News Column

Improper Unemployment Pay Soars In Past 5 Years

April 23, 2012

Casey Smith

More than 74,000 cases of improper unemployment insurance payments occurred in Oklahoma over the past five years, a Tulsa World analysis of Oklahoma Employment Security Commission data shows.

Payments between 2007 and 2011 equaled more than $47.8 million funded by employer taxes and federal money, data shows. The commission attempts to recover money when it discovers improper payments, agency spokesman John Carpenter said.

The Oklahoma Employment Security Commission provides unemployment benefits to qualified residents through the state's unemployment insurance program and the federal emergency unemployment compensation program. The agency also provides services for the work force and business community.

Employers pay taxes that fund Oklahoma's unemployment insurance program. The separate, federally funded emergency program temporarily extends payments for people who have exhausted regular state benefits. The emergency program began in 2008 and is scheduled to end in January.

Nearly 80 percent of the more than 74,000 improper payment cases involved state benefits, equaling $38.1 million, data shows. Other improper payment cases were through the emergency program. Cases can last for one or several weeks, Carpenter said.

The number of state program improper payment cases more than doubled between 2007 and 2011, increasing from nearly 5,000 cases to more than 10,000, data shows. Cases increased for three consecutive years until falling more than 40 percent between 2010 and 2011.

Increases are directly tied to the unprecedented rise in the number of claims filed with the agency because of the recession, Carpenter said.

From 2007 to 2011, the number of state program claims the commission paid increased more than 50 percent, from approximately 112,000 to almost 171,000, data show. Over the period, more than 850,000 claims worth nearly $1.59 billion were paid.

Improper payments fall into three categories, Carpenter said.

Claimant error payments occur because a claimant mistakenly provided incorrect information when applying for benefits, he said.

Administrative error payments occur when the agency approves a claimant's benefits only to later discover that person did not qualify, Carpenter said.

An employer has 10 days to protest a claim filed against them, Carpenter said. Sometimes employers return late paperwork that shows the person already approved for benefits does not qualify.

"That's actually a large percentage of the (improper) claims that were made," Carpenter said. "Fraud is a part of it, but it isn't a huge part of it."

Just more than 20 percent of improper payment cases involved fraud, data show. Fraud occurs when individuals intentionally represent themselves as eligible for payments they are not entitled to, according to state law.

Improper payments occur rarely in Oklahoma compared to other states, according to a Department of Labor analysis released last summer. Oklahoma's projected improper payment rate of less than 6 percent was the seventh lowest when compared to other states, the analysis shows.

Rates were highest in Indiana and Louisiana, where rates were more than 43 percent.

"We did do very well, but you're still talking about millions of dollars. Doing well is not good enough," Carpenter said.

The analysis estimates $66.9 million total in improper payments in Oklahoma between July 2008 and June 2011. A commission news release states the actual amount was just less than $25 million. The amounts differed so greatly because the commission counted each overpayment claim, whereas Department of Labor statistics were projected based on a random sample, the release said.

In recent years, the commission has increased efforts to detect improper payments, Carpenter said. The agency has made internal changes to increase efficiency. Changes have allowed the commission to review more cases and catch more improper payments, he said.

In addition to tips the agency gets from concerned residents and random sample audits, the commission uses two data-driven methods to discover improper payments have been made, he said.

At the end of every quarter, the commission cross matches unemployment benefit payment data with wage report data employers file, Carpenter said. An investigation is done if benefits and wages were drawn at the same time.

The commission also does weekly comparisons of the people receiving benefits with the new hire reporting system. Federal law requires each state to track new hires as a method to enforce child-support payments. The Department of Labor now requests that the state concentrate on new hire data as the primary method to discover improper unemployment payments, Carpenter said. However, the requirement is "a law without any teeth," he said.

"While it's set out employers have to do this, there's no penalty in the law," he said.

It is his impression that about half of employers within the state report, Carpenter said. A commission news release estimated employer compliance to be as low as 30 percent.

The registry could be the commission's best tool for finding improper payments if every business reported new hires, he said.

"If every employer in the state reported on that, we would certainly have the ability to track more of these improper payments when people go back to work," Carpenter said.

The unemployment system can be overwhelming for employers, said Brett Baker, who owns Part-Time Pros with his wife, Carey.

Baker said he did not have an HR background when the couple started the temporary work agency for professionals.

"It's just a confusing system," he said. "But maybe that's because of my lack of education of it too."

Baker hired an HR consultant after it got to the point he was spending a day each week handling paperwork and proof for claims, he said.

"I hired someone a year ago because I grew so frustrated," he said.

Joe Schulte, owner of Southwood Landscape and Nursery, said he believes the unemployment insurance system works. The 10 days employers have to return paperwork when a claim is filed against them is enough time, he said. Proof the commission requests if a person was fired for reasons such as discipline or tardiness should already be documented and available in the personnel file, he said.

"It seems to work just fine from my perspective," Schulte said. "It's a matter of making sure all the t's are crossed and i's are dotted."

When the commission discovers improper payments have been made, the primary goal is to recover the money, Carpenter said.

"When you get down to it, one of the most important things to us is getting that money back as soon as possible," he said.

In 2003, the commission began a garnishment program to recover the money directly from people's paychecks.

The program cannot recoup the entire value of the payments, Carpenter said. But it is a dramatic improvement over the previous situation, when the agency relied on the claimant to pay the money back.

The commission also intercepts state tax refunds to recoup money, he said. Next year the agency will intercept federal tax refunds and lottery winnings.

People who committed fraud are denied from filing for unemployment benefits for up to two years, he said.

Legislation pending this session would add a penalty of 25 percent of the amount of the original overpayment in fraud cases.

Currently, those who receive improper payments due to fraud or claimant error are charged 1 percent interest each month the payment is not repaid.

Source: (c)2012 Tulsa World (Tulsa, Okla.)

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