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Notice

Notice Requesting Public Comment on Two Proposed Unemployment Insurance (UI) Program Performance Measures To Meet Requirements in the Improper Payments Elimination and Recovery Act of 2010 (IPERA)

Action

Notice.

Summary

The Department of Labor (Department) is seeking public comment on two proposed UI Performs Core Measures for UI Integrity: (1) UI Improper Payments; and (2) UI Overpayment Recovery.

 

Table of Contents Back to Top

Tables Back to Top

DATES: Back to Top

Written comments must be submitted to the office listed in the addresses section below on or before March 14, 2012.

ADDRESSES: Back to Top

Written comments may be submitted to the address specified below. All comments will be made available to the public. Warning: Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publically disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines. Comments may be submitted anonymously.

  • Federal eRulemaking Portal: http://www.regulations.gov, identified by Docket ID Number ETA-2012-0001. Follow the instructions for submitting comments.
  • Mail or Hand Delivery/Courier: Please submit all written comments (including disk and CD-ROM submissions) to Mr. Andrew Spisak, U.S. Department of Labor, ETA/Office of Unemployment Insurance, 200 Constitution Avenue NW., Room S-4524, Washington, DC 20210. Be advised that mail delivery in the Washington, DC area may be delayed due to security concerns. Hand-delivered comments will be received at the above address. All overnight mail will be considered to be hand-delivered and must be received at the designated place by the date specified above.

Please submit your comments by only one method. The Department will not review comments received by means other than those listed above or that are received after the comment period has closed. The Department will post all comments received on http://www.regulations.gov without making any change to the comments, including any personal information provided. The http://www.regulations.gov Web site is a Federal portal, and all comments posted there are available and accessible to the public.

SUPPLEMENTARY INFORMATION: Back to Top

I. Background Back to Top

IPERA [Pub. L. 111-204 (31 U.S.C. 3321 note)] amended the Improper Payments Information Act of 2002 (IPIA) [Pub. L. 107-300 (31 U.S.C. 3321 note)] and established several criteria that Federal agencies must meet in order to be in compliance with the law. According to section 3(a)(3) of IPERA:

The term `compliance' means that the agency (F) has reported an improper payment rate of less than 10 percent for each program and activity for which an estimate was published under section 2(b) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note).

For the 2010 IPIA reporting period, the Department reported an improper payment rate of 11.2 percent (10.6 percent overpayment rate and 0.6 percent underpayment rate) in its Fiscal Year (FY) 2010 Agency Financial Report (AFR), p. 179, (http://www.dol.gov/_sec/media/reports/annual2010/2010annualreport.pdf). For the 2011 IPIA reporting period, the Department reported an improper payment rate of 12.0 percent (11.35 percent overpayment rate and 0.65 percent underpayment rate) in its FY 2011 AFR, p. 204 (http://www.dol.gov/_sec/media/ reports/annual2011/2011annualreport.pdf).

In addition, IPERA establishes requirements for payment recapture audits. Office of Management and Budget (OMB) guidelines in Appendix C of OMB Circular A-123, Part I(B)(3), established the follow requirements that Federal agencies must follow:

[A]ll agencies are required to establish annual targets for their payment recapture audit programs that will drive their annual performance. The targets shall be based on the rate of recovery (i.e., amount of improper overpayments recovered divided by the amount of improper overpayments identified).

Agencies have the discretion to set their own payment recapture targets for review and approval by OMB, but agencies shall strive to achieve annual recapture targets of at least 85 percent within three years (with the first reporting year being FY 2011, the second FY 2012, and the third FY 2013).

In response, the Department has developed statistical models to set recovery targets based on historical performance data and the Administration's economic assumptions. These targets have been reviewed by OMB and published in the Department's FY 2011 AFR, p. 215.

Because the UI improper payment rate exceeds the 10 percent minimum performance level in IPERA, the Department has developed an Integrity Strategic Plan to bring the UI program into compliance. In June 2011, the Department issued a “call to action” in Unemployment Insurance Program Letter (UIPL) No. 19-11 to ensure that UI integrity is a top priority and to provide tools and support for State agencies to develop strategic plans to reduce improper payments.

