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1 CRRECTIVE ACTIN PLAN State: Pennsylvania Federal Fiscal Year: 2014 Measure: Benefit Payment Control Detection of verpayments Establish 50 percent of the overpayments that the Bureau Accuracy Measurement (BAM) unit estimates during the rolling threeyear period. Performance Level: Current 12/31/13 3/31/14 6/30/14 9/30/ % 41% 43.5% 44.5% 46.0% State: Pennsylvania Federal Fiscal Year: 2015 Measure: Benefit Payment Control Detection of verpayments Establish 50 percent of the overpayments that the Bureau Accuracy Measurement (BAM) unit estimates during the rolling threeyear period. Performance Level: Current 12/31/14 3/31/15 6/30/15 9/30/ % 48.0% 49.0% 50.0% NARRATIVE The Pennsylvania Department of Labor & Industry is implementing several projects with the goal of detecting and establishing larger numbers of overpayments over the next two federal fiscal years. Pennsylvania currently participates in the UI Integrity Institute because we are one of 11 high impact states. The goal of the institute is for participating states to work together to improve the prevention and detection of overpayments nationally. Labor & Industry officials believe that participation in the task force will help them develop new and more effective strategies for detecting and preventing overpayments. Below is a summary of the Benefit Payment Control and Benefit Integrity (BPC) unit s main projects and initiatives. The BPC unit, a component of the ffice of Unemployment Compensation Benefits Policy (UCBP), has responsibility for preventing, detecting, and

2 recouping overpayments. Since the solution to meeting the performance measure is a multi-year task, the department has prepared this multi-year corrective action plan. Delegating Additional Responsibilities to the Designated verpayment Teams (DTs) During 2011 and the beginning of 2012, UCBP and the ffice of UC Service Centers (UCSC) established and trained certain UC service center supervisors, examiners, interviewers, and clerks to serve on the Designated verpayment Teams (DT). The role of these teams is to focus on the detection, establishment, and recording of overpaid federal and state benefits. Each UC service center currently has a DT team, which is helping the department to establish and record more overpayments. Moreover, the clerks on these teams are helping to reduce the department s backlog of unrecorded UC, EUC and EB overpayments. During January of 2013, two clerks on the DT teams, one from Allentown and one from Lancaster UC service centers, learned how to process UC Referee decisions, UC Board of Review decisions, and vacate determinations. In May 2013, the original two clerks and one additional clerk from Lancaster learned how to process more complex UC Referee and UC Board of Review decisions as part of a pilot project. As of August 2, 2013, these clerks handle a sizeable number of UC Referee and UC Board of Review decisions from the Harrisburg verflow Center and the seven (7) UC Service Centers. Specializing this work among designated staff assists in expediting the removal, reduction, and/or modification of claimants overpayments. UCBP and UCSC staff in Central ffice will continue to monitor the performance of the DT teams and provide additional training and guidance whenever necessary. Developing and Implementing Procedures for Third Party Fraud Cases UCBP s Adjudication Unit and the BPC unit are working jointly to develop procedures for third-party fraud cases. Third party fraud is when someone uses another person s Social Security Number to file a claim fraudulently. There are many types of this fraud, such as cases involving deceased and/or incarcerated claimants. Regardless of the type of fraud, all third party fraud cases involve identity theft. Sometimes the victim knows the perpetrator and sometimes he/she does not. Third party fraud cases are investigated by the Internal Audits Division, a branch of the department s ffice of Integrity. When the investigation is completed, the case goes to the ffice of Chief Counsel for review and recommendation. Then it goes to the Adjudication Unit for a determination. If someone is found guilty of third party fraud and his/her Social Security Number is known, the Adjudication Unit will establish a fault or fraudulent overpayment. Adjudication and BPC staff will create standard procedures for processing these identity theft claims with the goal of generating more fault and/or fraudulent overpayments. In addition to the obligation to repay the overpayments, all claimants who commit fraud to obtain benefits: may have to serve penalty weeks in lieu of prosecution for UC fraud,

