Getting more weekly unemployment benefits from your state than you expected sounds like a good problem to have. But experts say it could be costly if your state overpays unemployment insurance (UI). With the unemployment rate expected to hit a three-year high over the next 12 months, more people could find themselves facing this problem as their incomes fall.
Here’s what happens if your state overpays your unemployment insurance benefits and six steps to take if you’re faced with this issue.
What happens if a state overpays unemployment insurance benefits?
If for any reason you end up receiving more than you should have received, you may receive notice that the state is trying to collect that extra payment.
During the peak of the COVID-19 pandemic, many states struggled to process overwhelming numbers of unemployment insurance claims, and others faced a wave of fraudulent claims, making the situation even harder to manage. States frequently had to ask unemployed people to repay overpayments of unemployment insurance benefits.
While the unemployment rate is currently at an all-time low, economists in Bankrate’s Economic Indicators survey expect the rate to remain around its current level of 4.3% next year due to the recession. Still, as the unemployment rate rises, states could find themselves facing new situations where unemployed people are being paid inaccurate amounts.
How long do I have to repay unemployment benefits?
You will receive a notice in the mail giving you a deadline to pay your UI overpayment. If you don’t pay it back within that time frame, your current benefits may be garnished to pay off the outstanding balance. Your federal or state income tax refund, disability benefits, and future unemployment benefits may also be garnished to collect the amount owed.
What to do if you receive an overpayment notice
1. File a dispute or request a waiver with your state government
UI is not a one-size-fits-all program, and each state has different ways of administering and processing funds, so you should check your state’s requirements for resolving overpayments.
In most cases, especially if you are not responsible for the overpayment, you will need to consider filing an appeal or overpayment waiver or seeking some other formal waiver from the state.
Generally, you can apply for an exemption if:
- You were unaware of the overpayment.
- I was overpaid due to an agency error.
- If you remit overpaid UI payments, you could face financial problems.
“That means they may have made a mistake, and there’s no way to repay it without putting you in serious financial hardship,” said Michelle Evermore, an unemployment insurance expert and senior policy analyst at the National Employment Law Project. “If you didn’t do anything wrong and it was an honest mistake,[repayments]often get delayed.”
In some cases, the process can be time-consuming and expensive. For example, in New York, someone who disagrees with a refund notice must request a hearing, during which the claimant does not have to repay the additional balance. Most of these appeals procedures may require the individual to show no evidence of fraud, false statements, or technical defects.
If the overpayment wasn’t your fault, you may be able to get it forgiven, Evermore says. But some states don’t forgive overpayment UI, regardless of the cause. For example, the Texas Workforce Commission (TWC) requires claimants to pay back overpayments even if they weren’t your fault.
2. Find out your state’s overpayment recovery procedures and negotiate a payment plan
States also have different methods for collecting overpayments. Some states choose to withhold the overpayment from your additional unemployment benefits over a period of time. For example, in Texas, if you have an overpayment and are receiving unemployment benefits, the Texas Workforce Commission (TWC) will collect your weekly unemployment benefits and apply them to the overpayment until it’s paid in full.
Other states, including North Carolina, allow claimants to pay these claims with credit or debit cards, checks or money orders, which can also include garnishing federal or state tax refunds and lottery winnings. In most cases, the amounts are too small to warrant prosecution, Evermore said.
States usually allow you to negotiate a repayment plan, so if you’ve lost your job or are facing a serious reduction in income, it’s worth exploring whether you can avoid paying off your balance, or at least pay it off in installments.
3. Keep an eye on the changes in the National Diet Building
Paying attention to what your federal lawmakers are doing is an important step, especially if you’re in the appeals process or trying to delay repayment. Just as the economy is in flux, so are the guidelines regarding unemployment benefits. For example, several important changes have been made to unemployment benefit rules during the COVID-19 pandemic, making it easier for unemployed people to forgive repayments of overpaid benefits.
4. Look back at your income statement and calculate what’s in it for you
Generally, your weekly unemployment insurance benefit is based on a percentage of your pre-unemployment earnings.
For example, in California, your weekly benefit is determined by your highest-earning quarter during your employment, and your weekly payment can be between $40 and $450. If you earned $10,000 in your highest-earning quarter, your weekly UI payment would be $385.
You can often find out how your UI benefits are calculated on the website of the department that administers UI in your state.
Keep the documentation your state provides you with about your benefits up to date and compare it to the amount you receive in your weekly check. While you’re there, you can also do the math yourself to check your weekly UI totals for any errors.
5. Manage your spending
If you’re worried or suspect there may be an error in the amount of benefits you’re receiving, it may be a good idea to put the money aside until you can contact your state unemployment office.
With the U.S. economy heading toward a potential recession, which could increase economic uncertainty and reduce income stability, limiting spending is a wise move. The money from cuts can be used to build up an emergency fund that can act as a guardrail in times of financial hardship.
6. Don’t be afraid to apply
Fear of receiving more than you need through UI, despite its plethora of challenges and administrative issues, shouldn’t deter you from seeking out a program that could make the difference between being able to pay rent or buy a meal.
“Don’t think this is the end of the world,” Evermore said. “There are avenues of appeal and people should follow those.”
How to dispute an unemployment benefit overpayment
If you received a notice of an overpaid unemployment insurance benefit and are confused because it doesn’t match your calculations, the notice may be in error. Federal law requires a right of appeal, so you can appeal an overpayment claim no matter what state you live in. However, the appeals process varies by state.
The time given to appeal is one factor that varies from state to state. If a state does not provide guidelines regarding time, federal law sets a 30-day requirement, although some states may have shorter deadlines.
Typically, you can appeal by writing a letter or completing an appeal form and submitting it by mail, at a local office, or online to the state government department that administers UI. Your written appeal should include the following:
- your name
- social security number
- Your address
- Date of receipt of notice of overpayment
- A copy of the decision letter
Check your state’s website for state-specific requirements necessary to file an appeal.
You may or may not be required to continue repaying overpaid benefits while your appeal is pending. In Texas, for example, the state continues to collect benefits to repay any overpayments determined during the appeal process. However, if you have not claimed benefits, you are not required to make payments during the appeal process. In California, on the other hand, you cannot begin repayments unless your appeal is denied.
It’s important to read all notices from the state and double-check the information so you don’t accidentally discover you’ve been overcharged or end up overpaying in the first place and having to deal with unexpected issues later.
— Freelance writer Allison Martin contributed to an updated version of this story.
