Section C

Recovery Methods

Overview

Introduction	SESAs are encouraged to continue their efforts to obtain statutory authority that provides access to a full range of recovery methods, techniques, and tools.
Focus recovery efforts on most effective methods	While all the components for effective programs may be in place, it is important to use all available recovery methods, when appropriate, to maximize recovery efforts. A well-developed collection strategy should focus resources on the most effective methods while limiting the use of less cost-effective methods to those instances when all other methods have failed.
In this section	The following topics will be discussed in this section.

Topic	Page
Collection Documents	2
UI Benefit Offset	6
Interstate Recovery	9
Other Offset Programs	11
Personal Contact	13
Civil Action	16
Outsourcing Debt Collection Activities	18
Summary of Guidelines	19

Collection Documents

Introduction	Collection documents are basic recovery methods used by nearly all collection organizations. Documents common to most SESAs include (1): Predetermination notices. Overpayment determination notices. Billing statements. Installment agreements. Collection letters. Demand letters.
Considered to be least effective	Some collection documents are essential to initiate the recovery process. Others, such as collection letters, are considered by some in the private sector to be the least effective collection method because: Limited opportunities are available for one-on-one discussions to develop solutions. Documents can be discarded without being opened.
Explore your mail	To maximize recovery through the use of collection letters, SESA staff are encouraged to examine their own personal documents and/or "junk" mail. Why open the envelope? Did the envelope color or size have an effect? Why read the enclosed material? Did the use of colored paper have an effect? Some features considered to be effective are: Smaller than standard size paper. Better quality of paper and print.
Effectiveness of text	To be effective, collection documents should be developed with text that is easy to read and understand. Surveys and studies conducted by the private sector have found that 60 percent of adults between the ages of 21 to 25 cannot read at the standard eighth-grade level. Effectiveness can be diluted by: Legalistic and/or accusatory terminology. Too much or too little information. Mixed messages, such as pay amount due followed by information about withholding future UI benefits. This can appear to be an option available to the debtor.
Potential impact of language	Being placed in the position of reacting to debtor concerns created by the language used in the collection document can delay the recovery process for other cases. This table reflects the potential impact of collection document language on the debtor and the collector:

How to dispute	Only the overpayment determination should provide information about the right to appeal and instructions on how to dispute the overpayment.
Tone of the document	As the collection cycle continues, the tone of the documents should intensify. Statements should be included to outline what may happen if payment is not received. Since the overall objective is to collect the money due while maintaining the goodwill of the debtor, collection documents should: Be non-threatening. Be professional in appearance. Include a repayment coupon and return envelope. Provide information, such as: amount due, date payment is expected, where to send payment, how to submit address change information.
Increasing effectiveness of the document	Effectiveness can be increased by use of: Format. Color. Bolding. Underlining.
Note:	For examples, see Section D, Collection Documents.
Guidelines	It is recommended that SESAs review all collection documents and revise as needed to: Improve readability. Provide clear, concise information. Eliminate accusatory language. Minimize the use of legalistic terminology. Enhance effectiveness through use of formatting, i.e., color, bolding, underlining, etc.

UI Benefit Offset

Introduction	A successful recovery program includes using current UI benefits to repay an existing overpayment. The recovery of benefit overpayments by offset has long been held to be consistent with federal requirements.
Offset amounts vary	All SESAs have the statutory authority to offset payable UI benefits to recover non-fraud overpayments. All but one SESA can offset to recover fraud overpayments. Offset amounts can vary by: Percentage allowed by state statute, e.g., 100 percent to 10 percent for non-fraud. Type of UI benefits, e.g., state, federal, special programs. Type of overpayment, e.g., fraud, non-fraud, agency error.
1997 ETA 227 report data	This table contains selected 1997 ETA 227 report data.

Category	Fraud (millions)	Non-fraud (millions)
Overpayments Established	$242.2	$314.2
Cash Recovery	$93.1	$73.6
Offset Recovery	$33.9	$74.1
Total Recovery	$127.0	$147.7
Percentage recovered by offset during 1997:	Fraud overpayments: 33.9% Non-fraud overpayments: 50.2%

Offset between state and federal UI programs

States that have signed either the original or modified Cross Program Offset Agreement with the Secretary of Labor(2) are permitted to offset overpayments between state and federal programs. In the absence of such a signed agreement, states are prohibited from using federal benefits to offset state program overpayments; however, states are not prohibited from using state program benefits to offset federal program overpayments.