UIPL No. 33-11 (September 21, 2011) launched an initiative to reduce unacceptably high levels of improper payments in six “High Priority” States. The Department will work closely with these States to support cross-functional teams and develop strategic plans to reduce improper payments below the 10 percent IPERA criterion. UIPL No. 34-11 (September 28, 2011) provided information on the definition and implementation of the UI Performs Benefit Year Earnings Core Measure to reduce the leading cause of UI improper payments—claimants who return to work and who continue to claim and collect UI benefits.

This notice describes and solicits comments on two proposed performance measures to meet the IPERA statutory requirements. The Department establishes measures that capture key dimensions of UI program performance in accordance with applicable legislation and sets criteria or target levels defining acceptable performance according to the measure. If a State's performance does not attain these levels, the State must take corrective action through its annual State Quality Service Plan (SQSP) (OMB No. 1205-0132, Expiration Date 10/31/2014). Comments should be submitted by the date and to the address provided in the addresses section of this notice.

II. Proposed Improper Payments Measure Definition and Acceptable Level of Performance (ALP) Back to Top

Measure Definition: Combined percentage of UI benefits overpaid and underpaid, estimated from the results of the Benefit Accuracy Measurement (BAM) survey of paid UI claims in the State UI, Unemployment Compensation for Federal Employees (UCFE), and Unemployment Compensation for Ex-Service Members (UCX) programs.

ALP: Section 3(a)(3)(F) of IPERA establishes “an improper payment rate of less than 10 percent for each program and activity for which an estimate was published under [IPIA].” Section 2(e) of IPERA amends section 2 of IPIA and defines an improper payment as “any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments).” In accordance with IPERA requirements, the Department is proposing an ALP of less than 10 percent, first applicable to calendar year (CY) 2012 performance. State performance for the 2011 IPIA reporting period (July 2010 through June 2011) is provided in Attachment A. This ALP will be effective unless the IPERA and/or IPIA are amended, in which case the Department will bring its ALP into line with the amended requirement.

Calculation: The measure would be calculated from BAM data using the following data elements:

  • Total Overpayment Amount for Key Week (BAM data element h5)—defines the amount overpaid to the claimant in the key week (the paid week selected for audit), excluding overpayments for improper payments caused by another State's workforce agency.

The amounts coded in h5 include overpayment codes 10, 11, 12, 13, and 15 in data element ei2 (Key Week Action). Overpayments attributable to a State workforce agency other than the State agency that selected and audited the payment are excluded (Prior Agency Action (data element ei6) codes 90 to 99).

  • Total Underpayment Amount for Key Week (BAM data element h6)—defines the amount underpaid to the claimant in the key week, excluding underpayments for improper payments caused by another State's workforce agency.

The amounts coded in h6 include underpayment codes 20, 21, and 22 in data element ei2 (Key Week Action). Underpayments attributable to a State workforce agency other than the State agency that selected and audited the payment are excluded (Prior Agency Action (data element ei6) codes 90 to 99).

  • Original Amount Paid (BAM data element f13)—defines the amount paid to the claimant in key week.

The Annual Report overpayment (OP) rate is the estimate of:

It is derived from the weekly BAM samples; each week's sample result is weighted by the number of paid UI weeks in the BAM survey population.

The Annual Report underpayment (UP) rate is the estimate of:

It is derived from the weekly BAM samples; each week's sample result is weighted by the number of paid UI weeks in the BAM survey population.

The improper payment (IP) rate (expressed as a percentage) is the sum of the Annual Report overpayment rate plus the underpayment rate:

IP = OP + UP.

Information on the BAM program is available at http://oui.doleta.gov/unemploy/bqc.asp.

Performance Period: The performance period would be based on BAM data for the CY. Per the BAM State Operations Handbook (ET Handbook 395, 5th edition), 95 percent of BAM cases must be completed within 90 days after the week ending date of the BAM sampling week (referred to as a batch), and 98 percent of BAM cases for the CY must be completed within 120 days after December 31. The first measurement period would be January 1, 2012, to December 29, 2012 (end date of the last BAM sampling batch in 2012).