3 could face prosecution for UC fraud at the district magistrate level, or could face prosecution under Pennsylvania s crimes code if their overpayments exceed $20, The Adjudication and BPC units will continue to monitor the effectiveness of these procedures, making adjustments whenever necessary. Expanding the Incarcerated Claimants Cross Matches n May 30, 2012, the department implemented the Justice Network (JNET) County Incarcerated Claimant Cross Match to obtain incarceration information from county prisons. Prior to implementing the JNET program, BPC staff was only alerted about incarcerated claimants in state correctional institutions and overpayments occurring due to claimants filing for benefits while incarcerated in county prisons were detected only after-the-fact since there was no system in place to alert BPC of the initial incarceration. The JNET program first focused on Philadelphia County since estimates indicated that Philadelphia s prison population to be nearly one third of the state s total prison population. nce upgrades to the Legacy mainframe computer system were tested and updated, additional counties were added incrementally by region. In ctober 2012, 17 western Pennsylvania counties were added to the cross match. In November 2012, 22 central Pennsylvania counties were added to the cross match. The remaining 27 eastern Pennsylvania counties were added during January Expanding the Treasury ffset Program (TP) A key component of the department s corrective action plan is the Treasury ffset Program (TP), in which BPC staff request the Internal Revenue Service (IRS) to garnish the federal income tax refunds of eligible claimants to recoup UC overpayments. During November 2012, BPC and ffice of Information Technology (IT) staff determined that approximately 17,940 claimants owing $1, or more qualified for the program. UC Service Center staff imposed penalty weeks against these individuals in lieu of prosecuting them for UC fraud. Section 801(b) of Pennsylvania s Unemployment Compensation Law (Law) prohibits claimants from receiving benefits while they are serving their penalty weeks. As of August 7, 2013, the department has recouped $16,524, from approximately 8,780 TP claimants during tax year 2012/calendar year The number of claimants represents approximately percent of the potential TP claimants during this period. The average payment per claimant is approximately $1, The department intends to expand the TP program during tax year 2013/calendar year Affected claimants will include those: whose fraudulent overpayments of state UC benefits or state extended benefits (EB) exceed $25.00; who have penalty weeks due to their fraudulent behavior;

4 in which the department garnished the claimants prior federal income tax refunds; in which the department filed a lien before the statutory deadline for recouping these overpayments. The statute of limitations for recouping fault UC and EB overpayments is six years after the benefit year ending (BYE) date of the overpaid claims. Members of the BPC section will continue to monitor the performance of this program and will make adjustments and recommendations whenever necessary. Implementing Pennsylvania s Amnesty Program Pennsylvania s Act 60 of 2012 established a three-month Amnesty Program running from June 1, 2013 through August 31, 2012 in which eligible claimants are given the opportunity to receive a discount on interest and penalties if they satisfied their overpayment obligation. When a claimant makes the necessary payment, the department will decrease the outstanding interest and/or penalty weeks on their overpayment(s). n May 28, 2013, the department mailed notices to 130,453 claimants who met the criteria for the program. The department engaged in a multimedia advertising campaign throughout the Commonwealth of Pennsylvania, which included the creation of the website. Department and IT staff created the payment portal so that claimants could make electronic credit card payments towards their debts. The website was also updated to provide information for individuals about the program and how to participate. Additional outreach efforts consisted of the mailing of a second notice, reminder s, automated reminder calls, legislative kits, radio advertising during the last two weeks of the program, as well as print and online media advertising. Labor & Industry officials will compile pertinent data about the program and forward the data to the Pennsylvania General Assembly after the program ends. Imposing a 15 Percent Surcharge on Fraudulent verpayments Sections 251(a) and 251(b) of the federal Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Public Law ) impose a surcharge of at least 15 percent on fraudulent overpayments of federal and state unemployment compensation benefits. Pennsylvania Department of Labor & Industry officials have requested that the Pennsylvania General Assembly include this provision in Pennsylvania s UC Law. Department staff will take the necessary steps once the General Assembly enacts the necessary legislation and Governor Tom Corbett signs the legislation into law to implement the penalty provisions. Increasing the Sample Size for the BAM Audits

