Feds OK another collection pause on Michigan unemployment aid overpayments

Beth LeBlanc
The Detroit News

Michigan's Unemployment Insurance Agency plans to again halt efforts to recoup some payments to 391,000 claimants who collected unemployment benefits during the pandemic.

The narrow waiver granted by the U.S. Department of Labor allows the state to stop new wage garnishments or intercepts of state tax refunds on individuals who used federal unemployment programs made available during the pandemic. A similar waiver expired in May. 

The suspension does not extend to claims being investigated as fraudulent, overpayments made in state unemployment insurance programs or debts owed to other states. The suspension also does not apply to other existing collection activity such as wage garnishments, federal tax return intercepts or garnishment of current unemployment benefits. 

The suspension lasts through Oct. 31. 

"The suspension will put money back in the pockets of people who needed pandemic unemployment benefits and followed the rules when they asked for help," said Julia Dale, director for the Unemployment Insurance Agency. "This federal action will allow us the time we need to evaluate claims for overpayment waivers, which we will be announcing soon.”

The state has waived about 62,300 claims this year for a total of $484.2 million in overpayment forgiveness, according to the agency. 

In all, the UIA has waived more than $4.4 billion in overpayment debts on more than 407,300 claims since July 2021 on pandemic unemployment aid, the agency said.

Dale said the suspension through the end of October will give the state breathing room to continue processing additional waivers for thousands of individuals whose claims were snarled in a rushed rollout of new federal pandemic benefits in 2020 and 2021. 

The agency continues "advocating aggressively" with the U.S. Department of Labor to deliver on the waivers, the department said in a press release. 

The suspension of collections comes amid more than two years of turmoil at the agency, which saw record numbers of claims during the pandemic that created a bottleneck and delayed payments for some individuals for months.

While getting those payments out, the agency also was juggling the implementation of new federal pandemic unemployment programs and fending off unprecedented attempts at fraud from within and outside the agency.

Over the past year, the agency has informed hundreds of thousands of claimants they were ineligible or overpaid — in many instances, because of a mistake made by the agency during the pandemic.

The overpayment notices have led to panic among individuals who legitimately believed they'd been eligible for benefits, especially after being granted the payments by the agency. A deluge of appeals and a class action lawsuit challenging the agency's overpayment demands as unconstitutional have been filed since those redeterminations were issued. 

The agency is working to deliver waivers to individuals who were overpaid through no fault of their own, but the effort needs to be coordinated with the U.S. Department of Labor since those overpayments included billions of dollars in federal unemployment money.