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As lawmakers grapple with whether to extend a temporary $600 bump in unemployment benefits to help people who have been furloughed or had their hours reduced as a result of the coronavirus pandemic, a government watchdog is warning that the program is likely making overpayments.
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According to a report released Thursday by the Government Accountability Office, the expanded benefit program is at an “increased risk of improper payments” due to the dramatic rise in unemployment insurance claims.
More than 47 million people have filed jobless claims since mid-March.
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The unemployment insurance program in general has been designated a “high-priority program” by the Department of Labor’s Office of Inspector General due to overpayments, which were estimated at $2.7 billion in fiscal 2019 – a year without a global pandemic, the GAO explained.
Additionally, history has shown that temporary programs following natural disasters have led to improper payments, GAO researchers said.
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There are two main scenarios whereby the government may be making payments to people who do not necessarily qualify for them.
The first is a situation where claimants return to employment but do not report their work – and thereby continue to receive benefits.
There is an additional risk posed by businesses that receive aid through the Paycheck Protection Program. GAO said improper payments in this case may happen if workers are paid with PPP loan dollars while also receiving unemployment benefits.
In fact, there is currently no way for the government to detect in real time information about claimants who are receiving wages from PPP loans.
Department of Labor officials said they are developing comprehensive monitoring systems to help states implement the necessary processes to detect and recover overpayments. GAO requested clarification to call state attention to “the potential for fraudulent or otherwise improper payments.”
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Republicans, along with business leaders in some industries, have already raised concern that the expanded benefit may disincentivize workers from seeking out new employment.
GAO also noted some people may refuse to return to work over health-related safety concerns.
Under the CARES Act, eligible Americans who are out of work entirely or underemployed because of reasons related to coronavirus can receive an additional $600 a week for up to four months.
Benefits for 68 percent of workers are likely exceeding what they would have earned if they were still working, and the median replacement rate for about 20 percent of people is 134 percent.
Some Democrats are in favor of extending the proposal, as millions of new Americans continue to file new jobless claims each week. White House officials have advocated for finding other ways to provide financial aid to people in need.
For example, the administration has backed what it calls a “back to work bonus” as an alternative, which would provide an incentive for individuals to reenter the marketplace.
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