Dependent allowance issues (unemployment insurance)

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What are unemployment insurance overpayments? Unemployment insurance overpayments refer to benefits paid to individuals that they were not entitled to receive. Overpayment causes include misreported benefit year earnings; inadequate work search activity; separation issues; ability and availability to work issues; base period wage issues; employment service (ES) registration issues; severance, vacation, Social Security, and employer pension pay issues; and dependent allowance issues. Read about unemployment insurance here.

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Dependent allowance issues, in the context of unemployment insurance, refer to errors that occur when claimants inaccurately report on their eligibility for additional unemployment insurance payments intended to support dependents. Dependent allowance issues occur in states that offer additional unemployment insurance stipends for claimants with dependents. Most states base benefits on claimants' previous incomes and do not offer extra regular payments for dependents.

Dependent allowance issues were one of the nine primary causes of unemployment insurance overpayments that the U.S. Department of Labor identified in its 2023 Benefit Accuracy Measurement (BAM) report.

Background

Dependent allowance issues were the tenth most common cause of unemployment insurance overpayments in 2023, accounting for about 0.05% of all unemployment insurance overpayments examined in the BAM report. The report identified dependent allowance issues as the cause of 0.01% of fraud-related overpayments.

The following table identifies the most common causes of unemployment insurance overpayments, including dependent allowance issues, according to the BAM report:

2023 unemployment benefits overpayments by cause
Cause	Overpayment rate	Fraud rate	Agency responsible rate
Benefit Year Earnings	32.20%	57.14%	20.70%
Separation Issues	23.74%	24.37%	40.21%
Work Search	21.49%	4.28%	2.15%
Able+Available	6.89%	4.28%	5.64%
Other Eligibility	6.36%	8.52%	11.24%
Base Period Wage Iss.	3.48%	0.05%	3.21%
Sev./Vac./SSI/Pension	2.07%	0.52%	5.42%
Other Issues	2.02%	0.80%	7.12%
ES Registration	1.70%	0.04%	4.30%
Depend Allowance	0.05%	0.00%	0.01%

Overpayment recovery by state

See also: Unemployment insurance fraud recovery

States typically use similar unemployment insurance overpayment recovery methods in cases of both fraudulent and non-fraudulent payments. States primarily use the following overpayment recovery methods:

• Benefits offset - States can deduct overpayment amounts (or a set percentage of overpayments) from future benefits payable to recipients.
• The Treasury Offset Program - A program that allows states to recover overpayments due to fraud and misreported work or earnings from the recipient's federal tax refund.
• State tax offset - States can garnish overpayment amounts from recipients' state tax refunds.
• Direct repayments from overpayment recipients.
• Interception of lottery winnings.
• Denial or suspension of professional licenses for individuals who have not returned overpayments to the state.
• Civil court action to compel repayment in non-fraudulent cases.
• Criminal court action to compel repayment in fraudulent cases.

Recovery of fraudulent claims

The U.S. Department of Labor compiles information on each states' unemployment insurance overpayment recovery options in cases of fraud. The following list includes highlights from the department's 2023 data:

• 40 states have laws providing for the recovery of overpayments due to fraud through state tax offset.
• 47 states allow for 100% benefit offset to recover overpayments due to fraud.
• 32 states charge interest on overpayments due to fraud.

The table below outlines each states' overpayment recovery options in cases of fraud:

