House Passes Bill Incentivizing States to Claw Back Fraudulent Unemployment Insurance Benefits

In this photo illustration, a person files an application for unemployment benefits in Arlington, Va., on April 16, 2020. Olivier Douliery/AFP via Getty Images

The House voted on May 11 to pass legislation aimed at incentivizing states to claw back fraudulently paid unemployment benefits made during the COVID-19 pandemic.

The bill, H. R. 1163, known as the “Protecting Taxpayers and Victims of Unemployment Fraud Act” passed in a 230–200 vote, with 10 Democrats joining Republicans in voting for the legislation.

Under the legislation (pdf) states would be allowed to retain 25 percent of any amount recovered from overpayments of Federal Pandemic Unemployment Compensation or Mixed Earner Unemployment Compensation that were determined to be fraudulently made.

Amounts retained by the state must, however, 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.

It may also be used for other “other program integrity activities as determined by the State,” according to the bill.

Additionally, the legislation allows states to keep 5 percent 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.

Hundreds of unemployed Kentucky residents wait in long lines outside the Kentucky Career Center for help with their unemployment claims, in Frankfort, Kentucky, on June 19, 2020. John Sommers II/Getty Images

Americans ‘Robbed’ of Billions

According to a report (pdf) 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,” Rep. Jason T. Smith (R-Mo.), the chief sponsor of the bill, said in a statement after its passing.

“Individuals had not just their benefits but their identities stolen to perpetuate this fraud, and sadly when they controlled all of Washington, Democrats refused to lift a finger to recover these funds and hold the criminals accountable,” he added.

The White House Office of Management and Budget, however, 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 percent in recovered overpayments to combat future fraud.

The Epoch Times has contacted the White House for further comment.

Rep. George Santos (R-N.Y.) looks on as the U.S. House of Representatives convenes for the 118th Congress at the U.S. Capitol in Washington on Jan. 3, 2023. Mandel Ngan/AFP via Getty Images

Santos Arrested on Unemployment Benefit Charges

Smith’s bill was also co-sponsored by Reps. James Comer (R-Ky.), Marjorie Taylor Greene (R-Ga.), and George Santos (R-N.Y.), among others.

Santos was arrested on May 10 on federal charges of wire fraud, money laundering, theft of public funds, and making materially false statements to the House of Representatives.

The charges also relate to Santos, 34, illegally receiving unemployment benefits while employed.

According to an indictment, the newly elected congressman, who represents New York’s 3rd Congressional District, applied for government assistance through the New York State Department of Labor in mid-June despite at the time being employed as a Regional Director of a Florida-based investment firm, making him ineligible for unemployment benefits.

“From that point until April 2021—when Santos was working and receiving a salary on a near-continuous basis and during his unsuccessful run for Congress—he falsely affirmed each week that he was eligible for unemployment benefits when he was not,” the indictment states.

As a result, Santos allegedly fraudulently received more than $24,000 in unemployment insurance benefits, according to prosecutors.

Santos has pleaded not guilty to the charges.

Asked if Santos’s indictment will undermine H. R. 1163, House GOP Conference Chairwoman Elise Stefanik (R-N.Y.) told The Hill, “As I’ve said from the very beginning on questions on this subject, this legal process is going to play itself out.”

“Unfortunately, this is not the first time a member of Congress from either party has been indicted. There are a set of rules and, as the majority leader stated, he voluntarily had stepped down from his committees,” Stefanik added.