Unemployment Insurance

The Department of Labor's Unemployment Insurance (UI) program is a federal-state partnership designed to partially replace lost earnings of individuals who become unemployed through no fault of their own and to stabilize the economy in times of economic downturn. The health of each state's UI program depends, in part, on their ability to control benefit payments by accurately determining eligibility for UI benefits in a timely manner. Labor's Office of Inspector General (OIG) and others have identified numerous aspects of the UI program that may be vulnerable to overpayments and fraud. Of the $30 billion in UI benefits paid in calendar year 2001, Labor estimates that this includes $2.4 billion in overpayments, including $560 million attributable to fraud or abuse. Labor's analysis also suggests that the states could have detected or recovered $1.3 billion of the total overpayments given their current policies and procedures. The management and operational practices at both the state and federal level contribute to overpayments in the UI program. At the state level, many states place a higher priority on quickly processing and paying UI claims than on taking the necessary steps to adequately verify claimants' initial and continued eligibility for UI benefits. At the federal level, Labor's policies and directives emphasize quickly processing and paying claims, with only limited attention given to payment accuracy. Although paying benefits to individuals in a timely manner is important, Labor's performance measurement system does not provide sufficient incentives and sanctions for states to balance the need for payment timeliness with the need for payment accuracy.