How to Handle Unemployment Benefit Overpayments

Unemployment overpayment occurs when recipients receive funds they are not entitled to from their states’ Unemployment Insurance (UI) authorities.

This can happen when unemployment benefits are erroneously awarded.

It can also result from qualified applicants being paid more than the appropriate amount.

Recipients are not entitled to keep monies they receive through an overpayment of unemployment benefits.

In fact, it is extremely important that recipients bring any unemployment overpayments they notice to the attention of their local UI authorities promptly.

The longer recipients wait to begin paying back unemployment, the more difficult doing so becomes and the more likely they are to face severe penalties.

If UI authorities notice overpayments before a recipient, they will issue a formal written notice of the error.

They will then instate or negotiate an unemployment overpayment payment plan with the recipient.

How Unemployment Overpayments Happen

Overpayment of unemployment benefits is most often caused by recipients submitting incorrect or incomplete information to their UI offices.

This may happen during the application process or when requesting weekly benefits payments.

For example, recipients may misrepresent the reasons for their lack of employment or may incorrectly report income and other benefits they are receiving.

Rarely, overpayments may result from simple system errors, typos during data entry or a calculation mistakes.

Unemployment overpayments come in several types:

  • Non-fault overpayments are the result of errors or mistakes that are in no way the fault of the recipient. This category includes mathematical and data entry errors on the part of UI offices, for example.
  • Non-fraud overpayments happen when recipients accidentally provide incorrect or incomplete information to UI authorities, leading to the overpayment of unemployment benefits.
  • Fraud overpayments occur when recipients intentionally give false or incorrect information to authorities in an effort to garner payments for which they should not legitimately qualify.

States may differ in the formal names they apply to these categories, but all states use some variation on them when classifying and responding to overpayments.

Not all overpayments need to be repaid in all states. In some states, overpayments that result from UI recipients receiving unexpected holiday, vacation or backpay from former employment are not required to repay those funds.

Similarly, qualifying overpayments that result from reversals of UI decisions may be exempt from repayment.

Unemployment Overpayment Penalties

Unemployment overpayment penalty rules and options depend on both the state in which the overpayment occurred and the reason for the overpayment.

In non-fault overpayments, for example, recipients typically do not face any punishments or negative consequences aside from paying back unemployment benefits they mistakenly received.

In rare cases, states may even grant an unemployment overpayment waiver to recipients who can prove extreme hardship.

Related Article: How much will you receive in unemployment benefits?

Non-fraud overpayments do not typically qualify for waivers. Recipients must pay back all unemployment benefits they received but were not entitled to.

However, since by definition non-fraud situations do not result from intentional deceit, UI authorities generally do not impose additional penalties on the parties involved.

Fraud overpayments, by contrast, are almost always met with serious repercussions. Unemployment overpayment penalties include but are not limited to:

  • Repayment of unemployment benefits
  • Criminal prosecution
  • Incarceration
  • “Penalty weeks” during which no benefits are paid, even though the recipient otherwise qualifies for them
  • Fines of up to 30 percent of the total dollar amount of overpayments received
  • Temporary or permanent disqualification from receiving further unemployment benefits

Learn About Repaying Unemployment Benefits

Recipients have a variety of options for paying back unemployment benefits after an overpayment.

  • Voluntary repayment. Recipients can elect to voluntarily repay unemployment overpayments in full upon notification of the error.
  • Deduction from benefits in increments. In the event of non-fault overpayments, UI offices may deduct the repayment amount from recipients’ future benefits incrementally. UI authorities typically restrict deductions to one third or less of a total benefit payment. For example, if a recipient owed $200 in overages and usually received payments of $100 per week, his or her UI office would take no more than $33 from his or her benefits payment per week until the full $200 was recouped.
  • Deduction from benefits in whole. Small overpayments of less than $100 may be removed from a single benefits payment, regardless of the percentage of the total benefits payment that amount represents.
  • Unemployment overpayment payment plan. In most cases, recipients will be assigned an incremental repayment plan as described above. However, recipients who wish to voluntarily repay some or all of the overages up front or for whom such a plan is fiscally non-viable may be able to negotiate alternative repayment plans with their UI offices.

UI authorities also have the right to collect, garnish or withhold other monies owed to overpaid recipients by the state.

Common examples include income tax refunds and lottery winnings. In the event that large sums must be repaid or that recipients refuse to cooperate, UI authorities may file court claims, place liens on recipients’ properties and add interest and other fees or fines to the total amount owed.

In extreme cases, UI authorities may garnish recipients’ spouses’ wages or seize recipient bank accounts to ensure repayment of owed funds.

Learn About Appealing Unemployment Overpayment Decisions

Recipients notified by authorities that they received unemployment overpayments that they must repay have the right to appeal those findings. Recipients who wish to file an unemployment overpayment appeal letter need to do so promptly upon receiving notice of their situations to avoid losing access to their full benefits.

Applicants who do not respond immediately must understand their next benefits payments will be reduced when authorities automatically subtract a portion of the repayment amount owed from their benefits.

Unemployment recipients who wish to argue that they have not been overpaid must be able to prove their cases.

The must provide information and documentation countering the UI overpayment claim.

Alternatively, recipients may submit an unemployment overpayment appeal letter acknowledging the overpayment but claiming severe financial hardship. In some cases where hardship can be demonstrated, UI offices will issue recipients unemployment overpayment waivers reducing the amount they owe or releasing them from repayment responsibility entirely.

A local UI office might also negotiate extended unemployment overpayment repayment plans to ease the financial burden on request.

Related Article: Receiving and Using Unemployment Benefits

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