Labor Dept. program anticipates saving $100M tracking unemployment fraud

TRENTON – The state Department of Labor and Workforce Development announced that by next month their innovative antifraud efforts will have saved $100 million in the Unemployment Insurance Trust Fund.

Deputy Commissioner Aaron Fichtner told the Senate Labor Committee today that an award-winning antifraud program – the first of its kind in the nation – was able to flag more than 200,000 potentially fraudulent unemployment claims per week.

The state borrowed $2.1 billion in 2010 to fill the fund coffers, and Gov. Chris Christie set in motion a task force to examine the depleted account.

The Unemployment Insurance Task Force made recommendations to “expand and toughen” restrictions on UI payments by creating another level of misconduct and increasing fraud penalties at all three levels. Fichtner said the adoption of the recommendations saved roughly $85 million for the fund between July 2010 and December 2011.

Christie actually scaled back a task force recommendation passed by the Legislature last year. The measure would have phased in increased employer contributions of $300 per employee, which Christie rolled back to $100 per employee.

As task force co-chair Melanie Willoughby, N.J. Business & Industry Association senior vice president, told the panel, “It was one of the (few) times we asked for a tax (increase).” She said employers understood the importance of addressing the negative fund balance.

This year, the task force recommendations are already being worked on. At the panel’s last meeting, they passed S1121, an adjustment of the UI tax rate for certain employers expected to capture more than $200 million for the UI fund. The bill is sponsored by committee chairman, state Sen. Fred Madden, (D-4), Washington Township, who sat on the task force with fellow committee member, state Sen. Steve Oroho, (R-24), Franklin Township.

Another recommendation of the task force was increased fraud prosecution, which Willoughby said the department has actively addressed.

Fichtner noted that the U.S. Department of Labor awarded the state department two innovation awards for the antifraud program. DLWD began their program in March 2011, and are cracking down on the most prevalent form of UI fraud: collecting unemployment after rehire. By next month, he said the “conservative estimate” is that the program will have saved the UI fund around $100 million. The department cross-checks “new hire” databases and notifies the thousands of cases flagged per week. If the benefit recipient does not respond, the department stops payment of UI benefits until the recipient responds to inquiries.

The next major recommendation that will be hashed out is whether UI benefits would be provided to seasonal employees, and what exactly is the definition of a seasonal employee. Labor Dept. program anticipates saving $100M tracking unemployment fraud