States that signed the Cross-Program Offset Agreement

The following forty-five states have signed the Cross-Program Offset Agreement:

Alabama Alaska Arizona Arkansas California Colorado Delaware District of Columbia Florida Georgia Hawaii Idaho Indiana Iowa Kansas

Kentucky Louisiana Maryland Massachusetts Minnesota Mississippi Missouri Montana Nebraska Nevada New Jersey New Mexico New York North Carolina North Dakota

Ohio Oklahoma Oregon Pennsylvania South Carolina South Dakota Tennessee Texas Utah Virgin Islands Virginia Washington West Virginia Wisconsin Wyoming

Offset between federal UI programs	Benefits paid under any federal program (including, but not limited to, UCFE, UCX, DUA, TRA, and EUC) may be used for offset of overpayments occurring under any other federal program. (3)
Restrictions to offsets of federal program claims	The following restrictions apply to offsets for claims involving federal programs:

Program	Restriction
UCFE (4):	Recoupment of fraudulent overpayments is limited to the two-year period after the determination becomes final.
UCX (5):	Same as UCFE.
TRA (6):	Any single deduction is limited by offset to 50 percent of the amount otherwise payable (7)

Note:

Although the EUC program has expired, existing overpayments under this program may be offset under other federal programs.

Guidelines

It is recommended that SESAs: Offset payable UI benefits to recover both fraud and non-fraud overpayments. Periodically evaluate the effectiveness of the offset percentage to ensure overpayments are recovered in asshort a period of time as possible. Pursue legislation that provides for the recovery of overpayments through the offset of UI benefits until: The overpayment is paid in full. The statute of limitations for recovery has expired. The overpayment is written off as uncollectible. Participate in all available reciprocal agreements to offset overpayments between programs.

Interstate Recovery

Introduction	It is generally recognized that a SESA may have difficulty in recovering an overpayment if the overpaid claimant resides out-of-state. Currently some SESAs have the capability to provide full cooperation while others lack the authority to provide assistance. The Interstate Reciprocal Overpayment Recovery Arrangement (IRORA) is a cooperative agreement among participating SESAs to facilitate the recovery process.
IRORA	The purpose of IRORA is to provide methods whereby one SESA can assist another in recovering overpayments from an individual. SESAs subscribing to IRORA act as agents for each other in a reciprocal arrangement for the recovery of overpaid benefits. Interstate collection under IRORA is coordinated through the Interstate Benefits Committee of the Interstate Conference of Employment Security Agencies. Participating SESAs agree to cooperate with each other and the Committee, and must accept rules, regulations, instructions, procedural forms, and interpretive decisions adopted by the Committee, except when it conflicts with state law.
States that signed the IRORA	The following thirty states have signed the IRORA:

Alabama Alaska Arizona Colorado District of Columbia Idaho Indiana Iowa Kansas Maryland

Minnesota Mississippi Missouri Montana Nebraska Nevada North Carolina North Dakota Ohio Oklahoma

Tennessee Texas Utah Vermont Virgin Islands Virginia Washington West Virginia Wisconsin Wyoming

Offset between state and federal UI programs	When the offset between states involves an offset between state and federal programs, both states involved must have signed either the original or modified Cross Program Offset Agreement with the Secretary of Labor.
Outsourcing alternative	Workload and staffing constraints can be factors in pursuing recovery for another SESA. Outsourcing debt recovery to a private collection agency is an option SESAs are encouraged to explore if the claimant is not currently claiming benefits in the resident state.
Guidelines	It is recommended that SESAs: Lacking authority to assist in recovering an overpayment for another state, review their law and policy. If necessary, the SESA should seek a change in the law to provide such authority. Consider outsourcing recovery to a private collection agency when the claimant resides out-of-state and is not currently claiming benefits in the state of residence. Participate in all available reciprocal agreements to offset overpayments between states.

