Some states overpaid jobless aid — and now want the money back

Unemployment benefits are designed to help out-of-work adults pay their bills while they look for a new job. But that aid has become a headache for tens of thousands of people in Ohio, Pennsylvania and other states who were mistakenly overpaid by their state unemployment offices — and are now being asked to repay the money.

Ohio officials said more than 160,000 people received overpayments in August and September through its regular unemployment claims as well as Pandemic Unemployment Assistance (PUA), the federal program designed to help self-employed workers and others who aren't typically eligible for jobless benefits. .

States are either asking recipients to return the money or subtracting the funds from their ongoing unemployment checks, adding to the financial stress of being jobless during the pandemic. In some cases, the overpayment was due to claimants misreporting their income, but errors by state labor department staff and computers errors also played a role. In Pennsylvania, for instance, a vendor processed duplicate payments, resulting in aid recipients getting too much money.

The issues highlight the need for more investment in state unemployment systems, said Andrew Stettner, senior fellow at The Century Foundation and an expert on unemployment.

"We have had a lot of signals that they have been underinvested in," he said. "They haven't been able to work through their backlogs as quickly as possible."

To be sure, the number of people who received overpayments is a small share of the 26.5 million unemployment claims filled in the most recent week.

"We understand the frustration overpayments cause during what is already a stressful time, and we are committed to doing everything we can to lessen those hardships within the bounds of state and federal law," said Tom Betti, a spokesman with the Ohio Department of Job and Family Services, told CBS MoneyWatch.

Ohio said about 20% of PUA claimants received an overpayment through the end of August, or about 108,000 people. Another 7% of regular jobless aid recipients, or about 57,000 people, received too much money through late September.

Texas and Colorado have also overpaid jobless claims, with the Texas Workforce Commission saying it overpaid $203 million to about 185,000 people from March 1 through September 15, according to the Dallas Morning Herald. A Colorado official told the Wall Street Journal that many overpayments were due to people incorrectly reporting their income, which affects benefits.

States each have their own formulas for calculating their regular unemployment benefits, typically basing the payout on the worker's earnings before they lost their job. The higher their income, the higher the benefit — although benefits are typically capped at a maximum.

Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, jobless workers also received an additional $600 in weekly aid, although that expired in July. The PUA benefit is also based on income and includes an additional $600 in weekly benefits.

Because of the delays in getting jobless aid to workers at the start of the pandemic, many people received checks reflecting weeks of back payment. That may have made it more difficult for claimants to realize that they had received too much.

Ohio said that claimants who got an overpayment and are still getting jobless benefits will see their checks reduced until the money is repaid. It added that recipients who had overpayments due to agency errors won't have to repay the money. However, most overpayments are due to incorrect wage data provided by workers, the state said.

Pennsylvania said it has reached out to people who received overpayments, and is giving them the choice of repaying in a lump sum or having future benefits reduced.

It added, "Errors do occur in Pennsylvania, just as they do in every state. There is truly a range of reasons for overpayments, including administrative errors, mistakes made by applicants, intentional fraud by applicants, and fraudulent activity."