The total number of unemployment claims has climbed throughout the course of the COVID-19 pandemic, with many applicants seeking benefits for the first time.
Inexperience with the application process, along with shifts in the process coming from a federal level can open the door for errors to be made; by the person filing, and by the state. Now, some of these errors have resulted in some individuals receiving more in assistance than the government says they should have.
But what happens when the state over-pays? For many across the nation, and right here in KELOLAND, the answer is that they must pay back the difference, often with penalties and interest.
Here we take an in-depth look at the specific laws regarding this issue in South Dakota, as well as some of the statutes laid out in Iowa and Minnesota law. The official text will come first, followed by our best attempt to break it down into common terms.
Within South Dakota’s codified laws, procedures for the repayment of benefits are outlined in chapter 61-6.
61-6-41: Deduction or repayment of overpayments
“An individual who was paid any amount as benefits under this title to which the individual is not entitled is liable for repayment of the amount overpaid, or for the amount received in the event of misrepresentation, unless recovery of the overpayment is waived as provided in § 61-6-42. The department may elect to recover the overpayment by requiring repayment by the individual or deducting the overpayment from any future benefits payable to the individual. The department may also recover the overpayment in the manner provided in §§ 61-5-59 to 61-5-66, inclusive, for the collection of delinquent contributions.”
What this section is saying, is that any person who received an overpayment, whether due to an error or intentional fraud, will have to pay back the overpayment. The Department of Labor can either demand repayment directly from the individual, or by garnishing it from any future benefits they may receive.
The two additional collection methods provided in sections 59 and 66 are directed at employers. The first allows the Dept. of Labor to place a lien on the employers property, essentially taking the property as collateral until the employer pays back the required amount. Section 66 allows the department to take an employer to court to rule on the repayment.
Section 41 does state that repayment can be waived, a process outlined in our next section:
61-6-42: Waiver of right to recover overpayment
“The Department of Labor and Regulation may, according to rules promulgated pursuant to chapter 1-26 by the secretary of labor and regulation, waive the right of recovery of any benefits received by any claimant not entitled thereto, if the overpayment was not the fault of the claimant and if, in the judgment of the department, recovery would defeat the purpose of benefits otherwise authorized or would be against equity and good conscience.”
This section states that under certain circumstances, the department can waive the repayment, allowing the individual who received it to keep the excess payment. To qualify for this waiver, the overpayment must have been the result of a mistake by the department, not the fault of the claimant. It must also be in a case where enforcing repayment would “defeat the purpose” of other benefits you are receiving.
The last stipulation for a waiver is in the case that enforcing repayment would be against equity and good conscience. The language in this statute leaves the decision of whether or not to grant a waiver up to the discretion of the state. According to Sioux Falls attorney Jami Bishop, you can send a letter to the state in order to request such a waiver.
61-6-45: Cancellation of uncollectible overpayments
“If benefit sums paid remain unpaid by the recipient or have not been deducted from benefits payable to the recipient within ten years following the date the overpayment was established, the secretary of labor and regulation may declare the sums uncollectible and cancel the overpayment. The secretary may cancel and waive recovery of such overpayment for which the claimant’s liability was established under § 61-6-41 upon receipt of proper certification by a Department of Labor and Regulation representative that:
(1) The claimant has been duly discharged of such liability by a federal bankruptcy court;
(2) The claimant has died and reasonable efforts have been made to recover the overpayment from the claimant’s estate; or
(3) The overpayment has been outstanding ten years or more after the liability was established and reasonable efforts have been made to recover it.”
This section establishes what is basically a statute of limitation on repayments, allowing the secretary of labor and regulation to waive repayment in the event that 10 years has passed since the overpayment was made, and no repayments or deduction of benefits has occurred.
This section also outlines a few other ways that cancellations can be implemented:
- If an individual has filed for bankruptcy, a federal bankruptcy court can rule that they do not have to repay an overpayment.
- If the individual who received the overpayment has died, and the department has been unable to recover the money from the deceased person’s estate, the secretary can cancel the repayment.
- If it has been 10 years since the overpayment, and the department has tried and failed to recover the funds, the secretary can cancel the repayment.
61-6-44: Interest on benefit not repaid–Interest paid into employment security contingency fund
“Any benefit erroneously paid which is not repaid shall bear interest at the rate of Category C rate of interest under subdivision 54-3-16 (3). If the claimant was at fault in causing the overpayment, interest applies from the date of the determination of overpayment until payment plus accrued interest is received by the department. If the overpayment was without fault of the claimant, interest shall apply only to any balance unpaid six months after the determination of overpayment and shall continue until payment plus accrued interest is received by the department. Interest collected pursuant to this section shall be paid into the employment security contingency fund.”
