Do I Have to Pay My Unemployment Benefits Back? What You Should Do If You Are Overpaid by Your State UI Agency and Unemployment Overpayment Waiver

This is a dreaded prospect for many who have been collecting standard and enhanced unemployment benefits. In most cases, assuming you were eligible for the pandemic unemployment benefits, the answer to the title of this article is usually “no” assuming you got through the state administered application and certification process. 

But with the myriad of unemployment benefits programs and differentiating eligibility criteria available now as part of various federal stimulus programs the answer may be changing to “maybe.” Especially if your states unemployment agency deems your receipt of the benefits as fraudulent (unintentional or not).

The unemployment claims and payment systems and staff in most states are simply overwhelmed with the massive spike in unemployment following the COVID pandemic, which increases the likelihood of error and qualification checks when processing unemployment claims.

The Pandemic Unemployment Assistance (PUA) program, which was put in place quickly, in particular is at a higher risk of overpayment because individuals making claims can self-certify and don’t have an employer verification step because this program generally covers freelancers, gig workers and contract workers who didn’t have a consistent employer or source of income.

Given the rampant fraud already being reported for those filing false claims, it is likely a large number of already paid PUA claims will eventually be reviewed and may be found to have inaccurate or fraudulent information. 

Why would I have to pay back my unemployment benefits? What went wrong?

If you were paid benefits you were not entitled to, several things could have happened:

  • You received a check for a week you didn’t file a claim.
  • You earned income during a week but received the same benefit amount as a week when you didn’t earn anything. 
  • Your state UI department did the math wrong paying more than your weekly unemployment benefit. 
  • There was a misunderstanding or technical error with your claim
  • Your claim was flagged as fraudulent

Unemployment Overpayment Waiver for ALL non-fraudulent claims

Federal rules required states to collect overpaid unemployment benefits. However in a recent petition California, New York, Texas and Florida joined all states, in urging the federal government to relax federal mandates and waive overpayments when the payment was not the claimant’s fault.

The states argued the since many individuals who received pandemic UI assistance are now seeing their benefits changed to overpayments – requiring them to repay these funds, which they received through no fault of their own.

This has created undue burdens on these individuals, who probably already spent the funds from the PUA, PEUC, MEUC and FPUC programs, months ago. Given the challenges collecting the money and risk to individual’s economic stability, the states are arguing that is not even cost effective to try and recover these funds.

Some states have already provided limited waivers but a consistent process is needed with federal guidance. Further, individuals flagged with potentially overpaid claims will be denied further UI assistance until repayment is made, as individuals determined to have overpayments are ineligible for future UI assistance.

Your UI is coming out of the wrong program

With all of the different enhanced unemployment programs available for the unemployed Americans states have worked hard to make sure each claim gets in the right “bucket.” Sometimes, due to lack of information, incorrect interpretation of rules, inaccurate information, or simply error – and individual’s claim ends up in the wrong program – i.e., receive regular UI but was not a full-time employee and should have been in the PUA claim bucket. 

You committed fraud

Individuals found to have committed fraud are responsible for paying back the overpayment with interest and a penalty. 

Unemployment fraud usually occurs when an individual lies or misrepresents themselves on their application. Other common fraudulent actions include neglecting to report money earned while also receiving benefits or not reporting a refusal to work. 

In addition to payments, interest, and a monetary penalty, you could be charged, prosecuted, and sentenced to jail time. 

Someone else committed the fraud, or you were a victim of identity theft, report it to your state’s unemployment agency immediately (link to the new article), and follow the steps listed at the bottom of the Fraud Page.

It is vital to be your own advocate, if something feels wrong, it probably is. 

If you receive a payment when you have gone back to work or received a different amount than expected – contact your agency immediately. Some individuals report receiving multiple payments on the same day or larger than typical deposits into their accounts. Put that money aside and contact your employment agency – it may take them a while, but they will eventually track down the error. 

How much time do I have to pay them back?

Each state and many cases are different – usually, you can negotiate a repayment schedule. The statute of limitation on unemployment overpayment varies from 20 years in New York to never in Texas. 

As with any debt owed that are struggling to repay, the best course of action is communication. 

Do I have to pay them back if I’m not working?

Yes – but you can appeal. 

Each state has an appeals section of its unemployment website, and each state’s appeal process is different. Some allow for hardship waivers, California and Florida, and some like Texas do not.

States also differ on how they handle the overpayment of UI when the individual is still collecting. 

Like California, some states may opt to deduct a portion of what you owe from future unemployment benefits. 

States like Texas require individuals to repay all of their overpayment before any future benefits are disbursed. 

Will they garnish my wages?

They may. 

If you do not pay back your overpayment or monetary penalty, the Department of Labor may take legal action in the form of filing a judgment. 

A judgment, once entered against an individual, can be used for up to 20 years. This allows the Department of Labor to garnish wages or remove money from your bank account to pay what you owe. 

In some states, including New York, will use a “right of offset.” The “right of offset” allows states to seize any payment the state may owe you, including, but not limited to: future Unemployment Insurance benefits, state tax refunds, and contract payment. 

New York State has an excellent FAQ page for questions regarding Overpayments and Penalties. 

In California, the Employment Development Department, EDD offers options for those who cannot repay their overpayments quickly, including deducting money from future unemployment benefit payments.  

However, like every state, they have other options, including reducing or withholding federal and or state income tax refunds and lottery winnings. In addition to filing a judgment against you, California may also place a lean on your property. California’s Overpayment FAQs are here

Can I appeal? 

Yes, you can appeal for a waiver if the mistake was not your own or did not commit the fraud yourself. Usually, an individual will receive some type of notice via the mail. At that point, you request a waiver or appeal. On an appeal, you can argue your ability to repay the overpayment. Note that since unemployment is administered at a state level, the appeals process varies on a state by state basis. For example:

Texas’ rules are rigid, with little leeway and no payment exceptions for hardship. You can appeal and find out more about the Texas appeal system here

In New York, you may appeal, and if the ruling is against you, you have 30 days to appeal their decision. New York’s FAQs on overpayments is here.

California’s FAQs for Unemployment Insurance Appeal’s board is here.

Florida’s “What to do if you are overpaid” site is here.

How many other people are in this boat?

Overpayment of benefits happens. In a typical year, this is not a lot though and overpaid claims make up about 10% of all unemployment claims. 

2020 and 2021 so far has not been typical, so expect a lot more. 

With the rapid increase in applications for unemployment benefits and the addition of programs like PUA, overpayments are likely at a much higher level, some saying up to 25%– although hard numbers are unavailable at this time and likely won’t be until 2021 when the program period ends.

If you receive a notice of overpayment or suspect an overpayment, contact your unemployment agency immediately. 

Don’t know who to contact? Check your state’s unemployment overpayment and appeal process (google it).

Be proactive! Delinquency can lead to judgments, property liens, and may adversely affect your credit. 

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