UI Benefit Accuracy Measurement Annual Report Overpayment Rate in Detail

Causes of Overpayments in CY 2004

The leading cause of overpayment errors in CY 2004 was unreported or erroneously reported benefit year earnings and income, which accounted for over one-fourth of the $3.4 billion overpaid and 2.8 percent of the $34.4 billion in UI benefits paid in CY 2004. Separation issues were the second leading cause of overpayments, accounting for 21 percent of the amount overpaid and 2.1 percent of benefits paid.

Leading Cause of Overpayments by State

Unreported or erroneously reported benefit year earnings and income were the leading cause of overpayment errors in 23 of the states. Work search issues were the leading cause in 12 states, and employment service registration issues were the leading cause of overpayments in eight states. Separation issues were the principal cause of overpayment errors in seven states.

Overpayment Cause Trends

Unreported or erroneously reported benefit year earnings (BYE) account for the largest proportion of overpayments, and separation issues are the second leading cause of overpayments. In CY 2004 the percentage of UI benefits that were overpaid due to BYE issues increased, while the percentage of UI benefits that were overpaid due to separation issues was unchanged after increasing in each of the three previous years. Work search issues, the third largest cause of overpayments, increased for the third consecutive year. ES registration issues have also increased over the last five years. The percentage of UI benefits that were overpaid because of errors in reporting or recording base period wage issues has decreased slightly in recent years as the automation of wage reporting has improved.

Responsibility for Overpayments in CY 2004

Claimants alone were responsible for 58 percent of the dollars overpaid; claimant responsibility accounted for overpayments representing 5.8 percent of total UI benefits paid in CY 2004. Errors resulting in overpayments that were attributed exclusively to the state agency accounted for 15 percent of the amount overpaid and represented 1.5 percent of the UI benefits paid. The claimant and agency shared responsibility for an additional 9 percent of the overpayments. The category "All Other" includes overpayments for which more than one party has responsibility, such as agency and employers, as well as third parties.

The following chart displays the overpayment responsibility of the major responsibility classifications for the period CY 2000 to 2004.

Claims filed by telephone had the highest overpayment rates, both in terms of the percentage of UI weeks paid (10.5 percent) and the percentage of UI benefits paid (4.8 percent). Between 6.2 percent and 7 percent of the UI weeks paid for which the initial claim was filed in-person, through the Internet, or other methods (mail and employer-filed claims) were improperly paid. The UI benefit overpayment rates for these claims varied little, from 3.1 to 3.4 percent.

Claimants who filed their initial claims through the Internet received higher weekly UI benefits, compared with other filers, indicating that, on average, these claimants earned higher wages prior to their unemployment. Because of these higher weekly benefit amounts, Internet-filed claims also had highest average overpayment errors, although their overpayment rate was lower than claimants who filed by telephone.

As is the case with initial claim filing methods, continued claims filed by telephone had the highest overpayment rates, both in terms of the percentage of UI weeks paid (11.5 percent) and the percentage of UI benefits paid (7.2 percent). The overpayment rates for claims filed by mail (6.3 percent of UI weeks paid and 4.2 percent of UI benefits paid) or through the Internet (6.9 percent of UI weeks paid and 3.7 percent of UI benefits paid) were lower than those filed by telephone.

Also consistent with the initial claims data, claimants who filed their continued claims through the Internet received higher weekly UI benefits, compared with other filers. However, unlike claimants who filed their initial claims via the Internet, claimants who used the Internet to file their continued claims did not have the highest average overpayment error. Continued claims filed by mail had the highest average overpayment ($163.74), although the differences among the filing groups are not large enough to be statistically significant.

Monetary overpayments average approximately $32 per erroneous payment. These errors generally represent a reduction of the claimant's weekly benefit amount due to erroneously reported or recorded base period wages. However, most of these claimants remain eligible for some UI benefits. In contrast, separation overpayments often involve complete disqualification (due mostly to voluntary quits and discharges), resulting in an average overpayment of $215 per erroneous payment. Nonseparation errors average $160 per overpayment and encompass several issues. Some of these, such as able and available and work search violations, result in total disqualification for the compensated week of unemployment, whereas other issues, such as earnings from part-time employment or income from social security or pensions result in a partial reduction of benefits for the week of unemployment that is affected.

Workload averages place overpayments in the context of the number of transactions and eligibility determinations made in the UI system. The average overpayments per workload are computed by dividing the amount of benefits overpaid in each cause category by the appropriate workload measure. For example, BAM estimates that approximately $229 million were overpaid due to monetary issues. Dividing this amount by the 8,489,349 first payments results in an average overpayment of approximately $27. Average overpayments per workload for separation and nonseparation errors are significantly smaller than the average amount per overpayment. For example, dividing total overpayments due to separation issues ($710.6 million) by the 14 million first payments and eligible additional claims* produces an average overpayment of $51. Nonseparation overpayments, which comprise issues related to the claimant's continued eligibility during his or her benefit year (for example, benefit year earnings, able and available, and work search issues) totaled nearly $2.5 billion, an average of $18 per UI week paid.

^* Additional claims are filed when a claimant returns to work during the benefit year before exhausting the maximum amount of UI benefits to which he or she is entitled, is separated from that employment, and files a claim for additional weeks of unemployment. The agency determines eligibility based on the circumstances of the claimant's separation from the intervening employment.