Recovery of fraudulent claims
State	Recovery of overpayments through offset			Monetary assessments			Max prison time imposed when fraud committed by
	Reduction in weekly benefit amount (WBA)	Number of years benefit offset limited	State tax refunds	Interest charged	Fines or penalties on claimant	Fines or penalties on employer	Claimant	Employer
AL	100%	6 years from date overpayment is final	Yes	2% per month	4 x WBA to maximum benefit amount; 15% of overpayment	$50 - $500	1 to 20 years under Classes B & C felony charges	1 year
AK	100%	No	Yes	No	50% of each fraud overpayment	Penalty assessed under misdemeanor or felony statutes	5 years	Penalty assessed under misdemeanor or felony statutes
AZ	100%	No	Yes	10% per year	15% of overpayment	$2,500	Depends on individual’s record	6 months
AR	100%	No	Yes	10% per year	50% of overpayment (15% if repaid within 30 days)	$20-$200	60 days	60 days
CA	100%	6 years from mailing	Yes	7% until summary judgment filed; 10% until paid in full	30% of overpayment	$20,000	1 year minimum	1 year minimum
CO	100%	No	Yes	No	$25 – $1,000 fine; 65% of overpayment penalty	$25-$1,000	6 months	6 months
CT	100%	8 years	Yes	1% per month	50% 1st offense; 100% subsequent offense	Penalty assessed under misdemeanor or felony statutes	1 year minimum	1 year minimum
DE	100%	5 years from end of benefit year	Yes	18% per year	$23 – $57.50 fine; 15% of overpayment	$20-$200	60 days	60 days
DC	100%	No	Yes	No	Up to $100 fine; 15% of overpayment	$1,000	60 days	6 months
FL	100%	Commenced within 7 years from date established	No	No, unless and until a civil judgment is entered	15% of overpayment	$5,000	5 years	5 years
GA	100%	7 years from release date of notice of determination and overpayment	Yes	1% per month	15% of overpayment	Up to $1,000 for basic fraud; at least $1,000 for multiple counts	12 months per count	Penalty assessed under misdemeanor or felony statutes
HI	100%	2 years from mailing or final appeal decision; after, if individual agrees (percentage up to individual)	No	No	Up to $10,000 fine; 15% of overpayment	Up to $10,000	5 years	1 years
ID	100%	8 years from final determination date	Yes	Yes	25% 1st instance; 50% 2nd instance; 100% 3rd instance and subsequent	$20-$200 and 10 x WBA	Penalty assessed under misdemeanor or felony statutes	Penalty assessed under misdemeanor or felony statutes
IL	100%	No	Yes	No, unless suit filed and judgment entered; then 9% per year	15% of overpayment	Up to $500	180 days	180 days
IN	100%	No	Yes	0.5% per month	25% 1st instance; 50% 2nd instance; 100% 3rd instance and subsequent; 15% of overpayment penalty	See note	6-36 months or 2-8 years	6-36 months or 2-8 years
IA	N/A	N/A	Yes	No	15% of overpayment	50% of tax owed	10 years	N/A
KS	100%	No	Yes	1.5% per month	25% of overpayment	$20-$200	60 days	60 days
KY	100%	10 years from end of applicable BY	Yes	1.5% per month	Up to $10,000 fine; 15% of overpayment	$500-$10,000	1-5 years	1-5 years
LA	100%	No	Yes	No	Penalty is greater of $20 or 25% of overpayment balance	$50-$1,000	10 years	30-90 days
ME	100%	No	Yes	1% per month	50% 1st incident, 75% 2nd incident, 100% other incidents	Penalty assessed under misdemeanor or felony statutes	Penalty assessed under misdemeanor or felony statutes	Penalty assessed under misdemeanor or felony statutes
MD	100%	No	Yes	1.5% per month	Up to $1,000 fine; 15% of overpayment	Up to $1,000	90 days	90 days
MA	100%	No	Yes	1% per month until total interest = 50% of overpayment	$1,000-$10,000 fine; 15% of overpayment	$2,500-$10,000	6 months to 5 years	1 year
MI	100%	3 years from overpayment	Yes	Yes	100% 1st instance; 150% 2nd instance overpayment amount	100% - 1st instance; 150% - 2nd instance	1 year	1 year
