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Weekly unemployment claims stay low after fraud adjustment

New IdentityTheft Scam

by Timothy McQuiston, Vermont Business Magazine Regular initial unemployment claims remain at levels more typical of pre-pandemic weeks after the Vermont Department of Labor was able to eliminate the vast bulk of fraudulent claims. VDOL now requires new claimants to call the department directly. As the VDOL discovered, and other states have realized, criminal operations were barraging online systems with false claims. In addition, initial technical issues with the work search requirement for unemployment insurance filers have been resolved. The work search requirement was suspended by the governor during the pandemic and was reinstated on May 9.

Also, the Legislature has removed 2020 from the unemployment calculation for businesses. If they hadn’t, rates to employers would have escalated and the UI Trust Fund would have unnecessarily ballooned. Commissioner Michael Harrington had urged the Legislature to change the law regarding how employers are charged to meet the UI Trust Fund obligations.


Vermont unemployment rate for April holds at 2.9 percent


The Vermont UI Trust Fund was well-stocked with over $500 million before the pandemic and is still flush with over $200 million. Despite the Stay Home order from a year ago and layoffs at their highest levels since the Great Depression because of the pandemic, current law would have required a steep increase in employer charges because of those pandemic-related layoffs. At current law more than $1 billion would be raised.

Harrington said this would have put a burden on employers who are just emerging from the recession and is simply not needed.

It also would have punished employers who were not at fault for the pandemic or for the layoffs related to it.

As for the fraud, criminal enterprises in the US and internationally were taking advantage of the new benefit year (in which claimants were required to re-file) to file false claims in Vermont and across the nation.

In many cases the criminal enterprises were using personal information they had gained from data breaches at other private companies or credit agencies upwards of 15 years ago and were biding their time for the best opportunity to take advantage. The pandemic has provided that opportunity, Harrington said.

He said Vermont has likely lost millions of dollars because of this, but knowing exactly how much has been difficult to assess.


Department of Labor temporarily suspends online UI application for new fliers in order to combat fraud


While the Labor Department was catching most of the fraudulent claims, even those that managed to get through for even a few weeks were able to steal substantial amounts of money because of the sheer volume of attempts (see Figure 2 graph below).

Harrington said that upwards of 90 percent of claims online were fraudulent. Given the data available now, it appears to be over 95 percent.

Governor Scott has said he hopes to use a surplus of federal funds to update the 30-year-old Labor Department mainframe and other IT systems to reduce the opportunity for fraud should another large-size calamity arise.

He added that there always has been fraud related to UI claims. He said such fraud should be a felony, but in the case of the pandemic, the criminals are not only outside Vermont but outside the nation.

Suspending the online registration appears to have solved the problem for now.

The UI Trust Fund is still well funded. Harrington pointed out that much of the money lost is likely in the federal PEUC and PUA programs, as the US government extended benefits because of the pandemic.

Current UI Claims

Meanwhile, on May 22, 2021, the Labor Department reported 358 new weekly filings (they were 6,372 on May 1). This weeks claims are the same as the week before. But they are 1,194 fewer than the same time last year.

As for ongoing jobless claims, for the week ending May 22, 2021, the Labor Department processed 8,860 regular UI claims, down 1,675 from the previous week and 42,977 fewer than the same time last year.

As for further comparison, initial Vermont claims last year for the week of March 21, 2020 (the first full week of the pandemic in Vermont), were 3,784, up 3,125 from the week of March 14, 2020.

​For the legitimate claims this week, there were 18,860 on regular UI; 8,680 on PEUC; 6,826 on PUA; and 6 on extended benefits as of May 22, 2021.

Nationally, claims fell to 406,000, below economists’ expectations of 425,000. They were 444,000 the previous week. This is the lowest number of claims during the pandemic. However, these remain historically high numbers. 

Productivity also exceeded expectations in the first quarter. But the April US unemployment rate ticked up one-tenth to 6.1 percent.

Labor Commissioner Harrington has said at Governor Scott’s media briefings that the new federal stimulus and unemployment money will help Vermonters.

The Vermont unemployment rate for April of 2.9 percent is near the same level as it was just before the pandemic.

Labor Department Report to Legislators

(The Legislature adjourned May 21; this represents the last report from the VDOL.)

Figure 2 shows the spike in suspected fraudulent claims.

Peaks was April 25, 2020, and last bar is May 8, 2021

VDOL tables as prepared for the Legislature. Click HERE to see full report.