5 Increasing the sample size for the Benefit Accuracy Measurement (BAM) unit s audits is another feature of the corrective action plan. Members of the BAM unit have the expertise to review more than the 480 claims that were reviewed during calendar year Consequently, the BAM unit reviewed up to 496 claims during calendar year Members of the unit will be reviewing 520 claims during calendar year It is expected that increasing the sample size will decrease any distortions in the BAM error rate due to an inadequate sample size. Both the BPC and the BAM units will monitor the effects of the increased sample size during federal fiscal years 2014 and 2015, making adjustments in the sample size if necessary. Joining the Interstate Reciprocal verpayment Recovery Agreement (IRRA) Section 2103 of the federal Middle Class Tax Relief and Job Creation Act of 2012 now mandates that all states participate in the IRRA program. IRRA gives states the authority and method for the recovery of improper payments of state and federal unemployment compensation benefits from individuals filing under the Interstate Benefit Payment Plan, the Interstate Arrangement for the Combining of Employment and Wages, or Intrastate under any state's law. Currently approximately thirty-three states have a reciprocal IRRA agreement under which they recover overpayments for one another. nce Pennsylvania UC Law is amended to permit participation in IRRA, BPC will create new procedures and forms to implement the program. Claimants who have overpayments in other states will have mandatory transfers of their Pennsylvania benefits towards these obligations. perating the Border State, Interstate, and Intrastate Cross Matches The Border State, Interstate, and Intrastate post-audit cross matches are a major source of overpayment detection for Pennsylvania s unemployment compensation system. Previously, UCBP and UCSC management established a special post-audit unit in the Altoona UC service center. This unit, an important part of both agencies overpayment detection and prevention activities, operated at various periods between 2004 and Unfortunately, the extremely high volume of claims during the economic downturn forced the majority of the people in the post-audit unit to handle claims taking duties. This situation severely limited the post-audit unit s production of overpayments. However, UCBP and UCSC management recently re-established post-audit units in the Altoona UC Service Center and the Harrisburg verflow Center in an attempt to increase the detection and establishment of overpayments. As of July 27, 2013, the Altoona UC service center had two supervisors and 11 employees handling approximately 10,618 potential overpayments. The Harrisburg verflow Center had two supervisors, 10 full-time employees, and three part-time employees handling approximately 47,933 potential overpayments.