MN	N/A	N/A	Yes	1% per month	40% of overpayment	Penalty assessed under misdemeanor or felony statutes	20 years	20 years
MS	100%	5 years from last week overpaid	Yes	1% per month	$100 - $500 fine; 20% of overpayment	$100-$1,000	30 days for each fraudulent week	6 months
MO	100%	No; may write off as uncollectible after 5 years of no activity	Yes	No	25% - 100% of overpayment	25% - 100% of fraudulent amount	6 months for each violation	6 months for each violation
MT	100%	5 years; 10 years if lien filed	Yes	Yes	50% of overpayment	$50-$500	Depends on recommendation of district attorney or employer	30 days for each false statement
NE	100%	3 years from end of applicable BY	Yes	No	Up to $500 fine; 15% of overpayment	Up to $500	90 days for each count	90 days
NV	100%	10 years from date overpayment established	No	Civil judgments only (6% per year)	15% of overpayment	$2,000	10 years	10 years
NH	1%-10%	10 years from date overpayment decision is final	No	1% per month	Up to $4,000 fine; 20% of overpayment	Up to $100,000	15 years	15 years
NJ	100%	No	Yes	5% for CY 2009	25% of total overpayment	$100 to $1,000 per offense	Decided by court	90 days
NM	100%	No	Yes	No	Up to $100; 25% of overpayment	Up to $10,000	30 days	30 days
NY	100%	No	Yes	9% per year (civil action only)	$500; the greater of $100 or 15% of overpayment	$500	1 year	1 year
NC	100%	No	Yes	No	Up to $200 fine; 15% of overpayment1	Up to $200	2 years	2 years
ND	100%	No	Yes	18% per year	$1,500 fine; 15% of overpayment	$1,000	10 years	30 days
OH	100%	6 years from date overpayment is final	Yes	14% per year	Up to $1,000; 25% of overpayment	Up to $1,000	6 months	6 months
OK	100%	No	Yes	1% per month	Up to $500 fine each week after conviction; 25% of overpayment	$50-$500	6 months	90 days
OR	100%	No	Yes	1% per month	15 - 30% of overpayment	$100-$500	Penalty assessed under misdemeanor or felony statutes	90 days
PA	100%	10 years from date applied for benefits	No	Computed annually based on IRS rate	$500 - $1,500; 15% of overpayment	$100 - $1,500 per offense	30 days per week illegally claimed	30 days per offense
RI	100%	No	Yes	1.5% per month	Greater of $1,000 or double value of fraud; 15% of overpayment	Greater of $1,000 or double value of fraud	1 year	1 year
SC	100%	No	Yes	No	$50 - $250 fine; 25% of overpayment	$20-$100	30 days for each offense or week claimed	30 days
SD	100%	No	No	12% per year	Up to $2,000 fine (higher fine if amount obtained > $200); 50% - 1st instance; 100% - any subsequent instance overpayment amount	$1,000	1 or 2 years	1 or 2 years
TN	100%	No	No	1.5% per month	30% - 1st instance; 50% - any subsequent instance overpayment amount	Penalty assessed under misdemeanor or felony statutes	1 year minimum	1 year minimum
TX	100%	No	No	1% per month	Up to $4,000 fine; 15% of overpayment	$4,000	Depends on whether prosecuted as misdemeanor or felony	Penalty assessed under misdemeanor or felony statutes
UT	100%	No	Yes	No, unless it goes to judgment	Up to $10,000 fine; 100% of overpayment	Up to $20,000	15 years	15 years
VT	100%	5 years from determination date	Yes	No	Up to $5,000 fine; 15% of overpayment	Up to $50	30 days	30 days
VA	100%	No	Yes	No	Up to $2,500; 15% of overpayment	Up to $1,000	1 year	1 year
WA	100%	No	No	1% per month	$20 - $250; 15% - 1st instance, 25% - 2nd instance, 50% - any subsequent instance overpayment amount	$20-$250	90 days	90 days
WV	100%	10 years from last week overpaid	No	Yes	$100 - $1,000 fine; 20% of overpayment	$20-$200	30 days	30 days
WI	100%	No	Yes	No	Up to $25,000 fine; 40% – 100% of overpayment depending on facts of fraud	Up to $25,000	Up to 10 years	Up to 10 years
WY	100%	No	Yes	No	20% of overpayment and additional 5% of unpaid balance every 6 months thereafter until paid	$750	5 years	5 years

