States accidentally overpaid thousands of workers over the spring and summer during a rush to get relief to unemployed and idled Americans. Now they want the money back.
Funds have long since been spent and many of those workers continue to struggle with the coronavirus pandemic’s economic fallout. Partly due to federal rules governing some unemployment aid, multiple states are trying to recoup money or cutting current benefits to make up the difference.
Individuals themselves often have no idea they are being overpaid, in part because formulas for unemployment checks can be hard to decipher. Many also waited weeks to start receiving benefits, and say they believed that large checks were simply the back payments they were owed because of delays.
Autumn Stull owns a maternity and children’s consignment store in Golden, Colo. It temporarily closed in March when the state went into lockdown, so she applied for benefits through the Pandemic Unemployment Assistance program, which allows self-employed individuals to collect aid. She resumed operating in May by appointment, and returned the store to fully open after a gradual process that began in late June.
The weekly checks helped Ms. Stull pay things such as rent and business insurance while her husband paid most of their personal expenses. Her check was cut in early September, from $618 a week to $223, and she discovered a notice on her account saying that she had been overpaid and now owed Colorado $8,972.
The state had added together her 2018 personal income, which was around $12,000, with her business income, and based her benefits on the higher sum, according to documents reviewed by The Wall Street Journal. Colorado later acknowledged the overpayment and sent Ms. Stull an updated benefit statement listing her 2018 income as $0 and cutting the weekly payment.
“Your heart skips a beat. Your stomach sinks. Your eyes get teary,” she says of reading the notice. “The money is gone. I used it. We’ve been through enough.”
Cher Haavind, deputy executive director of the Colorado Department of Labor and Employment, says many overpayments stemmed from workers incorrectly reporting their earnings. Ms. Haavind didn’t reply to follow-up questions about alleged state errors.
For many people, the repayment obligations hinge on a fine-print detail in the March Cares Act, which authorized the new programs.
States can waive recovery of overpayments for most unemployment insurance when there is no fraud involved, but the Pandemic Unemployment Assistance program follows a different set of rules. It is administered as a form of disaster relief, and the statute that guides it blocks states from forgiving the debts.
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Adding to the complexity, the PUA program gave new categories of workers—including gig workers and the self-employed—access to unemployment checks. But state unemployment systems were designed to calculate benefits based on traditional jobs, employer records, W-2 tax documents and verifying income with pay stubs. Re-engineering the systems to account for far more complicated self-employment income was bound to create problems, experts say.
“It makes sense that there would be mistakes made,” says Eliza Forsythe, a professor of economics and labor relations at the University of Illinois at Urbana-Champaign. But because states cannot waive the PUA overpayments, “that puts a lot of risk on benefit recipients down the line.”
When Meggan Hurley, a self-employed health coach in Guffey, Colo., applied for the pandemic assistance, she submitted all of the income-tax forms the state requested. She spoke to several staffers at the state’s unemployment-insurance office, “just to make sure I was filing correctly, because it was intimidating,” she says.
Her checks began arriving soon after. They were larger than she expected, so she called the Department of Labor and Employment, and eventually got through to a staffer, who told her the amount was correct and “not to worry about it,” she says. In early September, a notice was placed on her account saying that she had been overpaid by $13,969.
“It was an error in your system. I submitted my information in good faith that you knew how to do math. You can’t place the burden of your error on me,” says Ms. Hurley. She has started a petition on Change.org asking Congress to allow states to waive the PUA overpayments.
She and other affected workers might yet find relief. House Democrats’ latest version of the Heroes Act, introduced in late September, would allow states to waive PUA overpayments in cases where workers couldn’t repay them “without severe hardship.” The provision would apply to past and future overpayments.
The Labor Department measures states’ performance in administering unemployment-insurance benefits, tracking metrics such as overpayment and the time it takes to process applications. So there is an incentive for states to recover money they erroneously paid out, says Michele Evermore, a senior policy analyst at the National Employment Law Project.
But administrators generally don’t want to claw back benefits from struggling workers, she says. Forcing recipients to repay that money because of a glitch in federal legislation would create hostility toward the state unemployment agencies, she adds.
Thousands of Pennsylvania workers were overpaid because of a calculation error in software that vendor Geographic Solutions Inc. supplied for the state’s unemployment-benefits system. Paul Toomey, president of Geographic Solutions, says the company fixed the error immediately. After the state discovered the problem, it began cutting some benefit checks by half to repay the state, says Julia Simon-Mishel, an attorney with Philadelphia Legal Assistance who has been helping workers with unemployment claims.
“We apologize to the claimants who received the extra payment and appreciate their understanding as we return their benefit to the accurate amount,” says Sarah DeSantis, a spokeswoman for Pennsylvania’s Department of Labor and Industry. The state is reducing the repayment rate to one-third of recipients’ PUA benefits, she adds.
In Ohio, thousands of workers have been overpaid through the regular unemployment-benefits system and Pandemic Unemployment Assistance, says Michelle Wrona Fox, a staff attorney at Community Legal Aid Services in Youngstown, Ohio. For some of Ms. Fox’s clients, the state is docking their remaining benefits by half to recoup its money.
“I’m seeing complete panic,” she says. Many of Ms. Fox’s clients waited two to three months to get benefits in the first place, she says, and some are facing eviction. “They’re in dire straits,” she adds.
A spokesman for Ohio’s Department of Job and Family Services says about 20% of PUA claimants, or 108,000 people, had been overpaid as of Aug. 31 because of a combination of errors by the agency and claimants, but adds most of the errors arose from individuals failing to claim income they earned in weeks when they also received benefits.
In a smaller number of cases, errors were made by agency staff, and those overpayments will be waived where possible, says the department’s spokesman, Tom Betti.
“We understand the frustration overpayments cause during what is already a stressful time,” he says. “We are committed to doing everything we can to lessen those hardships within the bounds of state and federal law.”
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