Michigan unemployment agency waits 6 months to inform aid recipients of error

Lansing — Leaders within the Michigan Unemployment Insurance Agency were told as early as Jan. 6 that the federal government rejected four state-developed unemployment qualifications for aid, according to a letter obtained by The Detroit News.

The state agency told federal officials then that it was making the necessary changes to the qualifications for federal Pandemic Unemployment Assistance, aid for part-time, self-employed or gig workers who wouldn't normally qualify for benefits, the letter says.

But the Unemployment Insurance Agency didn't notify the nearly 600,000 people  affected by the mistake for nearly six months.

"The reviewers identified that the state’s initial and continued (Pandemic Unemployment Assistance) applications lists four additional reasons not supported under the CARES Act," Rose Zibert, acting regional administrator of the U.S. Department of Labor, wrote on Feb. 10 to the Michigan Department of Labor and Economic Opportunity. 

The "monitoring review" letter officially informed state Unemployment Insurance Agency Acting Director Liza Estlund Olson of the problematic qualifiers and that Labor Department officials met with several state officials in an "exit conference" Jan. 6 to discuss the review. The letter was first obtained by the Michigan House Oversight Committee.

The letter gives the clearest indication yet of how early Michigan unemployment officials were told about deficiencies that resulted in the beneficiaries of extra pandemic assistance being asked to reattest to their qualifications for aid. At least some have been billed for repayment. 

"The feds made it very clear what they had to do, and it took them half a year to come into compliance," Rep. Steve Johnson, R-Wayland, said Wednesday. "Meanwhile you had thousands of Michiganders who were potentially receiving money they weren’t entitled to. They could have addressed this a long time ago.”

The UIA on Wednesday acknowledged that it should have given the oversight committee, led by Johnson, a copy of the Feb. 10 letter when the committee asked for the earliest indications of the problematic qualifiers. Instead, the agency gave Johnson a copy of a separate Feb. 25 notice.

The agency said it removed the four ineligible reasons from unemployment applications by the end of January, but it took another five months to get to the point where the agency could review and notify the thousands of claimants affected by the mistake. At the time, the Unemployment Insurance Agency also was working to implement other changes associated with changing federal COVID-19 aid packages.

"It took time for the agency to make the thorough technical changes to its systems to ensure the requalifications could be appropriately distributed and processed," agency spokesman Jason Moon said. "This included complex development and intensive system testing."

The state previously has indicated it learned of three additional federal qualifications on Feb. 25, but did not say when it learned that four of the state-developed qualifications had been rejected. 

In late June, the state sent 648,100 letters to about 590,000 pandemic unemployment assistance recipients informing them that they would have to re-attest to their eligibility because of federal guidance adding three federal qualifications and rejecting four state-developed qualifications used during the pandemic. 

The letters set off a wave of panic for claimants who hurried to resubmit their qualifications, afraid that they would have to repay the unemployment money they received. About 241,000 individuals responded and asked to requalify, and their requalifications are being processed, the state agency said in late July.

Another 350,000 people never responded at all, with some alleging they never received the late June notice from the agency.

It's likely neither group will have to repay the benefits they received because the Whitmer administration has said it would ask the federal government for waivers for claimants "who followed the rules and received benefits through no fault of their own."

But some claimants caught up in the error have expressed confusion over the agency's response letters that tell them they owe thousands of dollars in overpayments while indicating it will likely be waived.

Some recipients said they received overpayment notices in July indicating they owed the agency thousands in mistakenly paid unemployment while assuring them they may be eligible for a waiver. Lawyers told lawmakers Tuesday that the letters were confusing and the waiver eligibility was unclear.

The situation has rekindled anxiety among jobless aid recipients and pushed a new wave of calls to lawmakers' offices, leaving unanswered questions that lawmakers hope to get answers to in committee, Johnson said.

"There’s a lot of explaining that the agency needs to do at this point," he said. 

The Feb. 10 U.S. Department of Labor letter included the results of a federal monitoring review of the state's unemployment program — conducted between Oct. 26 and December — that found several deficiencies within the state's system. Included in those deficiencies was the fact that the state had "four additional reasons listed on PUA initial and continued claim applications that do not meet COVID eligible conditions and are lacking in three required reasons."

The letter said the reasons developed by the state were "invalid" and that the state should reevaluate eligibility for everyone who marked one of those faulty reasons for benefits from May 9, 2020 onward. In addition, the letter noted that the state's exclusion of three federal qualifications could exclude "otherwise eligible individuals."

"The state indicated they have submitted service requests to make these changes in their system," the Feb. 10 monitoring review said. 

The letter indicated Department of Labor staff met with leaders at the agency for an exit conference regarding the review Jan. 6. Included in the meeting were UIA Deputy Director Kimberly Berry, Compliance Manager Bob Czech, Internal Controls Division Administrator Teresa Burns, Benefits Division Administrator Virginia Abdo, Adjudication Manager Kristine Kratz, Agency Security Officer Christina Mykolenko and UIA Chief of Staff Stephanie Glidden, according to the federal letter.

Johnson speculated the agency waited months to notify residents to see if the Biden administration would be more lenient than the Trump administration, under which the review was conducted.

He said he contacted the agency Wednesday morning after reading the Feb. 10 letter to request Estlund Olson to testify at the committee's next meeting. 

"The fact that they waited until June is absolutely ridiculous," Johnson said. "It’s hard to figure out how much is mismanagement, how much is incompetence and how much of it is just willful misconduct.”

On Tuesday, individuals who received the mailing, such as Alex Hill, told lawmakers on the House Oversight Committee that the notice of overpayment was alarming and confusing.

Hill was told on July 29 that he owed about $27,000 to the agency and, though there was some mention of a waiver, he was unable to clarify over phone calls with UIA staffers what the letter meant or which steps he should next take. 

He thinks he requested a waiver but is uncertain. 

"It’s a shame that the people who suffered through this pandemic and relied on unemployment are having to pay for a mistake that isn't our own," Hill told lawmakers.

eleblanc@detroitnews.com