Recovery of non-fraudulent overpayments

The U.S. Department of Labor compiles information on each states' unemployment insurance overpayment recovery options in non-fraudulent cases, including accidental misreporting. The following list features highlights from the department's 2023 data:

• 41 states have laws providing for the recovery of non-fraud overpayments through state tax offset.
• 33 states allow for up to 100% benefit offset to recover non-fraud overpayments, depending on circumstances.
• 39 states can pursue civil action to recover non-fraud overpayments.
• 14 states charge interest on non-fraud overpayments.

The table below outlines each states' overpayment recovery options in cases of non-fraudulent payments:

Recovery of non-fraudulent overpayments
State	Offset against future benefits	Number of years benefit offset limited	Offset with state tax refunds	Civil action permitted	Interest assessed
AL	100%	No	Yes	Yes	No
AK	100%	No	Yes	No	No
AZ	50%-100%	No	Yes	No	10% per year from month after overpayment established
AR	100%	4 years from date of final determination	Yes	Yes	10% annually once final overpayment has force and effect of judgment of Circuit Court
CA	25%	6 years from date overpayment notice mailed	Yes	No	No
CO	25%	No	Yes	Yes	No
CT	50%; if WBA <$100 then 25%	No; may write off as uncollectible after 8 years	Yes	Yes	No
DE	50%	5 years from end of BY	Yes	Yes	No
DC	100%	No	Yes	Yes	No
FL	100%	Commenced within 7 years from date overpayment is established	No	Yes	No, unless and until a civil judgment is entered
GA	50%	7 years from release date of the notice of determination and overpayment	Yes	Yes	No
HI	100%	2 years from date of mailing notice of redetermination or final appeal decision; after, may offset % agreed to by individual	No	Yes	No
ID	100%	No	Yes	Yes	Yes
IL	25%	5 years from date overpayment decision issued	Yes	Yes	No
IN	100%; if agency error, then 50%	No	Yes	Yes	No
IA	100%	10 years from date of last activity	Yes	No	No
KS	100%	No	Yes	Yes	1.5% per month if 2 years old
KY	25%	5 years from last day of BY	Yes	Yes	No
LA	100%	No	Yes	Yes	No
ME	10% of 1st $100 WBA; 50% of rest	No	Yes	No	1% per month starting 1 year after decision is set up in system
MD	100%	No	Yes	Yes	No
MA	100%; 50% if nonfault and individual requests	No	Yes	Yes	No
MI	Up to 20%	3 years from date of payment	Yes	Yes	Yes, starting 1 year after determination is final
MN	50%	6 years from date overpayment is determined	Yes	Yes	No
MS	100%	5 years from last day of week overpaid	Yes	Yes	1% per month on principal balance after 1st full month overpayment established
MO	100%	No; may write off as uncollectible after 5 years of no activity	Yes	Yes	No
MT	50%; higher if individual permits	5 years; must file lien against individual’s real and personal property to extend to 10 years	Yes	No	Yes
NE	Any amount per week and any amount up to MBA	3 years from end of BYE in which overpaid weeks were paid	Yes	Yes	No
NV	50%	5 years from date overpayment established	No	No	No
NH	1%-10%	10 years from date overpayment decision is final	No	Yes	1% per month on principal balance from 1st day of month after decision if not paid within 60 days
NJ	100% or 50%	No	Yes	Yes	2% annually 6 months after debt established if no formal payment agreement
NM	100%; 50% or 75% if request approved	No	Yes	Yes	No
NY	50%	No	Yes	No	No
NC	50%	No	Yes	Yes	No
ND	Minimum 50%	No	Yes	Yes	18% starting 180 days after establishment of overpayment or 180 days from date of final appeal determination
OH	100%	3 years from date decision is final	Yes	No	No
OK	100%	No; except for administrative error, 1 year from expiration of BY current at time overpayment established	Yes; administrative error	Yes; administrative error	1% per month starting date overpayment determined
OR	100%	5 years from week decision became final for nonfault or nonfraud overpayments; no time limit for fault overpayments	"Yes (if fault overpayment)"	Yes	If fault, 1% per month from 1st day of month following 60 days after final decision
PA	33⅓% (nonfault); 100% (fault)	4 (nonfault), 7 (fault) years from date of application for benefits	No	Yes	Computed annually based on the IRS rate
RI	100%	No	Yes	Yes	No
SC	100%	No	Yes	No	No
SD	100%	No	No	Yes	12% per year upon establishment of fault overpayment or 6 months after establishment of nonfault overpayment
TN	100%	After the expiration of 6 years from overpayment determination	No	Yes	No
TX	100%	No limit for overpayment absorptions on subsequent BYs	No	Yes	1% per month from 30 days after served (when becomes judgment)
UT	50% (nonfault) or 100% (fault)	If nonfault, 3 years from date decision is final; if fault, 8 years from effective date of judgment lien	Yes (fault only)	Yes (fault only)	No, unless it goes to judgment
VT	100%	5 years from determination date	Yes	Yes	No
VA	100%; 50% if administrative error	No	Yes	Yes	No
WA	50% (up to 100% depending on claimant request)	No	No	Yes	1% per month (simple interest) after ≥ 2 minimum monthly payments are delinquent
WV	100%	5 years from last day of week overpaid	Yes	No	No
WI	100%	No	Yes	Yes	No
WY	100%	First 5 years from effective date of claim resulting in overpayment	Yes	Yes	No

