issued May 14 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 7132 UIPL No. 23 -20 Program Integrity for the Unemployment Insurance UI Program and the UI Programs Authorized by the Coronavirus Aid Relief and Economic Security CARES Act of 2020 - Federal Pandemic Unemployment Compensation FPUC Pandem ic Unemployment Assistance PUA and Pandemic Emergency Unemployment Compensation PEUC Programs issued May 11 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 4621 UIP L No. 21 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 - Short -Time Compensation STC Program Provisions and Guidance Regarding 100 Percent Federal Reimbursement of Certain State STC Payments issued May 3 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 9622 UIPL No. 20 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 - Operating Financial and Reporting Instructions for Sec tion 2105 Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week issued April 30 2020 https wdr.doleta.gov directive s corr doc.cfm DOCN 6324 8 UIPL 17 -20 Change 3 American Rescue Plan Act of 2021 ARPA - Pandemic Emergency Unemployment Compensation PEUC Program Extension Elimination of Transition Rule Increase in Total Benefits and Extension of Coordination Rule issued March 26 2021 https wdr.doleta.gov directives corr doc.cfm DOCN 9169 UIPL 17 -20 Change 2 Continued Assistance for Unemployed Workers Act of 2020 - Pandemic Emergenc y Unemployment Compensation PEUC Program Extension Transition Rule Increase in Total Benefits and Coordination Rules issued December 31 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 9291 UIPL 17 -20 Change 1 Coronavirus Aid Relief and Economic Security CARES Act of 2020 -Pandemic Emergency Unemployment Compensation PEUC Program Questions and Answers and Revised Reporting Instructions for the PEUC ETA 227 issued May 13 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 8689 UIPL 17 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 - Pandemic Emergency Unemp loyment Compensation PEUC Program Operating Financial and Reporting Instructions issued April 10 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 8452 UIPL 16 -20 Cha nge 5 Expanded Eligibility Provisions for the Pandemic Unemployment Assistance PUA Program issued February 25 2021 https wdr.doleta.gov directives corr doc.cfm DOCN 3202 UIP L No. 16 -20 Change 4 Continued Assistance to Unemployed Workers Act of 2020 Pandemic Unemployment Assistance PUA Program Updated Operating Instructions and Reporting Changes issued January 08 2021 https wdr.doleta.gov directives corr doc.cfm DOCN 6973 UIPL No. 16 -20 Change 3 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Eligibility of Individuals who are Caregivers for Pandemic Unemployment Assist ance PUA in the Context of School Systems Reopening issued August 27 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 3849 UIPL No. 16 -20 Change 2 Coronavirus Aid Re lief and Economic Security CARES Act of 2020 Pandemic Unemployment Assistance PUA Additional Questions and Answers issued July 21 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 5479 UIPL No. 16 -20 Change 1 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Pandemic Unemployment Assistance PUA Program Reporting Instructions and Questions and Answers issued April 27 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 5899 UIPL No. 16 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Pandemic Unemployment Assistance PUA Program Operating F inancial and Reporting Instructions issued April 05 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 4628 UIPL No. 15 -20 Change 4 American Rescue Plan Act of 2021 ARP A - Extensions to the Federal Pandemic Unemployment Compensation FPUC Program and Mixed Earners Unemployment Compensation MEUC Program issued March 26 2021 https wdr.doleta.g ov directives corr doc.cfm DOCN 3728 UIPL No. 15 -20 Change 3 Continued Assistance for Unemployed Workers Continued Assistance Act of 2020 Federal Pandemic Unemployment Compensation FPUC Program Reauthorization and Modification and Mixed Earners Unemployment 9 Compensation MEUC Program Operating Reporting and Financial Instructions issued on January 05 2021 https wdr.doleta.gov directives corr doc.cfm DOCN 6122 UIPL No. 15 -20 Change 2 Coronavirus Aid Relief and Economic Security CARES Act of 2020 New Data Collection Instrument and Revised Reporting Instructions for Federal Pandemic Unemployment Compensation FPUC issued on June 15 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 7785 UIPL No. 15 -20 Change 1 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Federal Pandemic Unemployment Compensation FPUC P rogram Reporting Instructions and Questions and Answers issued on May 09 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 3946 UIPL No. 15 -20 Coronavirus Aid Relief an d Economic Security CARES Act of 2020 Federal Pandemic Unemployment Compensation FPUC Program Operating Financial and Reporting Instructions issued on April 0 4 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 9297 UIPL No. 14 -20 Change 1 Coronavirus Aid Relief and Economic Security CARES Act of 2020 Questions and Answers issued August 12 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 3791 UIPL No. 14 -20 Coronavirus Aid Relief and Economic Security CARES Act of 2020 - Summary of Key Unemployment Insurance UI Provisions and Guidance Regarding Temporary Emergency Stat e Staffing Flexibility issued April 02 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 3390 UIPL No. 13 -20 Change 1 Families First Coronavirus Response Act Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 EUISAA - Reporting Instructions Modification to Emergency Administrative Grants Application Requirement and Questions and Answers issued May 04 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 5374 UIPL No. 13 -20 Families First Coronavirus Response Act Division D Emergency Unemployment Insurance Stabilization and Access Act of 2020 issued March 2 2 2020 https wdr.doleta.gov directives corr doc.cfm DOCN 8634 and UIPL No. 05 -13 Work Search and Overpayment Offset Provisions Added to Permanent Federal Unemployment Compensati on Law by Title II Subtitle A of the Middle Class Tax Relief and Job Creation Act of 2012 issued January 10 2013 https wdr.doleta.gov directives corr doc.cfm DOCN 3698 .