Sampling Error: Because this measure would be based on sample data, the sampling error of the estimated BAM improper payment rate would be taken into account in determining whether a State meets its ALP. All estimates from samples are characterized as a distribution of values around the expected value of the universe. The sampling error is used to measure the variability of that distribution, and it is used to determine the probability that the value calculated from a particular sample drawn from a universe that meets an ALP may be below (or above) the true (universe) value.

Failure to Meet the ALP: States failing to meet the ALP would be expected to develop a Corrective Action Plan as part of the SQSP. Failures to attain an ALP in the first measurement period would be addressed in the 2014 SQSP (OMB No. 1205-0132, Expiration Date 10/31/2014).

Data Collection Costs: Because the performance measure would use data collected through the BAM survey, there would be no data collection start-up costs for this performance measure.

III. Proposed UI Overpayment Recovery Measure Definition and ALP Back to Top

Measure Definition: OMB Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123 [Part 1(B)(3)] defines the recovery rate as “the amount of improper overpayments recovered divided by the amount of improper overpayments identified.” This ratio will be expressed as a percentage.

ALP: The Department conducted an analysis of the UI recovery data and has established recovery targets of 64 percent in FY 2012 and 72 percent in FY 2013. These targets were reviewed by OMB and published in the Department's AFR, p 125. Attachment B outlines the methodology. The Department will use this methodology to compute future recovery targets based on the most recent recovery and other performance data available. State performance data for the period October 1, 2010, through September 30, 2011, the most recent 12-month reporting period available, are provided in Attachment C.

Calculation: The measure would be calculated from ETA Overpayment Detection and Recovery reports (ETA 227 and ETA 227 EUC):

  • Total Overpayments Recovered—section C, the sum of line 302, columns 11, 12, 13, 14, 22, and 23.
  • Total Overpayments Established Minus Overpayments Waived—section A, the sum of line 101, columns 4, 5, and 21, and line 103, columns 4, 5, and 21, minus section C, the sum of line 308, columns 13, 14, and 23.

Performance Period: The performance period would be based on the ETA 227 and ETA 227 EUC data for the CY. Per the Unemployment Insurance Reports Handbook (ET Handbook 401, 4th edition), the December quarter ETA 227 reports are due February 1. The first measurement period would be January 1, 2012, to December 31, 2012.

Sampling Error: Not applicable; this measure would be based on population data reported on the ETA 227 reports.

Failure to Meet the ALP: States failing to meet the ALP would be expected to develop a Corrective Action Plan as part of the SQSP. Failures to meet the CY 2012 target will be addressed in the 2014 SQSP (OMB No. 1205-0132, Expiration Date 10/31/2014).

Data Collection Costs: Because the performance measure would use data collected through the ETA 227 and ETA 227 EUC reports, there would be no data collection start-up costs for this performance measure.