During the benefit week ending May 8th, there were 32,156 weekly claims filed. This is a decrease of 1,748 continued claims filed over the previous benefit week. During the week ending May 8, $11,439,560 in benefits were paid out to claimants.

Over the weekend, the department identified an issue with the work search requirement which resulted in some claimants being prompted to enter their work search information when they should not have (e.g. they are self-employed) and other instances where claimants should have been prompted to report work search activities but were not. Programming Issues such as this were not unexpected given the many significant changes the UI system has experienced over the last year as well as the many nuances in the requirement created by different federal and state exemptions.

The issue was detected on Sunday when staff began working to rectify the situation. On Monday morning, a statement was posted to both the Department of Labor’s website, social media, and was also emailed out to claimants. When the issue is fully resolved, further updates will be provided.

Claimants who were able to file their claim without entering work search information will not be penalized and should continue to conduct work search activities this week to report on their claim next week. Claimants who are waiting for the changes to be made in the system will also not lose out on benefits because of this issue and have until Friday at 4:30pm to file their claim for the week. If there are further programming delays, claimants will be able to submit their claim without being ineligible for the week even if it is after the Friday deadline.

Initial UI Claims Fraud

According to a VDOL spokesperson, in April of 2021, initial unemployment claims increased to roughly 1,500 claims a day, with some days reaching well over 2,000 submissions. These numbers immediately raised questions about the validity of the claims being submitted.

The Department’s analysis resulted in well over 50 percent of claims submitted being flagged as fraudulent and needing to be manually reviewed by the UI Fraud Unit.

This created concern for the Department’s capacity to review claims in a timely manner as well as the monetary liability being given to fraudulent claims before a review could be conducted.

In response, the Department removed the online application from its website on April 28, directing claimants to the Claimant Assistance Center to file an initial claim or establish a new benefit year.

At the time the initial claims application was taken offline, more than 80 percent of claims were being marked as fraud.

Due to the evolving nature of this situation, and the commitment to processing timely benefits for eligible claimants, the Department does not currently have data to share on the number or amount of fraudulent payments. This is specifically due to the fact that the systems the Department uses do not aggregate claims that are marked as fraud that resulted in payments. States across the country, have had to quickly adapt to an unpredictable operational environment and increasing security threats that have emerged due to the pandemic.

To that end, VDOL is currently reconstructing historical data to remove fraudulent claims to better reflect the actual population of unemployed Vermonters.

Based on available data, there is strong evidence that throughout the spring, fraudulent activity contributed to an artificially high number of initial claims being reported based on the sharp decline once the application was removed.

However, the Department continues to manage a claims load that is roughly 10 times higher than pre-pandemic levels.

Weekly UI Report

Regular weekly UI claims in Vermont had been edging down since late January, but starting in late March headed steeply back up. Governor Scott declared a State of Emergency on March 13, 2020, and closed restaurants and bars after lunch on March 17, 2020. (He has extended the State of Emergency month to month since, now to May 15, 2021).

On March 24, 2020, Governor Scott issued a “Stay Home, Stay Safe” order and directed the closure of in-person operations for all non-essential businesses (effective March 25-May 15, 2020). These measures swelled the ranks of the unemployed and led to about 90,000 Vermonters filing for unemployment benefits.

As part of unwinding the emergency measures taken to combat the novel coronavirus a year ago and to jumpstart the economy now, on Tuesday April 6, 2021, Governor Scott unveiled two major actions.

First he announced his Vermont Forward Plan to get the state “back to normal by the Fourth of July” or nearly so. This is based on the rollout of vaccines. It would provide universal instead of sector-specific mitigation measures.

It would also lift economic and gathering restrictions, perhaps as early as mid-June but by the July 4th in any case.

Scott also revealed a $1 billion economic recovery and revitalization plan. This features major infrastructure upgrades, including $250 million for broadband.

