Labor Dept. Estimates $7.1 Billion in Overpayments to Unemployed

While many Americans are feeling the pain of expired unemployment benefits, some have gotten a good chunk more than they were legally eligible for.

Preliminary estimates released by the U.S. Department of Labor find that, in 2009, states made more than $7.1 billion in overpayments in unemployment insurance, up from $4.2 billion the year before. The total amount of unemployment benefits paid in 2009 was $76.8 billion, compared to $41.6 billion in 2008.

Fraud accounted for $1.55 billion in estimated overpayments last year, while errors by state agencies were blamed for $2.27 billion, according to the Labor Department. The department's final report will be released next month.

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Some of the overpayments likely can be traced back to the overwhelming workloads facing state employment agencies during the recession, said George Wentworth, a policy analyst for the National Employment Law Project.

"You've got a system that's been under siege like the unemployment insurance system has been for the last two years," Wentworth said. "You've got a lot of new staff coming into the system, there's been a lot of federal extensions [to unemployment insurance benefits] that have had to be programmed in and so on. There's just been a lot of change that states have had to handle. ... I just think the volume and the new staff have made the systems more susceptible to error."

The newly-unemployed, meanwhile, have found themselves frustrated when trying to reach out to state officials for help in properly filling out their claims.

"In 2009, it was a fairly regularly event to see different states' call centers basically reaching maximum capacity where people would not be able to get through for hours or days at a time," Wentworth said.

The Unemployment Claims 'Tsunami'

Heidi Myhre, of Hudson County, N.J., questions whether she could have avoided an overpayment dispute with the state if she had gotten help filling out her unemployment claim early on. When filing for unemployment insurance in 2007, she called the state several times for guidance, she said, and got nowhere.

Among Myhre's questions: Where on her claim form she should disclose that she receives more than $100 a week in dividends from a family-owned elder care business?

Myhre ultimately decided not to list the payment as earnings because, at the time, she wasn't working for the business. She would go on to receive six months' worth of benefits totaling just under $14,000.

Earlier this year, the state demanded that Myhre to return all the money and also pay a $3,500 fine for fraud after state officials determined that the payments from her family business should have, in fact, been considered earnings. With the help of a lawyer, Myhre successfully appealed the state's decision and reduced what she owed to $6,300.

She remains bitter about the experience.

"It was the most poorly managed debacle I've ever seen in my whole life," she said.

Myhre's lawyer, Jef Henninger, said that in the last six months, he's seen a big uptick in calls from people who have made mistakes on their unemployment claims and now face payback demands from the state. Henninger expects the situation to grow worse before it gets better.

"With so many more people applying for unemployment, statistics tell you you're going to get more incidents like this," he said.

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