Attachment A Back to Top

Unemployment Insurance Integrity Rates Back to Top
ST Amount paid IPIA (OP+UP) (percent) Annual report rate (percent) Under payment rate (percent)
[From: CY 2010 QTR 3]
[To: CY 2011 QTR 2]
Notes: 1. Amount paid includes State UI, UCFE, and UCX payments.
2. Rates exclude agency errors by States other than the sampling State.
Source: Benefit Accuracy Measurement.
Prepared by: ETA Office of Unemployment Insurance on 18 Jan 12.
AK $187,793,437 13.06 12.01 1.05
AL 423,475,745 24.38 24.15 .24
AR 404,922,070 12.59 12.43 .16
AZ 612,311,633 21.70 21.52 .18
CA 7,878,548,634 6.28 5.78 .51
CO 759,225,578 16.84 16.13 .71
CT 910,540,113 6.62 5.64 .98
DC 173,907,643 7.05 6.26 .78
DE 130,506,869 11.07 9.35 1.72
FL 1,981,338,921 8.36 8.09 .27
GA 1,051,141,752 5.36 5.05 .31
HI 308,105,469 3.62 3.29 .32
IA 517,702,648 14.37 12.70 1.67
ID 244,089,005 9.60 9.52 .08
IL 2,614,374,425 14.91 13.49 1.42
IN 950,389,758 60.33 59.90 .42
KS 460,373,464 3.64 3.61 .02
KY 574,241,696 8.42 7.95 .47
LA 356,969,426 32.95 31.46 1.49
MA 1,808,499,194 5.54 4.20 1.34
MD 864,135,379 10.83 10.74 .09
ME 198,708,529 17.76 16.97 .78
MI 1,608,631,516 11.91 11.40 .51
MN 1,040,046,493 10.72 10.25 .47
MO 722,648,523 8.26 7.73 .54
MS 234,393,333 13.73 13.15 .58
MT 155,810,976 11.45 10.41 1.03
NC 1,564,424,194 10.66 10.42 .24
ND 66,158,178 11.87 11.30 .57
NE 161,824,757 16.46 15.94 .52
NH 123,301,707 8.07 6.84 1.23
NJ 2,770,764,470 12.51 10.86 1.65
NM 270,220,624 22.71 21.83 .88
NV 642,558,333 9.17 8.77 .40
NY 3,760,176,447 7.39 6.99 .40
OH 1,491,641,475 20.95 19.42 1.53
OK 347,057,290 6.61 6.14 .47
OR 884,638,346 12.13 11.80 .32
PA 3,329,117,904 11.82 11.24 .58
PR 265,690,172 10.06 8.73 1.33
RI 289,317,413 6.06 5.65 .41
SC 486,351,866 17.94 17.72 .22
SD 43,851,969 17.12 16.69 .43
TN 539,350,249 17.92 17.77 .15
TX 2,548,344,654 12.54 12.00 .54
UT 331,290,619 10.99 10.43 .56
VA 692,676,373 16.73 16.57 .16
VT 131,581,881 5.63 5.25 .38
WA 1,509,672,386 15.71 15.52 .19
WI 1,154,698,728 12.73 12.37 .36
WV 217,742,942 5.52 5.01 .51
WY 97,180,931 9.42 8.96 .47

Attachment B Back to Top

Methodology for Establishing Recovery Targets Back to Top

Background

As required by the IPERA implementing guidance, ETA has developed UI overpayment recovery targets for FY 2011, FY 2012 and FY 2013. According to Part I(B)(3) of OMB's IPERA guidelines, “Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123” (April 14, 2011):

[A]ll agencies are required to establish annual targets for their payment recapture audit programs that will drive their annual performance. The targets shall be based on the rate of recovery (i.e., amount of improper overpayments recovered divided by the amount of improper overpayments identified).

Methodology

The UI recovery targets involve aggregating overpayments established and recovered under three UI program areas: State UI, permanent Extended Benefits (EB) and the temporary Emergency Unemployment Compensation (EUC) programs. Recoveries are made using the traditional tools available to States in addition to the Federal Tax Offset Program (TOP), implemented by only three States as of the date of the analysis. The recovery targets reflect separate methodologies for projecting recoveries or recovery rates for (a) State UI plus EB recoveries obtained using traditional tools; (b) recoveries of EUC overpayments made using traditional tools; and (c) recoveries of State UI, EB, and EUC overpayments through TOP. Administration economic assumptions as of the time of the analysis were taken into consideration for all projections.

a. Traditional State UI and EB recoveries. Recovery estimates for this segment are based on statistical (regression) models that use the historical establishment and recovery data reported on the ETA 227 report to project recoveries for State UI and EB overpayments. The models estimate the relationships between UI overpayments established and recovered for the State UI and EB programs based on several explanatory variables, including the amount of State UI and EB unemployment compensation (UC) program benefit payments, the Total Unemployment Rate (TUR), the overpayment balances available for collection, and the amount of EB program payments as a percentage of total UC benefits paid. The TUR, produced by the Department of Labor, Bureau of Labor Statistics, is used as the primary economic indicator of overall labor market conditions. UI overpayment recovery targets for FY 2011 were projected for the full FY based on actual performance data for the first three quarters. Model projections for FY 2012 and FY 2013 were based on the Administration's economic assumptions for the TUR and projections of UI and EB payments based on those assumptions. Estimates for FY 2012 and FY 2013 reflect TOP recoveries to the extent that those recoveries reduce overpayment balances available for collection by standard State recovery techniques, for example, recovery through cash, UI benefit offset, liens, wage garnishment, etc. These models exclude EUC establishments and recoveries because EUC is a temporary program without sufficient historical data.

