Unemployment insurance clawbacks are moving ahead in Michigan, affecting about 350,000 workers with overpayments dating back five years.
Most of those affected filed claims in 2020 and 2021 during the height of the COVID-19 pandemic [1]. At the time, benefit claims surged nationwide — including a wave of fraudulent filings — overwhelming the system. Later, some were flagged as incorrect, while others were accepted in error.
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In those cases, states required claimants to return overpaid UI amounts. But a class action lawsuit in Michigan paused collection activities in December 2022.
Now, that pause is being lifted. In May, the Michigan Court of Claims signed off on a settlement and collection activities can now resume — with first clawback payments due September 29 [2].
“If you applied for or received benefits since 2020, you should review your Michigan Web Account Manager (MiWAM) account,” according to the Michigan Advocacy Program (MAP) [3].
Understanding UI and overpayments
Unemployment insurance provides temporary financial help if you lose a job through no fault of your own. It’s intended to replace a portion of your income to cover bills during your job search.
There is no federal program for unemployment program. States set their own eligibility rules [4]. In Michigan, the Unemployment Insurance Agency (UIA) runs the program, funded by employer taxes [5].
Overpayments happen fairly often, whether it’s the claimant’s fault or not. Michigan has an improper payment rate of 20.7% — about one in five UI checks. But it’s not the worst in the nation. Rhode Island tops the list with a 45% error rate [6].
“Overpayments can occur for many reasons, like when someone does not timely report work or other changes that can affect benefits or when an individual chooses to continue receiving payments during an appeal,” according to the Social Security Administration [7].
While it could be a mistake on the claimant’s part, it could also be the result of an administrative error the claimant had nothing to do with.
Notices about overpayments began appearing in people’s MiWAM accounts on or after September 9, with formal collection notices sent on or after September 12 that provide details on the amount owed. The first payment is due on September 29.
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If you’ve been overpaid, what are your options?
If you’ve received a notice, you have a few choices: pay back the amount owed, negotiate a payment plan or request a hardship waiver.
- Pay in full: If you can afford to pay the balance by September 29, you can pay online via your MiWAM account or mail a check or money order along with a Form 1088 Payment Voucher.
- Dispute the amount: If the overpayment doesn’t match your records, you can file an appeal. The process varies by state [8].
- Payment plan: If you can’t pay it back in full, you may be able to negotiate a payment plan with the state UIA, especially if you’re unemployed and looking for work.
- Hardship waiver: If repayment would cause “extraordinary financial hardship,” you can apply for a waiver. In Michigan, requests can be submitted online through MiWAM or by mailing in Form 1795.
“If you believe that the Unemployment Insurance Agency made a mistake such as accusing you of receiving benefits you never received, miscalculating your overpayment or any other potential error, you should seek legal assistance,” according to the MAP.
In Michigan, two additional overpayment waivers will be available in the future, according to the state’s UIA: inaccurate wage information and agency error.
What happens if you don’t pay?
If you don’t pay on time — and haven’t requested a waiver — you could face penalties, interest, wage garnishment, tax refund intercepts or deductions from future unemployment checks, according to Michigan’s UIA.
In other words, the state can take what’s owed from your tax refund, your paycheck or future benefits.
Whether the error was yours or the agency’s, it’s best to start taking steps immediately. Ignoring it won’t make it disappear — it will only grow with interest and penalties.
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[1]. Fox 2 Detroit. “Michigan unemployment overpayment collections resume this month – What to know”
[2]. Detroit Free Press. “Michigan court OKs $55M settlement in pandemic-era unemployment benefits lawsuit”
[3]. Michigan Advocacy Program. “Unemployment Insurance Agency Resumes Collections on Overpaid Unemployment Benefits, Waivers Available”
[4]. USA Government. “Unemployment benefits”
[5]. Labor and Economic Opportunity
[6]. Department of Labor. “Unemployment Insurance Payment Accuracy by State”
[7]. Social Security Matts. “Learn about Overpayments and Our Process”
[8]. Bankrate. “Unemployment overpayment: What to do when your state wants the money back”
This article originally appeared on Moneywise.com under the title: 350,000 Michigan workers are facing a steep unemployment clawback deadline — what to do if it happens to you
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