6 Some overpayments involving the Border State, Interstate, and Intrastate cross matches result in overpayments on the parent UC claims and the subsequent EUC and/or EB claims which increases the obligation that the claimants must repay. Recouping More Money for Fraudulent EUC and FAC verpayments Previously, Section 4005(c) of the federal Supplemental Appropriations Act, 2008 (Public Law ) stipulated that state UC agencies throughout the United States could apply up to 50 percent of a claimant s benefits towards fraudulent EUC overpayments. Section 2002(f) of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5) applied this principal to fraudulent FAC overpayments. However, Section 2143 of the Middle Class Tax Relief and Job Creation Act of 2012, (Public Law ) stipulated that state UC officials are to recoup fraudulent EUC and FAC overpayments at the percentages in which they recoup fraudulent overpayments of state UC benefits. Therefore, fraudulent EUC and FAC overpayments are recouped at 100 percent of a claimant s Weekly Benefit Rate. This modification corresponds to the 100 recoupment rate for fault EB and fault UC overpayments in Pennsylvania. Department officials will take the necessary steps to implement this provision of Public Law The State and National Directories of New Hires Both the State and the National Directories of New Hires cross matches are effective tools in detecting overpayments at an early stage. ne result of the department s participation in the UI Integrity Task Force Initiative was improving the procedures for conducting these cross matches, resulting in quicker detection of potential overpayments. The mainframe computer system first puts a stop on a claim once the cross match generates a new hire hit from an employer who reports a hiring date or rehire date for the claimant and the claimant has filed for weeks subsequent to the date of hire. The first step in this process is to find a match between the department s claim records and data from the National and State Directories of New Hires. nce this occurs, the mainframe computer issues automated forms simultaneously to the claimant and employer. If necessary, an examiner from the Harrisburg verflow Center or a UC service center calls the parties if they do not complete and return the forms. nce the examiner reviews the information that the claimant and employer report, he/she issues a disqualifying determination and an overpayment determination, if appropriate. By automating part of this process, UC service center staff can detect and establish overpayments more quickly plus attempt to prevent further overpayments from occurring. The Harrisburg verflow Center and each UC service center currently have staff reviewing the completed new hires forms from the employers, contacting the claimants, and establishing the overpayments. A number of UC service center employees throughout the commonwealth have access to the Cypress computer system to verify new hires data on a weekly basis. Having each

7 office handle new hires issues should help the department increase the number of new hires overpayments. BPC staff intends to improve the new hires system by having the mainframe computer list the name and address of the employer that hired the claimant on the system s General Annotations screen. This automated annotation will occur at the time of a cross match hit between the department s claim records and the National and State Directories of New Hires. The general annotation also will record the claimant s date of hire, enabling the Harrisburg verflow Center and the UC service centers to have easy access to this information. Sending Additional Billing Statements to verpaid Claimants The Pennsylvania Department of Labor & Industry currently mails monthly and quarterly billing statements to claimants who have fault or nonfault overpayments of UC, UCFE, and UC benefits. nce the Unemployment Compensation Management System (UCMS) became operational, department officials also were planning to mail monthly billing statements to claimants for overpayments in the following programs: DUA, EB, EUC, FAC, and TRA. Due to the uncertainty with the UCMS system for benefits functionality, the department will create DUA, EB, EUC, FAC, and TRA billing statements to be issued through the Legacy system. The department will also begin issuing billing statements involving back wage award overpayments for the following programs: EB, UC, UCFE and UC. Issuing these additional billing statements will increase the recoupment of overpayments. Training UC Service Center Staff to Prevent, Detect, Establish, and Recoup verpayments ne of the findings of a March, 2013 U.S. Department of Labor audit was that too many individuals in the UC service centers had too little knowledge about overpayments. To rectify this situation, ffice of UC Benefits Policy (UCBP) and ffice of UC Service Centers (UCSC) staff in central office plan to conduct additional training of UC service center managers, supervisors, and employees. The trainers not only will determine which individuals need training, but also will monitor the effectiveness of the training and the performance of the employees. The trainers will make adjustments to the handouts, PowerPoint presentations, and materials whenever necessary.

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9 MILESTNES: (number sequentially) (1) Monitor the performance of the Designated verpayment Teams (DTs) that operate in the Harrisburg verflow Center and the UC service centers. Provide additional training and guidance whenever necessary. (2) Develop and implement procedures for third party fraud cases so that UCPB staff can issue appropriate determinations more quickly and accurately. Monitor the effectiveness of these procedures, making adjustments whenever necessary. Completion Date Federal Fiscal Year (FY) /31/ /31/ /30/ /30/2014 (3) Continue to operate the Incarcerated Claimants Cross Matches and monitor the performance of BPC and ffice of UC Service Center staff. (4) Increase the number of participants in and revenue from the Treasury ffset Program (TP) during tax year 2013/calendar year Monitor the performance of BPC staff in operating this program. (5) Implement Pennsylvania s Amnesty Program with the goal of maximizing the amount of recouped overpayments from claimants. Submit pertinent data from the program to the Pennsylvania General Assembly by the statutory deadlines. (6) Implement the imposition of a 15 percent surcharge on fraudulent overpayments of federal and state benefits. Record pertinent data about the surcharges and make adjustments whenever necessary. (7) Monitor the results of the increased sample size for the Benefit Accuracy

