DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 01-97
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	MARY ANN WYRSCH Director Unemployment Insurance Service
SUBJECT	:	General Accounting Office (GAO) Report Concerning Unemployment Insurance (UI) Overpayments to Military Reservists

1. Purpose. To:

   a.announce the publication of a final GAO Report entitled UNEMPLOYMENT INSURANCE: Millions in Unemployment Insurance Overpaid to Reservists (Report No. GAO/HEHS-96-101); and

   b.recommend that State Employment Security Agencies (SESAs) review and revise, as necessary, their UI program procedures and claims forms to clearly delineate he claimant's responsibility to report Reserve income if the applicable State law so requires.

2. Background. In response to a request from Congresswoman Patricia Schroeder, the GAO undertook a study to examine the extent to which military reservists were not complying with State law requirements by not reporting their Reserve income to the SESAs while in claims status. This study was conducted using seven States' Fiscal Year (FY) 1994 claimant data and Reserve payroll and personnel data for the same period. The seven States were California, Colorado, Florida, Georgia, Massachusetts, Pennsylvania, and Texas. Colorado amended its UI law in May 1995 to exempt Reserve pay for weekend drill and annual training participation from its UI program offset requirements. The GAO study was conducted between August 1994 and May 1996.

3. Results of GAO Study.The GAO analysis of the data from the seven States revealed that some Reserve personnel are receiving improper UI benefit payments. The GAO reports that it estimates that UI claimants who were active participants in the Reserve failed to report over $7 million in Reserve income in FY 1994 which resulted in UI benefit overpayments of approximately $3.6 million, of which Federal agency benefit charges were about $1.2 million. The figures from the seven States reviewed account for 27 percent of all reservists therefore, projected nationally, the losses to the State trust funds and Federal agencies budgets were much greater.

   The GAO Report listed four reasons that may contribute to UI claimants not reporting their Reserve income to the SESAs. These reasons are:

   a.Many UI claimants may be unaware of the State law requirement to report Reserve income to the SESA;

   b.Many SESAs do not specifically cite the requirement for claimants to report Reserve income on the UI program materials provided the claimant nor on the UI claims forms;

   c.Claimants may not report Reserve income because there is little chance of being caught due to the lack of Reserve wage records in the SESAs' data bases; and

   d.SESA crossmatching efforts to detect unreported wages are constrained by limited access to Reserve payroll data.

4. Recommendations Regarding the GAO Finding.The Unemployment Insurance Service (UIS) recommends that SESAs whose State UI law provides for the reduction of Reserve earnings from the UI weekly benefit amount (WBA):

   a.assess their operations to ensure that they cover this requirement in Benefit Rights Interviews;

   b.clearly note this State law requirement in the information material provided to UI claimants as appropriate; and

   c.include some mention of this requirement on weekly claim forms.

5. National Office Actions. The UIS National Office will review all handbooks and Benefit Payment Control materials and will revise them to include references to reductions of the WBA for Reserve income if required under the applicable State's law. The National Office will also be working with the Departments of Defense and Transportation to facilitate the timely, accurate, and efficient exchange of Reserve payroll information to SESAs seeking such information for crossmatching purposes.

6. Action Required.SESAs should provide copies of this directive to appropriate staff.

7. Copies of GAO Report.Copies of the GAO Report No. GAO/HEHS-96-101 may be obtained by mail at:

   U.S. General Accounting Office
   Post Office Box 6015
   Gaithersburg, Maryland 20884-6015

   For information on how to access this report on the INTERNET, send an E-Mail message with "info" in the body to:

   info@www/gao.gov

   or contact the GAO's World Wide Web Home Page at:

   http://www.gao.gov

8. Inquiries. Direct inquiries to the appropriate Regional Office.