American Rescue Plan

• The American Rescue Plan (ARP) signed into law by the President on March 11 and includes provisions to extend various Unemployment Insurance programs:
o Pandemic Unemployment Assistance (PUA) was created in March 2020 as a program for individuals not typically eligible for regular unemployment insurance to file for and receive benefits (e.g. self-employed, independent contractors, etc.). This program has been extended until September 6, 2021. The benefit week ending September 4, 2021 will be the final week claimants are able to file in the PUA program.
o Pandemic Emergency Unemployment Compensation (PEUC) was also created in March 2020 as an extension program for claimants who exhausted their regular unemployment insurance benefits but remained unemployed. The ARP extends the number of weeks an individual may receive in the PEUC program from 24 to 53 weeks if they exhaust their regular UI benefits.
o Federal Pandemic Unemployment Compensation (FPUC) has also been extended through the benefit week ending September 4, 2021. Claimants will receive an additional $300 benefit which will be added directly to their state weekly benefit payment.
o Reimbursable Employers: The ARP increases the federal reimbursement rate for non-profit and municipal governments from 50% to 75% for the amounts of compensation paid for weeks of unemployment beginning after March 31, 2021, and ending on or before September 6, 2021.
o Unemployment Insurance Tax Exemption: The first $10,200 in 2020 unemployment benefits are exempt from federal income tax for households with incomes below $150,000 per year. This tax exemption is under the jurisdiction of the IRS. Claimants may find more information about the exemption on the IRS website here: https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion…
1099 Processing Incident
• Once a claimant has received and reviewed all of their 1099 documents, if they still feel that the information provided on the forms is incorrect, they can submit a 1099 correction request form. If a claimant needs a new 1099 or never received a 1099, they can also request to have the Department reissue their 1099. Individuals who receive a 1099 from the Department but never filed for unemployment benefits should file a fraudulent 1099 report with the Department immediate. All in formation regarding 1099 requests can be found at https://labor.vermont.gov/request-1099-correction.
Recapture Update
• As of March 7th, the Department had recaptured 61% (approximately 57,600 returned out of 94,800) of all original 1099s that were delivered to the post office.
Identity Protection Update
• The State has contracted with Identity Theft Guard Solutions, Inc (IDX) to provide identity protection service to claimants. This protection will cover claimants for a minimum of 12-months. Notices were mailed to all 2020 claimants on Thursday, February 18. Claimants have until May 18, 2021 to register with IDX for credit monitoring services, which are retroactive to the date of the incident (January 29, 2021).
• As of March 22, 2021, 11,573 individuals (11.7% of population) had enrolled in ID protection. Claimants have until May 19, 2021 to enroll. The industry average for enrollment is 10% of the affected population.

First quarter 2021 US GDP (second estimate) grew at a significant  6.4 percent, which was unchanged from the first estimate. Economists had expected it to be even higher at 6.6 percent.

US GDP had its worst quarter on record in the second quarter last year as it fell 31.4 percent in that April-June period; the next worst was in 1921, which led to the Great Depression.

Meanwhile, the state unemployment rate, which was the lowest in the nation before the pandemic, then spiked during the pandemic, has retreated and is now the fifth lowest in the nation and back to its pre-pandemic level, which is not really that good of a thing.

The VDOL points out that the US Census modeling has not caught up with the reality of the pandemic and Vermont’s 2.9 percent unemployment rate in April portrays a rosier economic picture than what actually exists.

Harrington has previously said that the real unemployment rate is more in the 5 percent range, and if it included the PUA, the rate is likely more in the 6-8 percent range.

Harrington and Scott said that while the data the US Census collects is not erroneous, they disagree with the methodology the federal government is using given the altered behavior of people during the pandemic.

They said people have left the workforce for reasons related to the pandemic, like for personal safety or childcare, which then lowers the total Labor force, which works as the denominator in the calculations, thus lowering the unemployment rate.

PUA claims are not included in the unemployment rate calculation.

The PUA benefits in some cases are more advantageous. PUA claimants also can get partial payments even if they have some income.

Governor Scott has also extended his Emergency Order until June 15. He has said that he will continue to extend the Order as long as necessary.

However, the governor said on Tuesday, May 25, that he would end most of the pandemic mandates when the state hit the 80 percent vaccination level. This could happen as soon as the week of Memorial Day. The governor had targeted July 4th for the state “getting back to normal,” but Vermont vaccination rates accelerated and the state leads the nation.

Unemployment claims hit their peak in early April 2020.

At that point, Governor Scott’s “Stay Home” order resulted in the closing of schools, restaurants, construction and more, while many other industries cut back operations.

The official Vermont March 2020 unemployment rate was 3.1 percent, but the April 2020 rate was 15.6 percent, which is the highest on record. The Vermont unemployment rate in May 2020 fell to 12.7 percent.

The US April 2020 rate was 14.7 percent, the highest rate since its was first calculated in 1948 and the highest unofficially since the Great Depression of about 25 percent.

