As a result of the COVID-19 pandemic, unemployment agencies across the United States have been dramatically affected. As CCC reported earlier this month, a handful of states have been affected by a Nigerian fraud ring targeting state unemployment programs in an attempt to fraudulently collect not only state unemployment benefits but the additional $600 per week stimulus being distributed by state unemployment programs. Washington State has been hit particularly hard with the Washington Employment Security Department announcing that “hundreds of millions” of dollars in fraudulent unemployment has been paid out.  Illinois, Rhode Island, California, and Oklahoma have also reported an increase in fraudulent filings of unemployment claims.

As if the fraudulent claims weren’t enough, five states have now announced a data breach of their unemployment programs. Arkansas, Colorado, Florida, Illinois, and Ohio have all reported that the personal information of individuals filing for unemployment compensation benefits has been breached during the COVID-19 pandemic. Colorado, Illinois, and Ohio all contracted with the same vendor, Deloitte to quickly build and implement the system used to provide Pandemic Unemployment Assistance to claimants who are ineligible for “regular” unemployment benefits. State systems for the most part are very antiquated and were unprepared for not only the influx in numbers of claims filed but the additional programs assigned to the agencies through the stimulus packages provided by the federal government.

To cover all of the unemployment benefits being paid; fraudulent or not, state unemployment agencies need to have the funds to cover these claims initially, even if the federal government may eventually reimburse the agency. Several states have taken loans from the federal government to cover their agencies, with New York being the most recent. The drain to state trust fund balances is expected to continue, as unemployment claims related to the COVID-19 pandemic increase.  CCC’s Tax Department continues to track these developments as additional states struggle to meet the increased applications for Unemployment Benefits while minimizing the impact on the employer Unemployment Insurance tax rates when possible.  Additional applications for Advance Authorizations are anticipated, as the underfunded State Trust Fund balances continue to deplete.

 

The impacts of the COVID-19 Pandemic on the state unemployment programs will continue. Please continue to follow CCC for additional updates on the impact of the COVID-19 Virus on state agencies, unemployment rates, and the State Trust Fund Balances.

 


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