Missouri bill seeks to forgive mistakenly overpaid unemployment benefits

Currently, Missourians can avoid paying the federal benefits back, but not the state, if they are granted a waiver

By: - December 1, 2021 1:06 pm

Supporters of a bill to create a “regulatory sandbox” program say waiving some regulations for small businesses could help grow the economy. (Photo by Joe Raedle/Getty Images).

The state saw a historic number of Missourians apply for unemployment benefits in 2020.

About 639,000 Missourians filed in the first three months of the COVID pandemic, as businesses shut down to stave off the virus’ spread.

“They were encouraged to apply,” said Jim Guest, director of the volunteer lawyers program at Legal Services of Eastern Missouri. 

Guest was among many service providers across the state who were “swamped” helping people get through the initial unemployment application process. 

The state was trying to get the money out to families quickly, he said, which was commendable. 

But Missouri — like many other states — later realized that their agencies had made some mistakes. Some people who received unemployment benefits weren’t eligible. Others were overpaid.

The state began garnishing wages and putting liens on tax returns of those who were overpaid. Gov. Mike Parson was adamant that he would not accept federal permission to waive overpayments.

In July, the Parson administration changed course. Missourians started receiving letters from the state saying they could avoid paying the federal benefits back if they applied for a waiver within 30 days.

Since the letters went out, the state department of labor has processed approximately 23,000 waiver requests and granted about 10,500 to not pay the federal benefits. 

Though it is better than forcing struggling families to pay for the state’s mistake, Guest says the overpayments should have simply been forgiven instead of making Missourians jump through bureaucratic hoops.

“It’s disappointing to me because it was the state trying to collect benefits on behalf of the federal government,” Guest said. “The federal government wasn’t even asking or demanding that they do that. It seems so punitive to me.”

Despite the waiver for federal money, these Missourians still have to pay for any state-funded unemployment overpayments — which is something that both House Republicans and Democrats pushed back on this spring, said state Rep. Ian Mackey, D-St. Louis. 

Mackey pre-filed legislation Wednesday to halt the state from recovering overpayments of COVID-related unemployment benefits for both the state and federal benefits.

“The intent really is just to stop the harassment of these folks who, a year ago, mistakenly received this money and to stop the future harassment of trying to collect it,” Mackey said.

Blanket waiver

The U.S. Department of Labor gave state governments the option of doing a “blanket waiver” for people who received more money at no fault of their own. 

However, Missouri chose the option to have each person apply for a waiver individually. 

This option, the feds advised, would potentially result in “the same amount of overpayment being forgiven, but at a greater cost to the state because of the workload generated from processing individual waivers,” according to a May 5 letter from the U.S. Department of Labor. 

In addition, the governor demanded that Missouri residents pay back any overpayment residents received from the state, even as a bipartisan group of lawmakers pushed for legislation allowing the state to use federal relief funds to forgive the state debt. 

“If this bill were to come back from the Senate with the state portion included and we were able to fund with CARES Act funding…that is something I would personally be in favor of,” said state Rep. Scott Cupps, R-Shell Knob, during a March legislative hearing.

State Rep. Peter Merideth, D-St. Louis, said he receives numerous calls and emails every week about people struggling with this issue.

“If the government makes a mistake, the government shouldn’t be hounding you to fix it,” Merideth said. 

The letter

For many people, the state’s letter notifying them that they owe $4,000 or $6,000 in unemployment overpayment is intimidating, Guest said. 

“I get really worried about the people who we don’t even talk to,” he said. “They get a letter saying you owe this crazy amount of money, and it scares the heck out of them.”

The letter warns of garnishing wages, putting a lien on tax returns and property if people don’t fill out a waiver in 30 days or pay back the money. And while it explains the waiver process and a payment plan, Guest says that it’s a lot to navigate. 

Going through an individual waiver process not only requires more work from labor department employees, Guest said, but also from service providers who are helping people fill out the applications and appeals.

“The evidence is that there was a minuscule amount of fraud,” he said. “This is not something where people were taking advantage of the system.” 

The state overpaid roughly $96 million in unemployment benefits between January and September last year, or about 2% of all the benefits paid out.

In its May letter to state workforce agencies, the U.S. Department of Labor describes two circumstances under which states may process “blanket waivers.” 

The first scenario is when an individual is eligible for payment under one unemployment program for a given week, but through no fault of the individual, they were paid incorrectly under the pandemic-related programs at a higher weekly benefit amount.  

The second scenario is specific to the Pandemic Unemployment Assistance program — for people who were out of work due to the pandemic — and occurs when, through no fault of the individual, the state paid the individual a minimum weekly benefit amount that did not align with prior department guidance.

“If the state elects to do this, they must apply the blanket waiver to all overpayments meeting these circumstances since the beginning of the CARES Act programs,” a U.S. Department of Labor spokesperson told the Missouri Independent. “Individual requests are not required.”

Mackey said his bill doesn’t outline whether Missouri’s labor department continues the individual waiver process or does a blanket waiver. However, he said the amount of potential fraud doesn’t warrant the state’s manpower.

“Do we really need dozens and dozens and dozens of employees spending dozens of hours a day on this, just to smack the hand of somebody who might have done something they shouldn’t have?” Mackey said. “I don’t think that’s worth it.”

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Rebecca Rivas
Rebecca Rivas

Rebecca Rivas is a multimedia reporter who covers Missouri's cannabis industry. A graduate of the University of Missouri School of Journalism, she has been reporting in Missouri since 2001, including more than a decade as senior reporter and video producer at the St. Louis American, the nation’s leading African-American newspaper.