Early on in the pandemic, US jobless claims reached 5.2 million and then 6.6 million claims. Just prior to the steep job loss, there were 282,000 claims on March 14, 2020.

The Pandemic Unemployment Assistance (PUA) has added to the ranks of those receiving benefits, but is not counted in the official unemployment rate. The PUA serves the self-employed who previously did not qualify to receive UI benefits and might still be working to some extent.

As for regular UI claims in Vermont, during the Great Recession for the entire year in 2009, claims spiked at 38,081 claims.

The claims back in 2009 pushed the state’s Unemployment Insurance Trust Fund into deficit and required the state to borrow money from the federal government to cover claims.

Right now (see data below), Vermont has $220.6 million in its Trust Fund and saw the fund decrease by a net of $0.3 million last week. Payments lag claims typically by a week. The balance as of March 1, 2020, was $506.2 million.

Vermont at the beginning of the pandemic had more than double the UI Trust Fund it did when the economy started to slide in 2007, as the Great Recession descended. The fund eventually went into deficit and the state had to borrow money from the federal government to pay claims. Some states like California are already in UI deficit because of the COVID crisis.

Scott has said the UI fund is not expected to run out under current projections. At the this rate, Vermont has enough in the Trust Fund for more than 100 weeks.

“We are in a much healthier position than many other states,” Labor Commissioner Harrington has said.

Given the Trust Fund’s strong performance and the burden of unemployment taxes on employers, Governor Scott reduced the UI tax on businesses. He also announced that starting the first week of July, the maximum unemployment benefit to workers will increase about $20 a week.

Related Stories:

Vermont unemployment rate for April holds at 2.9 percent

Tax revenues still ahead of projections after revision, but less so: VBM Feb 17, 2021

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SBA reopens PPP on January 11

Unemployment benefits extended with authorization of federal relief bill

Unemployment rate falls to pre-pandemic level of 3.1 percent

Over $100 million in recovery grants awarded, still more available

Businesses to see double-digit rate decrease in workers’ comp insurance in 2020

Tax revenues finish year nearly $60 million above targets

UI tax rates for employers fell again on July 1, 2018, as claims continue to be lower than previous projections. Individual employers’ reduced taxable wage rates will vary according to their experience rating; however, the rate reduction will lower the highest UI tax rate from 7.7 percent to 6.5 percent. The lowest UI tax rate will see a reduction from 1.1 percent to 0.8 percent.

Also effective July 1, 2018, the maximum weekly unemployment benefit will be indexed upwards to 57% of the average weekly wage. The current maximum weekly benefit amount is $466, which will increase to $498. Both changes are directly tied to the change in the Tax Rate Schedule.

The Vermont Department of Labor announced Thursday, October 1, 2020 an increase to the State’s minimum wage. Beginning January 1, 2021, the State’s minimum wage will increase $0.79, from $10.96 to $11.75 per hour. The calculation for this increase is in accordance with Act 86 of the 2019 Vermont General Assembly. It tracks inflation.

This adjustment also impacts the minimum wage of “tipped employees.” The Basic Tipped Wage Rate for service or tipped employees equals 50% of the full minimum wage or $5.88 per hour starting January 1, 2021.

The Vermont Department of Labor has announced that the state is set to trigger off of the High Extended Benefits program, as of October 10, 2020. This determination by the US Department of Labor follows the recent announcement of Vermont’s unemployment rate decreasing from 8.3% in July to 4.8% in August.

The Unemployment Weekly Report can be found at: http://www.vtlmi.info/. Previously released Unemployment Weekly Reports and other UI reports can be found at: http://www.vtlmi.info/lmipub.htm#uc

NOTE: Employment (nonfarm payroll) – A count of all persons who worked full- or part-time or received pay from a nonagricultural employer for any part of the pay period which included the 12th of the month. Because this count comes from a survey of employers, persons who work for two different companies would be counted twice. Therefore, nonfarm payroll employment is really a count of the number of jobs, rather than the number of persons employed. Persons may receive pay from a job if they are temporarily absent due to illness, bad weather, vacation, or labor-management dispute. This count is based on where the jobs are located, regardless of where the workers reside, and is therefore sometimes referred to as employment “by place of work.” Nonfarm payroll employment data are collected and compiled based on the Current Employment Statistics (CES) survey, conducted by the Vermont Department of Labor. This count was formerly referred to as nonagricultural wage and salary employment.

UI claims by industry last week in Vermont are similar in percentage to those from a year ago.

 

 

Source: on 2021-05-27 14:00:00

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