b. TOP Recoveries. In 2008, State workforce agencies gained access to TOP to recover UI fraud overpayments that were not more than 10 years old. In December 2010, new legislation expanded TOP access to include nonfraud overpayments resulting from claimants' failures to report earnings and removed the 10-year limit on the debt. During FY 2011, three States—New York, Michigan, and Wisconsin—began participating in TOP, and data on their recoveries are reported by the U. S. Department of the Treasury. Projections of amounts recovered through TOP are based on the rates of TOP recoveries in these three States relative to the uncollected overpayment balance data from the ETA 227 report and fraud overpayments that the States wrote off as uncollectable before they gained access to TOP. At the beginning of FY 2011, States had uncollected fraud overpayment balances of approximately $3.2 billion, of which about $360 million was amounts written off during the past 10 years. Projected national totals for TOP for the country as a whole are based on very preliminary estimates of the rate at which States begin to access TOP.

c. EUC Recoveries. The recovery targets also take into account overpayment establishments and recoveries contributed by the EUC program. It is assumed that EUC overpayment establishments and recoveries will continue into FY 2013 and that collections through traditional techniques and TOP will be based on the amount of unrecovered EUC overpayments. The rates reflect existing information on amounts established and recovered reported on the ETA 227 EUC report. Existing data show that EUC recovery rates are considerably lower than State UI and EB recovery rates.

Targets

The following table summarizes the UI overpayment recovery rate targets, rounded down to the nearest integer. The UI recovery rates are constructed by dividing UI overpayment recoveries reported on the ETA 227 UI/EB and EUC reports by overpayments established, minus overpayments waived because they are unrecoverable under State law or policy. The sharp increase in recovery targets for FY 2012 and FY 2013 reflects the expected impact of the TOP program.

FY UI + EB + EUC including TOP (Adjusted for Waivers)
2011 45%
2012 64%
2013 72%

These targets are based on the following assumptions:

  • The TUR and State UI/EB outlays will not differ significantly from the Administration assumptions in the FY 2012 Budget Midsession Review. The TUR is projected as part of the Administration economic assumptions, and ETA forecasts UI and EB outlays based on the TUR and other economic assumptions. Because amounts of overpayments made, established, and recovered are highly sensitive to economic conditions, any significant change in these economic assumptions will affect the recovery rate estimates of the model.
  • Recovery activity for overpayments established for the EUC program is expected to continue into FY 2013 with residual recoveries for overpayments established after the expiration of the EUC program.
  • State agencies will begin to participate in TOP according to the adoption path reflected in the model. Based on Treasury information on State plans for adopting TOP and implementation status, the model assumes that by the end of FY 2011 three States will have enrolled in TOP; by the end of FY 2012, 26 States will participate; and by the end of FY 2013 and beyond, 49 States will participate. The implementation model is quarterly because data from the first three States suggest that over 95 percent of recoveries by TOP occur in the first or second calendar quarters, so the calendar quarter during which a State begins to participate in TOP is critical for estimates of first-year recoveries. Changes in the TOP implementation schedule will have a significant impact on recovery rates.

It is important to note that these estimates are based on actual counts of UI overpayments identified and recovered by the State agencies and reported on the ETA 227 reports for the FY 1986 to the third quarter of FY 2011 period, not the estimated UI overpayment rates and amounts that are reported in the Department's AFR for the IPIA, which are based on the results of the BAM audits of paid claims samples. Targets are also adjusted to exclude overpayments that are waived as unrecoverable by State agencies, according to the definition in the UI Reports Handbook (ET Handbook 401, 4th edition).

Additionally, although these targets were developed using historical FY counts of UI overpayments identified and recovered as reported on the ETA 227, they may be applied to a calendar year measurement cycle. As actual data on recoveries accumulate—driven largely by the rate at which States implement TOP—the out-year targets are likely to be revised.

