On February 7, 2022, the US Department of Labor released UI-PL 20-21, Change 1 To provide additional instructions for circumstances under which a state may waive recovery of overpayments under the CARES Act Unemployment Compensation (UC) programs, including elaborating on the criteria for waiving recovery of overpayments where an individual is without fault on an individual, case-by-case basis and expanding the existing limited scenarios for permissible use of “blanket waivers,” and to remind states that recovery activities for fraudulent overpayments may never be waived. See Additional State Instructions for Processing Waivers of Recovery of Overpayments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as Amended (doleta.gov)

 

This Unemployment Insurance Program Letter (UIPL) also describes the required collection activities for overpayments under the CARES Act UC programs which are not eligible for a waiver of recovery.

 

The enactment and administration of the federally funded Pandemic related unemployment compensation was extremely complicated, and the expanded waiver of non-fraud overpayments will also present a challenge for state agencies and the UI stakeholders impacted. Many policy/administrative issues will need to be worked out if a state decides to implement the US DOL changes, including:

 

  1. How will the CARES act related payments be sorted out from regular unemployment compensation to apply the flexible waiver authority only for these program dollars?
  2. How will cross program withholding and collection be handled to avoid waiving regular unemployment compensation overpayment determinations?
  3. Will the definition of the claims that were fraudulent change to enable broader write off?
  4. If the waiver of the pandemic related program overpayments result in a waiver of the regular unemployment compensation decision, a reduction in the overpayment amount, or a lesser recovery of the amount ordered, what will be the impact on charges to individual contributing and reimbursing employers and the unemployment trust fund?
  5. How will the waiver of overpayments already repaid be reconciled?
  6. How will the decision of one state to waive overpayments impact interagency agreements, Combined Wage Claims and Interstate Claims?
  7. Will new 1099G statements need to created and distributed for 2020 and 2021.
  8. What will be the impact (if any) on federal and state income tax returns?
  9. What will the impact be on the currently pending appeals of overpayments, the appeals that have already become final, and those pending or decided in court?
  10. How much in additional federal administrative funds will be provided for the added administration?
  11. Will each state agreement need to be amended to incorporate the terms of the UI- PL?

 

Although UI PL 20-21 Change 1 was carefully written to address many of the details and to limit the waiver to the federally financed Pandemic related unemployment compensation programs, the intertwining of those programs with regular unemployment compensation programs and the variety of claims fact patterns will be a challenge for state administrators and may result in unintended consequences for UI stakeholders, including contributing employers, reimbursing employers and claimants.

 

Doug

Douglas J. Holmes

President

UWC – Strategic Services on Unemployment & Workers’ Compensation

holmesd@uwcstrategy.org

614-805-2208