Reform proposals for reducing fraud and overpayments

This section presents the main approaches to addressing challenges related to unemployment insurance fraud and unemployment insurance overpayments.

If you know of any reform proposals that are missing, email us.

Incentivize job search efforts and job acceptance

In his 2019 article "Optimal unemployment insurance with monitoring," economist Ofer Setty proposed that job search efforts and job acceptance among unemployment insurance benefits recipients could be incentivized through monitoring procedures, decreasing a worker's UI benefits the longer they are unemployed, and increasing the taxes unemployed individuals pay once they return to work.

“

In optimal UI, a risk-neutral planner insures a risk-averse worker against unemployment by setting transfers during unemployment and a wage tax or a subsidy during employment. During unemployment, the worker searches for a job by exerting effort, the level of which is private information. Since the planner cannot observe the job-search effort, the constant benefits that are implied by the first-best allocation would undermine the worker's incentives to search for a job. Therefore, to solve the incentive-insurance trade-off, benefits should continuously decrease during unemployment, and the wage tax upon reemployment should continuously increase. I include monitoring in this framework as follows. The planner chooses the quality (precision) of the monitoring technology for the unemployed worker. The cost of monitoring increases with the monitoring's precision, which is correlated with the worker's job-search effort. The planner uses the monitoring signal to improve the efficiency of the contract by conditioning future payments and the wage tax not only on the employment outcome but also on the signal's outcome. These future payments create endogenous sanctions and rewards that, together with the monitoring signal, create effective job-search incentives. By exerting job-search effort, the worker increases the probability of a good signal and, consequently, of higher payments.

”

In their 2015 article "Unemployment Insurance Fraud and Optimal Monitoring," economists David L. Fuller, B. Ravikumar, and Yuzhe Zhang proposed that incentives to report new employment and disincentives to collect unemployment benefits while employed could reduce fraudulent claims. The authors proposed a constant period between verification checks for employment, tax incentives for individuals who promptly reported new employment between verification checks, and unemployment insurance benefits that decreased with the length of unemployment.

“

The most prevalent incentive problem in the U.S. unemployment insurance system is that individuals collect unemployment benefits while being gainfully employed. We examine a model of optimal unemployment insurance where a worker can conceal his employment status and the Unemployment Insurance authority has a technology to verify his employment status. We find that the optimal interval between consecutive monitoring periods is a constant, independent of history. The optimal employment tax is nonmonotonic, increasing between verifications and decreasing immediately after a verification. The optimal unemployment benefits decline with unemployment duration with sharp declines after each verification.

