The U.S. Department of Labor reported that an estimated $14 billion were overspent in unemployment benefits in fiscal 2011.
The federal government and states like Indiana, one of the worst offenders, are now trying to recoup the lost money and prevent future overpayment.
According to the Census Bureau, the distributed benefits did help 3.2 million Americans in need in 2010. However, there are three types of people who have received overpaid funds: people actively searching for jobs, those who were fired or quit their job, and those who have returned to work but are continuing to claim unemployment.
Overpayment is typically an administrative error made by the government, the employer, or the employee. It can also be a combination of all parties.
Scams also contributed to overpayment with claims involving prison inmates, illegal immigrants, and deceased citizens. During fiscal 2011, there were 2,700 convictions of fraud related to unemployment insurance. Punishment typically consists of probation, community service, or an added penalty to the payback amount.
Ryan Greminger, 39, of Richmond, Indiana admits that he collected unemployment benefits while serving a two-year prison sentence for a drug-related crime. Prior to his conviction, he was laid off from a factory in 2007. He was encouraged to keep filing claims from a fellow inmate.
"It's not like some big scheme I thought of," Greminger said. "I paid this guy $50 each time to have his girlfriend — a woman I had never met — file my unemployment claims."
Greminger explained that he needed the money to provide for his fiancé and their four kids. He is now out of jail and working to repay over $14,000 to the state.
"I accept responsibility for what I did. It was wrong. It was a mistake," he said. "I'm paying for it now."
Vice President Joe Biden is now leading the charge against wasted federal spending through the Campaign to Cut Waste initiative.
The Labor Department predicts that only half of the overpayments can be recovered. Gay Gilbert, an administrator in the Labor Department’s Office of Unemployment Insurances said that only a fourth of the “recoverable” funds have actually been retrieved.
“We believe our improper payment rate has very slightly started to tick down," Gilbert said.
When the federal government discovered overpayment, a letter is sent to the worker instructing them to return the funds. In some states, workers are allowed to prove if they are in financial distress to waive the payments. Otherwise, claimants can be taken to court if they do not pay back what they owe.
Repayments can be processed by being withdrawn from garnishing wags, being deducted from federal income taxes or payment plans.