On Tuesday, February 28th, the House Ways and Means Committee held a mark-up that included HR 1163, the Protecting Taxpayers and Victims of Unemployment Fraud Act. H.R.1163 – 118th Congress (2023-2024): To provide incentives for States to recover fraudulently paid Federal and State unemployment compensation, and for other purposes. | Congress.gov | Library of Congress In a vote along party lines the committee reported out a substitute version of the bill. Primary features of the bill are described by the committee to include:

Incentivize states to recover fraudulent unemployment payments.

  • Allow states to retain 25 percent of fraudulent federal funds recovered: Currently, state workforce agencies have little incentive to pursue costly investigations and prosecutions that do not pay out to states
  • Allow states to use recovery reward to improve UI program integrity and fraud prevention: o Hiring investigators and prosecutors to go after criminals to recover fraud payments; o Modernizing state systems’ ability to verify identity and income for unemployment; and o Additional program integrity activities as determined by the state to deter, detect, and prevent improper payments. Improve program integrity and prevent future fraud.
  • Allow states to retain 5 percent of state UI overpayments recovered, upon meeting data matching integrity conditions, and dedicating such funds to preventing future fraud – reforms supported by DOL-IG, and in past budget requests by President Trump and President Obama.

o Ensures UI claims are verified against the National Directory of New Hires and the State Information Data Exchange.

o Stops UI payments to incarcerated and deceased people. Extend the statute of limitations for prosecuting fraud.

  • Extend the statute of limitations for criminal charges or civil actions for prosecuting fraud from 5 to 10 years, as recommended by the Pandemic Response Accountability Committee in testimony provided to the Ways and Means Committee.

See one pager at Protecting-Taxpayers-and-Victims-of-Unemployment-Fraud-Act-One-Pager.pdf (house.gov)

See Committee Release at Ways and Means Approves Plan to Recover Hundreds of Billions in Misspent, Stolen Unemployment Benefits – House Committee on Ways and Means

There was extensive discussion over nearly 6 hours of debate during which Democrat members of the committee offered a long list of amendments. Issues discussed included:

  1. The definition of priorities for incentivized collection efforts for fraudulently claimed unemployment compensation. (e.g. criminal enterprises only, intentional fraud)
  2. Whether certain groups (low wage workers, gig workers, and/or social security recipients) should be excluded from overpayment recovery – even if claimed fraudulently
  3. Whether the determination of fraud may negatively impact otherwise innocent claimants
  4. The impact of incentivizing recovery of fraudulent overpayments through state funding incentives while pulling back a portion of the previously authorized $2 billion to US DOL to assist states.
  5. Whether the extension of flexibility to states in staffing that was provided in the CARES Act should be extended to permit contractors to provide recovery services

After considerable debate, the committee voted 20-17 to report out the substitute version of the bill. We expect this bill to move to the House floor for consideration in the Spring.

At this point, it is uncertain whether the Senate will take up the bill if it passes the House. There may be some portions of the bill that receive bi-partisan support in the Senate that could be included in omnibus legislation later this year.