Senate Finance Committee Chairman Max Baucus, D-Mont., plans to convene a hearing to consider White House proposals for reducing waste and overpayments in the unemployment insurance program.

The hearing, scheduled for next Tuesday, May 25, will examine overpayments and other problems with unemployment benefits. Just this week, however, Baucus joined House Ways and Means Committee Chairman Sander Levin, D-Mich., in proposing tax and unemployment legislation that would extend unemployment benefits through the end of the year (see Legislation Introduced to Extend Unemployment Insurance and Tax Breaks).

The Department of Labor estimates that the unemployment insurance program wasted approximately $11 billion last year in overpayments, money that is necessary to secure the viability of the program for the families and communities who depend on it. President Obama has proposed legislation, known as the Unemployment Compensation Program Integrity Act, to reduce overpayments and improve effectiveness in the unemployment insurance program.

At Tuesday’s hearing, entitled “Reducing Overpayments and Increasing Quality in the Unemployment System,” Baucus will examine the president’s proposal and discuss options for making unemployment insurance work more effectively for American workers.

Among several provisions, the Unemployment Compensation Program Integrity Act would permit states to use up to 5 percent of recovered unemployment compensation overpayments to deter and detect benefit overpayments. It also would allow states to use up to 5 percent of contributions collected due to employer fraud or tax evasion — including misclassification of employees — to combat these problems.

Mandates would include requiring states to assess a penalty of not less than 15 percent of the amount overpaid on any overpayments that result from claimant fraud. The act also would give employers an incentive to provide timely, accurate and complete information about why their former employees no longer work for them — information that is critical for states to make proper benefit payment decisions. Additionally, the act would require employers to report the first day of earnings for new hires to the National Directory of New Hires. This step would help to reduce overpayments due to individuals who return to work but continue to collect unemployment compensation.

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