Bill passed to encourage states to recover fraudulent unemployment benefits.

House Passes Bill to Combat Unemployment Fraud During Pandemic

The House of Representatives has passed a bill aimed at incentivizing states to unemployment benefits.”>recover fraudulently paid unemployment benefits during the COVID-19 pandemic. The Protecting Taxpayers and Victims of Unemployment Fraud Act passed with a 230-200 vote, with 10 Democrats joining Republicans in voting for the legislation.

What the Bill Entails

Under the legislation, states would be allowed to retain 25% of any amount recovered from overpayments of Federal Pandemic Unemployment Compensation or Mixed Earner Unemployment Compensation that were determined to be fraudulently made. The money retained by the state must be used to modernize employment compensation systems and information technology to improve identity verification and validation of applicants. The money may also be used to cover reimbursement of administrative costs incurred by the state to identify and pursue and recover the fraudulent overpayments, including to pay for the hiring of investigators and prosecutors. Additionally, the legislation allows states to keep 5% of state unemployment insurance (UI) overpayments, provided they agree to use the money to modernize the state’s UI technology infrastructure, improve the timely and accurate administration of the state’s unemployment compensation law, and dedicate the funds to preventing future fraud, among other things. The legislation also extends the statute of limitations for criminal charges or civil enforcement actions related to UI fraud from 5 to 10 years.

Why the Bill is Necessary

According to a report released on Sept. 22 by the Department of Labor’s Office of the Inspector General (OIG), criminals may have fraudulently obtained $45.6 billion in unemployment benefits from U.S. government programs meant to assist Americans during the pandemic. Republicans say the bill is necessary to prevent further fraud going forward. “Criminal organizations and foreign fraudsters exploited our unemployment benefits system to rob hundreds of billions of dollars from American taxpayers,” said Rep. Jason T. Smith (R-Mo.), the chief sponsor of the bill, in a statement after its passing.

Opposition to the Bill

The White House Office of Management and Budget has opposed the bill, arguing that it will strip state UI programs of the essential resources they need to fight fraud, combat identity theft, and recover overpayments, and would “set back the goals of strengthening program integrity and combating systemic fraud.” They further argue that the legislation would unfairly punish workers whose overpayments were the fault of a state agency. It is unclear how states would be stripped of essential resources, given that the bill allows them to use the 25% in recovered overpayments to combat future fraud.

Despite opposition, the bill has passed and is expected to have a significant impact on preventing unemployment fraud during the pandemic.