Got Extra Unemployment Benefits During the Pandemic? They May Be Yours to Keep

Some jobless workers who were overpaid on benefits may be in luck.

When the COVID-19 pandemic first erupted and restrictions were imposed to limit the spread of the virus, many businesses had no choice but to shutter temporarily and lay off staff. That led to a huge surge in unemployment claims.

Because states were overwhelmed with applications for benefits and needed to get that aid out quickly, some mistakes were made in the process of approving and paying claims. What’s more, some applicants may have made mistakes on their applications in the midst of all the chaos.

States have, for many months, attempted to recoup the extra money they paid out in unemployment benefits. But in May, the Labor Department issued new rules saying states could waive the collection of the excess benefits they paid under limited circumstances. Now, that list of circumstances is expanding so it doesn’t put an undue financial hardship on unemployment recipients who may have gotten more money than they should have.

No penalties for innocent mistakes

The Labor Department's new rules largely apply to jobless benefits issued under the Pandemic Unemployment Assistance (PUA) program. That program made jobless benefits available to gig workers and the self-employed -- groups that normally are not entitled to any sort of unemployment compensation in the event of job loss.

Now, states can opt to waive the collection of overpayments for certain people who received PUA funds as a result of incorrectly responding to screening questions determining their eligibility for benefits. They can also waive the collection of overpayments in situations where states themselves miscalculated the amount of money recipients were in line to receive.

To be clear, these new rules do not apply to situations where overpayments were made as a result of fraud on the part of applicants. But the fact that states won't have to go after innocent recipients of extra funds is a good thing.

Though the U.S. economy is in a much stronger place at this point than it was earlier on in the pandemic, many people have yet to recover personally from its financial blow. To ask those people to repay what could be thousands of dollars would no doubt put an undue hardship on them, especially if they have no money in savings and are still struggling to make ends meet.

A better system is needed

While it's true the early days of the pandemic saw an unprecedented number of unemployment claims, the reality is that mistakes on the payment front were bound to happen for a number of reasons. For one thing, it was virtually impossible for filers who had questions about their applications to actually reach a live person to discuss their situations personally. Plus, some states had (and still have) complicated application processes that can be especially challenging for those with limited English proficiency.

Ideally, we'll never have an unemployment crisis along the lines of what occurred in spring 2020. But states should use the events of that time as a lesson -- to prepare for another crushing wave of jobless claims and make the process of filing for unemployment less harrowing the next time around.

That could mean onboarding and training more staff, simplifying the application and certification process, and updating the archaic software systems that process jobless claims. If states had a better setup in place at the start of the pandemic, there's a good chance they would've sent fewer overpayments to begin with, thereby negating the need to go after innocent people for money they don't have.