When the COVID-19 pandemic hit in March of 2020, and employers across the U.S. started to shut down their businesses to limit the spread of the disease, it became quickly apparent that the State Workforce Agencies were not prepared for the influx of unemployment claims. Due to outdated systems and tremendous volumes, the states struggled to quickly make the changes needed to support federal programs enacted to help those who found themselves out of work due to the pandemic. States were thwarted in their efforts to get crucial benefits to impacted workers by outdated technology and a lack of resources after years of record low unemployment. The same outdated technology and urgency to payout benefits made the states vulnerable to fraud from international and local crime rings. When adding all the challenges together, this made it difficult for states to deliver benefits to unemployed workers quickly and equitably. Even as economic conditions have improved, states continue to face significant backlogs that have delayed benefits to workers and have struggled to address fraud perpetrated by sophisticated crime rings that are continuing to use new techniques to attack UI systems.
The U.S. Department of Labor recently announced details on how they plan to assist State Workforce Agencies in addressing these critical issues. While the core of these challenges will need to be addressed through comprehensive UI reform, the USDOL aims to address the most acute challenges states have faced over the last year with $2B allocated as a part of the American Rescue Plan Act (ARPA).
American Rescue Plan Act Unemployment Insurance Funding
The American Rescue Plan Act grants broad authority to the Department of Labor to help states address these challenges by using $2 Billion to:
- prevent and detect fraud,
- promote equitable access,
- and ensure timely payment of benefits.
These funds will be used to address common problems facing the system in the short-term “while also working to address long-term challenges by improving state processes and building a modern, modular IT system that will make the UI system easier to access, better prepared to prevent fraud, and more resilient to prepare for future surges in initial claims.” The USDOL has outlined a plan to spend the funding by focusing on 4 key areas to address systemic deficiencies in access based on proven strategies:
Direct assistance to the states through “Tiger Teams”:
Preventing and detecting fraud, promoting equitable access to benefits, and eliminating backlogs and ensuring timely payments are challenges that all states are facing to some degree. The USDOL is going to address these challenges by sending experts to the state to work hand-in-hand to find solutions. Deploying team resources directly to the states will help them zero in on what’s working and should be shared and what’s not and should be addressed. These “Tiger Teams” have been deployed into an initial six states on a voluntary basis – Colorado, Kansas, Nevada, Virginia, Washington, and Wisconsin – to help identify process improvements that can speed benefit delivery, address equity, and fight fraud. The department will expand the Tiger Team supports to additional states throughout the year.
Tools to states to help address immediate fraud concerns by facilitating more effective ID verification:
The past year has shown that the nature of fraudulent activity in UI will continue to be highly dynamic and states will require additional support and continuous monitoring for evolving threats. The department plans to take a more active role in helping states improve their identification verification processes by making identification services available to states to purchase. The hope is that these services will cut down on fraud which is contributing to large backlogs and the stealing of benefits that workers need.
Developing IT solutions to modernize antiquated state technology by centrally developing open, modular technology solutions that can be adopted by states as needed:
The pandemic has only underscored the desperate need for technological support and improvements. Many state systems are operating on outdated technology, which made it difficult for them to respond rapidly to changes in law and economic conditions. The solution proposed will develop open, modular technology solutions that states may adopt as part of ongoing modernization and improvement efforts. The USDOL hopes to provide software that can be adopted by the states to support end-to-end administration of UI, including benefit delivery, employer tools and appeals.
Providing direct grants to states to promote timeliness and equity and fight fraud:
According to the USDOL, “States lack the resources they need to manage the current volume of claims quickly, accurately and equitably. As a result, far too many workers, underrepresented populations, those with limited English proficiency, or low-income claimants face barriers in accessing unemployment insurance. To address that challenge, the department plans to make $700 million in grants to states available to promote equity and fight fraud.”
These modernization efforts will be the first step in overhauling the UI System. Thomas & Company is monitoring the plans for modernization and we will continue to engage with the USDOL and states to make sure that your voice is heard on changes that may impact you and your employees. For more information on the UI Modernization plan, please visit https://oui.doleta.gov/unemploy/pdf/FactSheet_UImodernization.pdf