Attachment C Back to Top

State UI Overpayments Established and Recovered Back to Top
ST UI + EB + EUC overpayments established UI + EB + EUC adjusted OPs established UI + EB + EUC overpayments recovered Pct. rec. (percent)
[October 2010-September 2011]
Notes: 1. UI includes State UI, UCFE, and UCX overpayments.
2. Overpayments established exclude overpayments waived.
Source: ETA 227 and ETA 227 EUC Reports.
Prepared by Div. of Performance Management on: 18 Jan 12.
AK $10,786,946 $10,786,946 $4,926,536 45.67
AL 43,289,401 43,109,121 10,989,706 25.49
AR 15,834,291 15,535,040 3,548,631 22.84
AZ 49,972,545 49,153,663 17,927,220 36.47
CA 355,671,845 319,473,699 88,802,967 27.80
CO 68,391,997 61,271,197 29,375,647 47.94
CT 24,034,518 23,869,538 9,940,414 41.64
DC 12,220,616 12,202,781 3,673,039 30.10
DE 8,965,003 8,935,039 4,552,476 50.95
FL 147,623,645 145,775,041 44,571,895 30.58
GA 23,231,700 22,569,632 8,087,146 35.83
HI 2,770,116 2,357,971 1,435,108 60.86
IA 15,843,340 15,754,367 9,341,187 59.29
ID 15,065,271 14,128,402 7,303,007 51.69
IL 182,087,681 182,087,681 70,338,632 38.63
IN 42,788,522 42,788,522 26,348,519 61.58
KS 34,676,662 34,144,019 10,576,328 30.98
KY 19,160,015 19,160,015 8,310,033 43.37
LA 26,509,327 25,299,358 7,617,548 30.11
MA 52,507,008 49,520,685 19,786,563 39.96
MD 74,634,081 73,857,637 24,762,560 33.53
ME 11,251,820 10,473,860 4,290,528 40.96
MI 159,904,300 154,893,349 46,695,875 30.15
MN 78,107,121 78,107,121 34,172,193 43.75
MO 43,124,208 43,124,208 17,194,165 39.87
MS 24,647,373 24,647,373 10,327,401 41.90
MT 8,315,543 8,243,443 3,282,896 39.82
NC 29,499,484 26,206,623 13,432,770 51.26
ND 2,829,616 2,819,461 1,590,573 56.41
NE 9,203,878 9,203,878 6,117,042 66.46
NH 8,765,741 6,758,020 2,106,741 31.17
NJ 217,078,665 216,569,050 173,289,168 80.02
NM 26,144,403 26,144,403 7,695,583 29.43
NV 79,263,713 75,184,087 11,304,039 15.04
NY 173,450,225 136,332,802 119,837,684 87.90
OH 110,977,907 110,839,890 40,467,585 36.51
OK 13,589,431 13,589,431 6,334,034 46.61
OR 52,034,282 43,226,825 15,972,461 36.95
PA 179,666,995 178,969,168 71,342,580 39.86
PR 9,015,270 9,015,270 4,352,634 48.28
RI 12,555,567 11,690,902 4,753,249 40.66
SC 42,786,170 42,315,788 18,882,525 44.62
SD 2,598,766 2,511,814 1,280,515 50.98
TN 26,502,776 25,426,645 9,965,361 39.19
TX 200,713,633 193,763,711 83,402,654 43.04
UT 24,886,880 24,659,843 11,568,309 46.91
VA 37,941,504 37,941,504 15,385,906 40.55
VT 3,181,382 2,097,223 917,377 43.74
WA 144,933,042 137,873,967 71,128,301 51.59
WI 81,590,555 78,734,237 53,254,357 67.64
WV 8,231,348 8,231,348 3,020,124 36.69
WY 6,047,490 5,741,420 2,155,330 37.54

Signed in Washington, DC, this 2nd day of February, 2012.

Jane Oates,

Assistant Secretary for Employment and Training.

[FR Doc. 2012-3252 Filed 2-10-12; 8:45 am]

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