Other Offset Programs

Introduction	Any overpayment of UI benefits, which the claimant is required to repay, may be recovered by recapturing or offsetting the overpayment from money to which the claimant is otherwise entitled to receive. Examples of other types of offsets include: State tax refunds and/or lottery winnings. Disability insurance. Worker's Compensation.
Important	Offset of UI benefits to recover overpayments of disability insurance, workers compensation, or state income tax liabilities is not permitted by federal law.
State income tax refunds and lottery winnings	Some SESAs can offset state income tax refunds and/or lottery winnings to recover overpaid UI benefits. These funds can be used to offset the UI overpayment if permitted by the state. For most SESAs, the state tax process is assigned to an organization other than the SESA. Variances among the SESAs include: Some SESAs limit the offset amount to 50 percent of the tax refund while other SESAs offset at 100 percent. Automation has virtually eliminated manual processing and duplicative verification processes between organizations for some SESAs while others are still struggling with labor intensive processes. Some offsetting organizations charge the debtor a processing fee while others charge theSESA.
Disability insurance offset	Some states have programs that provide benefits for unemployment due to disability. If a SESA has not already done so, they should examine their procedures to ensure disability insurance benefits may be used to recover overpaid UI benefits.
Workers compensation offset	All states have programs for compensating workers for unemployment caused by work-related accidents and illnesses. If a state's law does not include a provision for using worker's compensation benefits to offset an unemployment insurance overpayment, the SESA should seek legislation to enable such a procedure to be implemented.
Guidelines	It is recommended that SESAs: Seek legislation that provides for offset of any/all benefits and/or refunds to which the claimant is entitled to recover overpaid UI benefits. Consider streamlining and automating offset processes to reduce labor intensive manual processes. Pursue legislation that provides for the recovery of overpayments through the offset of money to which the claimant is otherwise entitled to receive until: The overpayment is paid in full. The statute of limitations for recovery has expired. The overpayment is written off as uncollectible. Consider transferring any costs charged by the offsetting organization to the debtor.

Personal Contact

Introduction	Organizations in both the private and public sector identified telephone contact as the most effective recovery method. Telephone collections are less expensive and time-consuming than many other types of recovery efforts and can be an effective means of recovery.
Support for a telephone outreach program	Statistics support the importance of an aggressive telephone outreach program. Collection experts in the private sector tend to rely on telephone collections. They believe the keys to successful, effective collections are a customer service philosophy and an ability to control the process through proven collection techniques.
Customer service techniques	Claimants may display or voice strong emotions of anger, tension, frustration, or fear. Customer service techniques proven to be successful during the collection process include: Flexibility in negotiating repayment. Treating debtors with respect. Asking questions and then really listening to the responses. Demonstrating a "firm but fair" approach. Using problem solving techniques to help the debtor take responsibility for repayment. Avoiding discussion about the reason(s) for the overpayment and maintaining focus on the repayment options.
Telephone collection techniques	Telephone skills are critical for a successful collection program. By asking questions that cannot be answered with a simple yes or no, the collector can obtain information to facilitate the recovery process. Staff skilled in telephone collection techniques can control the recovery process and be more effective at negotiating repayment with the debtor. This table reflects telephone techniques currently in use by some collection organizations.

Telephone Technique	Example of Application
Create a sense of urgency.	Payment in full must be made by 5:00 today. How much are you short of making payment in full today?
Give the debtor a task with a time frame for completion.	Put your check in the mail today and call me back before 5:00. Send the letter by the end of this week and call me as soon as you mail the letter.
Summarize any/all agreements.	You agreed to pay this account in full by personal check before the 11th of this month. You agreed to pay $50 on the 11th of each month until this account is paid in full.
Follow up to ensure tasks are completed.	Collector suspends file until after due date and then verifies tasks are completed. Follow up calls are made if the debtor has not completed the task.
Guidelines	It is recommended that SESAs: Enhance recovery programs by dedicating staff to this potentially effective collection method. Make personal contact with debtors if debts are not paid in full or repayment agreement reached within 60 days of the final appeal date. Provide staff with training in customer service and problem solving techniques to ensure contact with the claimant has a positive result. Use every contact with the claimant as an opportunity to recover the overpayment in full or negotiate a repayment plan.

Civil Action

Introduction	A viable recovery program requires the SESA to use judicial remedies in appropriate cases to effect recovery. Some SESAs have developed a collection strategy that relies extensively on recovery through civil action.
Judicial remedies vary among SESAs	The types of judicial remedies and when they may be used vary among the SESAs. In some SESAs, there are: No provisions in the law for recovering overpaid benefits through civil action. Provisions that require cumbersome, labor-intensive processes that result in a limited use of this particular method.
Statutory authority	Some SESAs have statutory authority to recover overpaid benefits through civil action proceedings (8). Those SESAs obtain a judgment that provides opportunities for recovery through: Garnishment of earnings. Levies on bank accounts. Liens on real or personal property.
Administrative authority	Some SESAs have administrative authority to obtain a judgment without the need for representation at court hearings. Other SESAs are hindered by the need for legal staff to attend court proceedings.
Factors to consider prior to initiating civil action	Factors to consider prior to initiating civil action are: The amount of the outstanding overpayment. The potential for recovery.
Guidelines	It is recommended that SESAs: Pursue legislation, when necessary, to obtain administrative authority that does not require SESA or legal staff to attend court proceedings. Develop written guidelines to ensure the civil action is pursued equitably. Capture statistical data to evaluate cost-effectiveness of recovery through civil action and shift cost of recovery to the debtor. Consider automating manual, labor intensive processes.

