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Unemployment Insurance (UI) Improper Payments


The U.S. Department of Labor is implementing a number of strategies to help states address Unemployment Insurance (UI) improper payments. Reducing the improper payment rate requires strong federal-state collaboration and intense focus by the entire UI system. In 2011, the Department announced a call to action to all states to ensure that payment integrity remains a top priority and to foster the development of state specific strategies to prevent improper payments. This call to action reinforced that "everyone owns integrity" across the UI system and provided the expectation that states continuously assess their root causes of improper payments and implement state-specific action plans to reduce their rates.

On September 27, 2012, the Department announced the award of approximately $169 million in supplemental budget requests (SBRs) to 33 states for projects related to program integrity and performance to address their root causes most likely to quickly reduce improper payments.

Core Strategies to Reduce Improper Payments

For Fiscal Year (FY) 2013, the Department is tracking state implementation of eight core strategies which can be used to effectively lower the rate of UI improper payments. Many states are already implementing these strategies, and the Department is working to highlight best practices, encourage states to replicate what works.

State Quality Service Plan (SQSP) / Strategic Plan Development — The SQSP is intended to be a dynamic document states use not only to ensure strong program performance, but also to guide key management decisions, such as where to focus resources. The SQSP should focus state efforts to ensure well-balanced performance across the range of UI activities. The SQSP also is designed to be flexible so as to accommodate, among other things, multi-year planning and significant changes in circumstances during the planning cycle. States can use this flexibility to incorporate the elements from the program Integrity strategic plans developed by their Cross-Functional Task Forces into the SQSP to address improper payments.

Business Process Analysis — Engage in a business process analysis to identify areas of weakness and to set the stage for reengineering processes that will improve program integrity performance. The review must be conducted collaboratively by state staff and a qualified independent third party contracted by the state, and recommendations from this review should be included in the state's strategic plan to the extent feasible. This strategy is required for those states with a Calendar Year (CY) 2011 improper payment rate above 10 percent that have received FY 2012 SBRs.

National Directory of New Hires (NDNH) Recommended Operating Procedures (ROP) — For several years, the Department has encouraged states' use of the NDNH to reduce improper payments in the UI program. These new hire directories, which were created for the purpose of child support enforcement, have allowed for improved access to wage data and data from other states regarding new hires and wages. Detailed Recommended Operating Procedures (ROP) have been developed to provide states with information about best practices in conducting this match.

State Information Data Exchange System (SIDES) — SIDES is a web based system that allows electronic transmission of UI information requests from UI agencies to multi-state employers and/or Third Party Administrators, as well as transmission of replies containing the requested information back to the UI agencies. The current implementation of SIDES allows for the exchange of Separation and earnings verification information.

SIDES Messaging — Implementation of products and tools designed for use by state UI agencies to communicate with employers and third-party administrators (TPAs) about the offerings and benefits of SIDES. This strategy is required for those states that have implemented SIDES by September 30, 2012, and received FY 2012 SBRs.

Claimant and Employer Messaging — Implementation of a statewide claimant and employer messaging campaign designed to:

  1. Iimprove claimants' awareness of their responsibility to report any work and earnings if they are claiming benefits
  2. Improve claimants' understanding of work search requirements as a condition of eligibility for benefits, and
  3. Improve employers' awareness of their responsibility to respond to state requests for separation information and/or earnings/wage verifications.

The state's campaign must consider how it may incorporate the Department's messaging products and tools.

Employer Service (ES) Registration — Implementing technology or other solutions designed to address improper payments due to a claimant's failure to register with the state's Employment Service or job bank in accordance with the state's UI law. This strategy is required for those states with a Calendar Year (CY) 2011 ES Registration error rate above 3 percent that received FY 2012 SBRs.

Treasury Offset Program (TOP) — Implementing the U.S. Department of the Treasury's TOP to recover certain unemployment debts from Federal income tax refunds. This strategy is required for those states who have received FY 2012 SBRs.

New Strategies and Pilot Projects

Also in FY 2013, the Department is working collaboratively with the UI system to develop and implement innovative new integrity strategies and pilot projects that may prove beneficial for adoption by all state UI programs. The Department will commence tracking state implementation of these initiatives as core strategies once it is determined they will be effective in identifying and preventing improper payments.

Work Search Pilot — Supplemental grant funding was provided to the New York State Department of Labor to build the necessary basic system linkages between the Workforce and UI systems to effectively capture, organize and share individual UI claimant work search record information. The New York project team is working with the state of Washington to ensure the replicability of the pilot design to other states.

Financial Data Pilot — The Office of Management and Budget's Partnership Fund for Program Integrity Innovation has provided funding to pilot the use of financial institutions' payroll deposit and payroll information to detect individuals receiving UI benefits who also have payroll payments or deposits to their bank accounts during the same period, allowing for timely follow-up by states with those individuals who may be newly employed. This project which is in collaboration with National Association of State Workforce Agencies' Information Technology Support Center and three states is a value test to determine if financial data can enable earlier detection of improper payments than the NDNH and if the "hits" from the cross-matching are quality "hits."

Do Not Pay Initiative Pilot — The Department is conducting a pilot of the data sources included in the Treasury Department's Do Not Pay solution in at least two states to assess if these sources will enhance UI agency efforts to detect fraud or errors in weekly claimant certifications. During the second quarter of FY 2013, the pilot states will incorporate use of The Work Number into existing business practices for the matching of claimant records as a value test for earlier detection of improper payments.

UI Integrity Center of Excellence — Supplemental funding was provided to New York State for the development of a UI Integrity Center of Excellence, via a cooperative agreement with the Department, with the goal of promoting the development and implementation of innovative integrity strategies, including the prevention and detection of fraud, in the UI program. One of the key goals for the Center will be to actively explore the use of new technologies and new data sources to enable sophisticated data analytics and predictive modeling to improve prevention and detection of improper payments.



Learn more about the nine core strategies to reduce improper payments.



Track state plans and implementation.



Download recent and historic improper payment data.



Download products for communicating with UI claimants and employers.