If a person has been ordered to repay an overpayment, they may end up having to pay back more than they actually received. According to section 44, the amount that is owed due to overpayment will accrue interest until it has been repaid. Subdivision 54-3-16 (3) sets this interest rate at 12% per year. If the overpayment is determined to be the claimant’s fault, the interest beings to accrue from the day the department realized they had overpaid. However, if the overpayment was not the fault of the claimant, they will have a 6-month window from the time the overpayment is noticed to pay it back without interest being added.
61-6-43: Collection or deduction of overpayments by another state
“If an agency administering another reemployment assistance or unemployment compensation law in another state has overpaid benefits to an individual located in South Dakota, the Department of Labor and Regulation may, in its own name and acting as agent for such other agency, collect the overpayment by civil action and pay the net amount recovered to the agency in the manner provided in §§ 61-5-59 to 61-5-66, inclusive. If benefits are currently payable to the individual, the department may, with notice to the individual, pay as much of the benefits to the agency as are necessary to satisfy the individual’s indebtedness to the agency.”
So what if a person is living in South Dakota, but has received an overpayment of benefits from another state due to employment outside of South Dakota? According to section 43, the South Dakota Dept. of Labor can recollect the overpayment on behalf of the other state. This repayment can also be ordered in the name of the South Dakota Dept. of Labor, meaning that an individual can receive a notice that they owe the department money for an overpayment, despite never having received benefits from the state of South Dakota.
a: “If an individual receives benefits for which the individual is subsequently determined
to be ineligible, even though the individual acts in good faith and is not otherwise at fault, the
benefits shall be recovered. The department in its discretion may recover the overpayment of
benefits either by having a sum equal to the overpayment deducted from any future benefits
payable to the individual or by having the individual pay to the department a sum equal to
Section a. states that overpaid benefits must be repaid in all situations, even if the claimant was doing what they thought was correct, and had made no other errors. This section outlines two ways in which the overpayments can by collected; either by deducting the amount owed from any future benefits the person qualifies for, or by having the claimant pay the amount directly to the department.
The process for recollecting on overpayments of unemployment benefits in the state of Iowa is outlined in chapter 96.3 subsection 7. For the full letter of the law, click here.
Subdivision one: Repaying an overpayment
“(a) Any applicant who (1) because of a determination or amended determination issued under section 268.07 or 268.101, or any other section of this chapter, or (2) because of an unemployment law judge’s decision under section 268.105, has received any unemployment benefits that the applicant was held not entitled to, is overpaid the benefits, and must promptly repay the benefits to the trust fund.
(b) If the applicant fails to repay the unemployment benefits overpaid, including any penalty and interest assessed under subdivisions 2 and 2b, the total due may be collected by the methods allowed under state and federal law.”
Subdivision one states that if any person has been overpaid, whether that be through an error with the claim or by an unemployment law judge’s decision, they must repay the benefits. It also states that the state may use any methods that are legally available to them when trying to recover the payment.
Subdivision two: Overpayment because of misrepresentation
“(a) An applicant has committed misrepresentation if the applicant is overpaid unemployment benefits by making a false statement or representation without a good faith belief as to the correctness of the statement or representation.
After the discovery of facts indicating misrepresentation, the commissioner must issue a determination of overpayment penalty assessing a penalty equal to 40 percent of the amount overpaid. This penalty is in addition to penalties under section 268.183.
(b) Unless the applicant files an appeal within 20 calendar days after the sending of a determination of overpayment penalty to the applicant by mail or electronic transmission, the determination is final. Proceedings on the appeal are conducted in accordance with section 268.105.
(c) A determination of overpayment penalty must state the methods of collection the commissioner may use to recover the overpayment, penalty, and interest assessed. Money received in repayment of overpaid unemployment benefits, penalties, and interest is first applied to the benefits overpaid, then to the penalty amount due, then to any interest due. 62.5 percent of the payments made toward the penalty are credited to the contingent account and 37.5 percent credited to the trust fund.
(d) The department is authorized to issue a determination of overpayment penalty under this subdivision within 48 months of the establishment of the benefit account upon which the unemployment benefits were obtained through misrepresentation.”
Subdivision two allows the state to add a penalty equal to 40% of the overpayment amount if the overpayment is found to be the result of fraud. This would be in addition to other potential penalties.
Once the applicant (claimant) receives a notice from the state that their overpayment is considered fraud, they have 20 days to file an appeal. The state’s laws on the appeal process are found in section 268.105.
This subsection also states that the commissioner must provide the applicant with the methods the state can use to collect repayment, as well as how those repayments will be applied. Under this subsection, the department has 48 months (4 years) to issue a penalty for overpayment.
The full reading of the laws regarding overpayments in Minnesota, including rules on interest, cancellations and court fees, can be found here.