Labor Department works hard to prevent fraud, protect trust fund

This is the fourth article in a series on unemployment insurance.

A key aspect of the Idaho Department of Labor’s administration of the state’s unemployment insurance program is safeguarding it against fraud, misuse and malfeasance on the part of employers or individuals. The vast majority of fraud cases are individual claimants who submit ineligible claims for benefits, or those accepting unemployment insurance payments that were paid to them in error, knowingly or not.

The Idaho Department of Labor takes the issues of fraud and overpayment very seriously and actively works to recover money paid out inappropriately.

During the COVID-19 pandemic, the department – along with Labor departments across the country – saw a substantial increase in the number of fraudulent claims being filed by bad actors and criminal syndicates. These organized fraud rings used stolen identities found on the dark web in order to receive unemployment benefits. At its height, 75%-80% of claims submitted were fraudulent claims which led to the department to contract with ID.me, a partner which helps individuals prove their identity for a variety of purposes. This partnership has resulted in only about two out of every 1,000 claims being filed by fraudsters.

Now that organized fraud efforts have dropped dramatically, the vast majority of fraud cases the Department consistently deals with are overpayments. An overpayment is when a claimant is paid more money than they were eligible to receive. Between March 1, 2020, and April 27, 2022, $65,610,584 was made in overpayments in both fraud and non-fraud. Of that amount, $18,181,000 has been recovered. Less than $250,000 is attributable to identity theft. To put that amount in perspective, Labor paid out $1,331,266,863 in total benefits during this time, meaning less than 5% was overpayments.

An overpayment can be the result of fraud or a claimant’s mistake. A fraud overpayment happens when a claimant makes a false statement, gives incorrect information or withholds information to receive benefits. A non-fraud overpayment occurs when a claimant receives benefits they were not eligible to receive, but Labor finds the claimant is not at fault or did not intentionally give false information or withhold information to get benefits.

About 54% of overpayments is due to fraud while the rest are non-fraud. The law says all overpayments need to be repaid, even if the overpayment is due to a mistake made by the claimant. If the claimant can’t repay the full amount, Labor will work with the individual to establish a payment plan. If the claimant doesn’t respond, Labor has statutory authority to force collections through liens. Labor can also offset tax refunds and future UI benefit payments as well as garnish wages.

Examples of the most common causes of fraud overpayments are:

  • The claimant continues to file after returning to work. Since individuals are often not paid until four weeks after starting a job, some claimants see this as an income source until they get their first paycheck.
  • The claimant fails to make two work search contacts or makes false statements regarding their work search efforts. A claimant makes up their work search or when the department verifies their work search, their work search does not check out.
  • The claimant is not able or available to return to work, which is a requirement to claim benefits. A claimant might have a broken leg and cannot return to work until they heal or the claimant has left the area on vacation without telling the department.
  • The claimant fails to report wages or willfully misreports wages. Some claimants do not report their earnings at all after returning to work or report a small portion in order to receive a UI payment.

Examples of the most common causes of non-fraud overpayments are:

  • An employer misreports wages earned in a claimant base period and the claimant could not reasonably have been expected to recognize an error in the wages reported.
  • Minor claimant math errors.
  • A claimant is found eligible at the initial claims level, but the employer protests and the decision is overturned, creating an overpayment for weeks already paid.

When unemployed Idahoans apply for unemployment insurance benefits, they provide information that includes why they are unemployed. Labor staff also review new hire reports and wage records submitted by employers to verify some of that information supplied by claimants. When discrepancies are discovered, such as when a claimant returns to work and continues to file, Labor staff investigate the situation and if payments were made inappropriately, an overpayment is created.

Having an overpayment affects a claimant’s potential future claims – someone with an overpayment due to fraud is not eligible for benefits until the entire balance is paid and a year has passed. In cases of fraud, penalties and interest are charged to a claimant.

Claimants can help prevent overpayments by reading the information in the pamphlet provided to them when they first file for benefits and calling a claim specialist when they have questions not answered in the pamphlet. Employers can help prevent fraud by reporting all new hires within 20 days and responding to information requests on unemployment claims in a timely manner.

– Darlene Carnopis, Idaho Department of Labor policy coordinator

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Part One: Idaho’s Unemployment Insurance Program Part of a National System

Part Two: Explaining Idaho’s UI Tax System – Claimants and Benefits

Part Three: Explainer on the Unemployment Insurance Trust Fund and Taxes