”

Require employers to report work refusals

See also: Refusal of work

The Foundation for Government Accountability (FGA) published a 2020 paper titled "Reporting Employee Work Rejections," proposing that states require employers to report unemployed workers who refuse job offers.

“

Individuals aren’t returning to work after being laid off, and are refusing new jobs as well. Instead, they continue to draw taxpayer-funded unemployment insurance benefits. Continuing to collect unemployment after refusing to work is fraud. ... States should set up simple, easy-to-use processes where employers can report employees who have refused an offer of suitable work.

”

Increase verification and reporting

The FGA published an article in 2021 titled "Top 10 Examples of Outrageous Unemployment Fraud in 2020—And How to Fix It." The article proposed that state agencies tasked with administering unemployment insurance programs could reduce unemployment insurance fraud by performing increased unemployment insurance verification checks against existing records and reporting their findings to state legislatures.

“

One typical practice for state unemployment agencies is to cross-reference their claims against the state’s quarterly tax and wage reports, provided by employers. However, rather than simply once per quarter, states should be performing these checks every week, since unemployment claims themselves happen every week. Further, a cross-reference is only as good as the database it utilizes. Therefore, weekly checks should be made against three important databases: prison records, the National Directory of New Hires, and the NASWA Integrity Data Hub. These are pre-existing databases to which states should already have access. State legislatures should also require their workforce agencies to report back, at least once per year, about their implementation of and findings from these crosschecks, including overpayments detected and money saved.

”

In his 1997 article "Unemployment Insurance Fraud and Optimal Monitoring," U.S. Department of Labor economist Burman Skrable proposed that additional use and publication of unemployment insurance fraud recovery and identification techniques could deter fraudulent claims.

“

Massive efforts to restructure the UI system's incentives are unlikely. Narrowly defined process improvements, at least to improve benefit payment administration, have had, overall, slight effects on payment accuracy. The most productive avenue remaining might thus be more, and more intelligent, detection and recovery efforts. Students of UI integrity have concluded that much evasive behavior is systematic, and thus liable to detection and deterrence by computerized profiling. They have urged this for increasing employer compliance with tax reporting laws and for screening claimants to focus scrutiny on those persons statistically more likely than average to violate various UI eligibility provisions (Blakemore et al. 1996; Burgess 1992; Burgess and Kingston 1987, p. 256). Such work could build on the profiling systems developed to identify laid-off individuals who are prone to need extensive reemployment assistance and implemented in the past two years. Benefits profiling could use the extensive BQC records. Employer profiling would require each state to mount one-time, if not continuing, random audit programs of employers as was done in Illinois. The targeted selections of workers would help SESAs focus enforcement efforts, information, and job search assistance on workers most likely to need them. Targeted employer audits would increase yield. Both should also provide more effective deterrence if the activity and results are publicized (Kingston, Burgess, and St. Louis 1986, p. 334; Blakemore et al. 1996, p. 22).

”

Require recovery of overpayments

See also: Unemployment insurance fraud recovery

The 2021 FGA paper "Top 10 Examples of Outrageous Unemployment Fraud in 2020—And How to Fix It" also proposed that state legislatures could require state workforce agencies to recover unemployment insurance overpayments and report any cases where recovery was not attempted or impossible.

“

State lawmakers should also require state workforce agencies to recover all fraud and non-fraud overpayments. Further, state workforce agencies should be required to report and explain to state legislators and the public any cases where they fail or refuse to recover any overpayments, even for allowable reasons such as agency error. Fraud and overpayment recovery should not be optional, since the unemployment tax increases on small businesses that are caused by a leaky unemployment program are also nonoptional.

”

See also

• Unemployment insurance
• Unemployment filings during the coronavirus (COVID-19) pandemic, 2020-2021
• State government plans to end federal unemployment benefits related to the coronavirus (COVID-19) pandemic, 2021

External links

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