States seek repayment of benefits as jobless overpaid

Unemployment payments that looked like a lifeline may now, for many, become their ruin.

Pandemic Unemployment Assistance — a federal program that covers gig workers, part-time hires, seasonal workers and others who do not qualify for traditional unemployment benefits — has kept millions afloat. The program, established by Congress in March as part of the coronavirus relief law, has provided over $70 billion in relief.

But in carrying out the hastily conceived program, states have overpaid hundreds of thousands of workers — often because of administrative errors. Now states are asking for that money back. The notices come out of the blue, with instructions to repay thousands or even tens of thousands of dollars. Those being billed, already living on the edge, are told that their benefits will be reduced to compensate for the errors — or that the state may even put a lien on their home, come after future wages or withhold tax refunds.

Many who collected payments are still out of a job, and may have little prospect of getting one. Most had no idea that they were being overpaid.

“When somebody gets a bill like this, it completely terrifies them,” said Michele Evermore, a senior policy analyst for the National Employment Law Project, a nonprofit workers’ rights group. Sometimes the letters themselves are in error — citing overpayments when benefits were correctly paid — but either way, she said, the stress “is going to cost people’s lives.”

The hastily conceived Pandemic Unemployment Assistance program has presented other troubles, including widespread fraud schemes and challenges with processing. As a result, states only recently had enough resources to start sending out overpayment notices. In the meantime, people have been collecting — and spending — sometimes thousands of dollars in what they understood to be legitimate benefits.

Geographic Solutions made duplicate payments for 30,000 Pennsylvania claims because of a system problem, a $280 million mistake, the State Department of Labor and Industry said. (The company says the problem arose from a one-day error that was immediately reported.) Overpayments can also occur if an applicant makes a mistake on a form, as ProPublica reported, or if a state determines that a recipient should not have been eligible. As of Sept. 30, about 27 percent of those approved for Pandemic Unemployment Assistance in Ohio had been overpaid, about 162,000 claims. In mid-November, the figure in Colorado was about 29,000; in Texas, it was over 41,000.

Many states waive overpayments on regular unemployment insurance when no fraud is involved, or when paying the money back would cause someone significant hardship. But the federal rules for Pandemic Unemployment Assistance prohibit forgiveness. Even if the state is at fault, the recipient is on the hook. States often start collecting the overpayment automatically, by withholding a portion — from 30 percent to 100 percent — of future unemployment benefit payments.

Many overpayments arose because state unemployment systems are designed to calculate benefits using W-2 forms, employer records, pay stubs and other documents associated with traditional jobs.

While overpayments under the federal program cannot be waived, applicants can appeal demands for reimbursement after the notice is issued.