The Healey administration is moving ahead with a plan to deal with overpayment of pandemic-era unemployment benefits by giving 59,000 recipients more time to resolve their cases, while beginning the process of clawing back $719 million from 112,000 others starting this week.
In 2020 and 2021, the pandemic unleashed an unprecedented amount of unemployment benefits for millions of workers in Massachusetts after the economy was largely shut down to reduce the spread of COVID-19. In the rush to send out checks, and amid ever-changing eligibility rules for new federal relief programs, some people approved for state benefits were later told they were overpaid ― in some cases by tens of thousands of dollars ― and would need to return the money.
After stories published in the Globe and pressure from the Legislature, the Baker administration rolled out a streamlined “one-click” waiver process last April. The state also launched a $1 million, multilingual marketing campaign to help recipients learn how to resolve their overpayment status.
Still, when Governor Maura Healey took office in January, about 171,000 people remained classified as owing jobless benefits money. As a result, their 2022 tax refunds could be intercepted by both the state and federal governments, according to Lauren Jones, the labor secretary Healey appointed and whose office oversees the Department of Unemployment Assistance.
These claimants are not accused of fraud, but rather were given too much money by mistake, through no fault of their own. In many cases, it was spent long ago to pay bills because people were out of work at the time.
Jones said resolving the outstanding overpayments has been a priority for the governor, who also wants to make sure the state does not take back money from recipients who deserved and needed it. To ensure that, the Healey administration decided to give 59,000 people who would have qualified for the one-click waiver program ― which expired in October ― more time to resolve their cases. They have been removed from the tax refund intercept list.
“We had a good faith effort in making sure that anyone that we believe were entitled to benefits during the most crazy days of the pandemic would not be impacted as much as possible, and we wanted to make sure that was our guiding principle,” said Jones.
Even in normal times, unemployment overpayments are not unusual. But the size and scope of them were magnified during the pandemic. In 2020 and 2021, the state administered $33 billion in jobless benefits to 4.2 million claimants. That was in sharp contrast to 2019 when the state dispensed just $1.4 billion in unemployment checks to 400,000 claimants.
Jones said her office’s review of the situation found that at one point there were 590,000 people who were collectively overpaid $4.3 billion. Between the Baker and Healey administrations’ efforts, about 81 percent of those claims were resolved through waivers. Many of the cases were attributed to new rules that required proof of employment.
The current plan ends a three-year pause on clawbacks related to unemployment overpayments that began in March 2020. Jones said the Healey administration feels comfortable moving forward with refund intercepts after a state marketing effort got the word out through 10,000 hours of phone calls and 60,000 text messages. That was on top of e-mails, direct mailings, social media posts, and radio advertisements.
With Massachusetts tax returns due April 18, the state Department of Revenue and the federal Internal Revenue Service will begin the process of intercepting 2022 tax refunds this week to apply the money toward overpayments. People can challenge the intercept and request a hearing with DUA.
Jones said people whose tax refunds are being intercepted have previously been notified that this could happen.
“We’ve done tremendous due diligence to make sure that we tried our best to minimize the population,” she added.
State Representative Josh Cutler, House chairman of the Joint Committee on Labor and Workforce Development, and his counterpart in the Senate, Pat Jehlen, said that they have been briefed on the administration’s plan on tax intercepts but that questions remain on the demographics of the intercept list, what to do with people who have trouble paying, and the ease in which people can get in touch with the DUA and DOR.
“It’s a step that needed to be taken, but something we continue to monitor,” said Cutler. “Even for the folks who there’s no other solution than a tax intercept . . . we have to be compassionate to them and try to find ways to make the process easier.”
A report filed to the Legislature last March about pandemic overpayments indicated that the average annual income of claimants was about $50,000, and about 30 percent were people of color.
“It’s a thorny issue,” added Cutler on intercepting refunds from people who don’t earn a lot of money. “That’s why it gets harder now because there aren’t a lot of easy steps to take . . . collecting this amount.”
Jason Salgado, a staff attorney at Greater Boston Legal Services, which provides free legal service to low-income clients, said during the pandemic the organization handled thousands of cases involving pandemic-era overpayments. Salgado said lawyers are handling far fewer cases these days, but overpayment issues persist, such as for the 59,000 people who qualified for an expedited waiver but never applied.
“We are very pleased by the administration’s willingness to ensure this group of claimants will not have their taxes intercepted,” said Salgado. “This decision will give these claimants much-needed breathing room, and is an important step in resolving DUA’s remaining overpayment cases.
The state needs to recover overpayments to replenish the unemployment insurance fund that was depleted during the pandemic. The state had to borrow money from the federal government and issued $2.68 billion in bonds last year to repay those loans and shore up the fund.
Employers, which fund unemployment benefits through taxes, now also pay a COVID-19 assessment to defray the cost of the bonds. Business groups have urged the state to use federal pandemic relief money to lessen the burden.
Shirley Leung is a Business columnist. She can be reached at firstname.lastname@example.org.