Outsourcing Debt Collection Activities

Introduction	Outsourcing overpayment recovery to private collection agencies can be an alternative in the recovery of overpaid benefits. The benefit to the SESA is the ability to focus resources on collecting debts considered to be cost effective for the SESA to pursue.
Selecting a private collection agency	Suggestions for selecting a collection agency include: Set guidelines and/or requirements to measure success. Know who the collection agency's other clients are and the priority that will be given to your accounts. Select a collection agency that is willing to accept goals and build a partnership. Assign accounts to more than one agency and monitor the results to ensure that the most successful agency for a specific period of time gets the higher dollar or a larger percentage of accounts. Evaluate the collection agency's success on a regular basis. Refer enough accounts, or collectible dollars, to create a large investment of time and effort by the collection agency. The collection agency will safeguard their investment by focusing on your accounts. Experience in recovery of overpaid unemployment insurance benefits.
Guidelines	It is recommended that SESAs consider outsourcing when: It is not cost effective for the SESA to pursue recovery. The debtor is living in a state other than the one in which he and/or she was overpaid. There is minimal expectation of collecting the amount owed and the overpayment may be written off as uncollectible.

Summary of Guidelines

Introduction	Recovery method guidelines are provided for SESA consideration to enhance the recovery of overpaid UI benefits.
Collection documents	It is recommended that SESAs review all collection documents and revise as needed to: Improve readability. Provide clear, concise information. Eliminate accusatory language. Minimize the use of legalistic terminology. Enhance effectiveness through use of formatting, i.e., color, bolding, underlining, etc.
UI benefit offset	It is recommended that SESAs: Offset payable UI benefits to recover both fraud and non-fraud overpayments. Periodically evaluate the effectiveness of the offset percentage to ensure overpayments are recovered in as short a period of time as possible. Pursue legislation that provides for the recovery of overpayments through the offset of UI benefits until: The overpayment is paid in full. The statute of limitations for recovery has expired. The overpayment is written off as uncollectible. Participate in all available reciprocal agreements to offset overpayments between programs.
Interstate recovery	It is recommended that SESAs: Lacking authority to assist in recovering an overpayment for another state, review their law and policy. If necessary, the SESA should seek a change in the law to provide such authority. Consider outsourcing recovery to a private collection agency when the claimant resides out-of-state and is not currently claiming benefits in the state of residence. Participate in all available reciprocal agreements to offset overpayments between states.
Other offset programs	It is recommended that SESAs: Seek legislation that provides for offset of any/all benefits and/or refunds to which the claimant is entitled to recover overpaid UI benefits. Consider streamlining and automating offset processes to reduce labor intensive manual processes. Pursue legislation that provides for the recovery of overpayments through the offset of money to which the claimant is otherwise entitled to receive until: The overpayment is paid in full. The statute of limitations for recovery has expired. The overpayment is written off as uncollectible. Consider transferring any costs charged by the offsetting organization to the debtor.
Personal contact	It is recommended that SESAs: Enhance recovery programs by dedicating staff to this potentially effective collection method. Make personal contact with debtors if debts are not paid in full or repayment agreement reached within 60 days of the final appeal date. Provide staff with training in customer service and problem solving techniques to ensure contact with the claimant has a positive result. Use every contact with the claimant as an opportunity to recover the overpayment in full or negotiate a repayment plan.
Civil action	It is recommended that SESAs: Pursue legislation, when necessary, to obtain administrative authority that does not require SESA or legal staff to attend court proceedings. Develop written guidelines to ensure the civil action is pursued equitably. Capture statistical data to evaluate cost-effectiveness of recovery through civil action and shift cost of recovery to the debtor. Consider automating manual, labor intensive processes.
Outsourcing debt collection activities	It is recommended that SESAs consider outsourcing when: It is not cost effective for the SESA to pursue recovery. The debtor is living in a state other than the one in which he and/or she was overpaid. There is minimal expectation of collecting the amount owed and the overpayment may be written off as uncollectible.

1. For description and information specific to each type of collection document, see Section D, Collection Documents.

2. Section 303(g)(2) of the Social Security Act.

3. Section 303(g)(1) of the Social Security Act.

4. ET Handbook No. 391; 20 CFR Part 609

5. ET Handbook No. 384; 20 CFR Part 614

6. 20 CFR Part 617

7. P.L. 93-618, Section 243(a)(2)

8. For additional information on legal action activities, see Section E, Legal Action.