10 MILESTNES: (number sequentially) Measurement (BAM) audits, making adjustments whenever necessary. Completion Date Federal Fiscal Year (FY) /31/ /31/ /30/ /30/2014 (8) Modify state UC law and the department s procedures so that the UCBP and the UCSC can participate in the Interstate Reciprocal (IRRA). Monitor the implementation of this change to current procedures. (9) perate the Border State, Interstate, and Intrastate Post-Audit cross matches. Monitor the performance of BPC and UC Service Center staff. (10) Recoup more money from fraudulent EUC and FAC overpayments by applying 100 percent of the claimants benefits towards these debts. Monitor the implementation of this policy change, making adjustments whenever necessary. (11) Monitor the performance of BPC and UC Service Center staff regarding the State and National Directories of New Hires cross matches, making modifications whenever necessary. (12) Create and send billing statements to claimants who have overpaid DUA, EB, EUC, FAC, and TRA overpayments. Monitor the implementation of this policy, making adjustments whenever necessary. (13) Train UC Service Center staff to prevent, detect, establish, and recoup overpayments. Monitor the effectiveness of the training and the performance of the students, making adjustments whenever necessary.

11 MILESTNES: (number sequentially) (14) Continue to implement action items identified in the department s UI Integrity Task Force (as described in the new SQSP section for UI Integrity). Completion Date Federal Fiscal Year (FY) /31/ /31/ /30/ /30/2014

12 MILESTNES: (number sequentially) (1) Monitor the performance of the Designated verpayment Teams (DTs) that operate in the Harrisburg verflow Center and the UC Service Centers. Provide additional training and guidance whenever necessary. Completion Date Federal Fiscal Year (FY) /31/ /31/ /30/ /30/2015 (2) Continue to implement and monitor procedures for third party fraud cases so that UCPB staff can issue appropriate determinations more quickly and accurately. (3) perate the Incarcerated Claimants Cross Matches and monitor the performance of BPC and ffice of UC Service Center staff. (4) Increase the number of participants in and revenue from the Treasury ffset Program (TP) during tax year 2014/calendar year Monitor the performance of BPC staff in operating this program. (5) Monitor the implementation of the 15 percent surcharge on fraudulent overpayments of federal and state benefits. Record pertinent data about the surcharges and make adjustments whenever necessary. (6) Monitor the results of the increased sample size for the Benefit Accuracy Measurement (BAM) audits, making adjustments whenever necessary. (7) Monitor the implementation of the department s participation in the Interstate Reciprocal (IRRA), making adjustments whenever necessary.

13 MILESTNES: (number sequentially) Completion Date Federal Fiscal Year (FY) /31/ /31/ /30/ /30/2014 (8) perate the Border State, Interstate, and Intrastate Post-Audit cross matches. Monitor the performance of BPC and UC Service Center staff. (9) Recoup more money from fraudulent EUC overpayments by applying 100 percent of the claimants benefits towards these debts. Monitor the implementation of this policy change, making adjustments whenever necessary. (10) Monitor the performance of BPC and UC Service Center staff regarding the State and National Directories of New Hires cross matches, making modifications whenever necessary. (11) Continue to send billing statements to claimants who have overpaid DUA, EB, EUC, and TRA overpayments. Monitor the implementation of this policy, making adjustments whenever necessary. (12) Train UC Service Center staff to prevent, detect, establish, and recoup overpayments. Monitor the effectiveness of the training and the performance of the students, making adjustments whenever necessary. (13) Continue to implement action items identified in the department s UI Integrity Task Force (as described in the new SQSP section for UI Integrity).