Unemployment Compensation Denied Claims Accuracy: Proposed Information Collection and Request for Public Comment

AGENCY:

Employment and Training Administration (ETA), Labor.

ACTION:

Notice and request for comments.

SUMMARY:

The Department of Labor, as part of its continuing effort to reduce paperwork and respondent burden, conducts a preclearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and/or continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA95) (44 U.S.C. 3506(c)(2)(A)). This program helps to ensure that the requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements on respondents can be properly assessed.

ETA is soliciting comments concerning the proposed new collection of information on the accuracy of decisions to deny claims for unemployment compensation (UC). ETA is seeking Office of Management and Budget (OMB) approval under the PRA95 to establish Denied Claims Accuracy (DCA) as a component of the quality control (QC) program in the Federal-State unemployment insurance system (20 CFR Part 602). A copy of the proposed data collection instrument is available on the ETA Office of Workforce Security (OWS) Web site, http://workforcesecurity.doleta.gov/,, or can be can be obtained by contacting the office listed in the Addresses section below.

DATES:

Written comments must be submitted to the office listed in the Addresses section below on or before December 4, 2000.

ADDRESSES:

All comments about this proposed collection of information should be addressed to: Andrew W. Spisak, Office of Workforce Security, Employment and Training Administration, U.S. Department of Labor, Room S-4231, 200 Constitution Avenue, NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT:

Andrew W. Spisak, telephone: 202-219-5223, ext. 157 (this is not a toll-free number); fax: 202-219-8506; e-mail: aspisak@doleta.gov.

SUPPLEMENTARY INFORMATION:

I. Background

Since 1987, all State Employment Security Agencies (SESA's), except the Virgin Islands, have been required by regulation at 20 CFR Part 602 to operate a quality control program to assess the accuracy of benefit payments in three programs: State Unemployment Insurance (UI), Unemployment Compensation for Federal Employees (UCFE), and Unemployment Compensation for Ex-Servicemembers (UCX). This program, implemented under the Department's authority at Sections 303(a)(1) and 303(b)(1) of the Social Security Act, was initially called Benefits Quality Control but was renamed Benefit Accuracy Measurement (BAM) in 1996.

The BAM methodology requires each State to draw weekly samples of UC payments. Minimum annual samples are set at 360 cases in the ten States with the smallest volume of UC claims and 480 cases in all other States. A specially trained staff of investigators reviews agency records and contacts the claimant, employer(s) and third parties to verify all the information in agency records and obtain additional information pertinent to the benefit amount for the sampled week. States have the flexibility to verify the UC payment information by telephone, mail, e-mail or fax, as they deem appropriate.

Using the new and verified information, the investigators determine what the benefit payment should have been to accord fully with State law. Differences between the actual and reconstructed payments are coded as underpayment or overpayment errors, and data on payment error type (for example, fraud, nonfraud, technically proper), cause, and responsible party are recorded in electronic databases in each State and in the Department of Labor National Office in Washington, D.C. The SESA's and the Department use this information to estimate payment accuracy rates, monitor program quality, guide possible future program improvements, inform system stakeholders, and perform various analyses. The program is operated under OMB approval, OMB number 1205-0245; approval expires October 31, 2002.

During the public consultation process which preceded the establishment of the QC/BAM program, several public interest groups representing employers, employees, and State government agencies proposed underlying principles to govern the program. The Department adopted these consensus principles in Unemployment Insurance Program Letter (UIPL) No. 4-86 (December 20, 1985).

In the final rule establishing the QC program for UC, published in the Federal Register (FR) at 52 FR 33520 (September 3, 1987), one of the consensus principles states that QC would be expanded to include the review/investigation of claims that had been denied [52 FR 33522].

In addition, 20 CFR 602.2 states that:

Other elements of the QC program (e.g., interstate, extended benefits programs, benefit denials, and revenue collections) will be phased in under a schedule determined by the Department in consultation with State agencies.

States determine claimant eligibility for UC in three broad areas: monetary determinations, separation determinations, and nonseparation determinations. Monetary determinations are made when a claim is initially filed (or when a claim is made to establish a new benefit year) to verify that the claimant has sufficient wage credits in the base period and has satisfied other monetary requirements to demonstrate attachment to the labor force.

Separation determinations are made when the claim is initially filed or when an additional claim is filed in the claimant's benefit year after a period of intervening employment. Separation determinations evaluate whether the claimant's unemployment is involuntary and through no fault of the claimant.

Nonseparation determinations verify that the claimant is meeting the eligibility requirements of State law for a specific week of unemployment.

In 1986-87, five States conducted a one-year pilot to measure the accuracy of decisions to deny UC eligibility for monetary, separation, and nonseparation reasons. These States tested three sampling designs and used the BAM case investigation methodology. Although the pilot identified significant rates of error in the denial decisions that were investigated, national implementation of a program to measure the accuracy of denied claims was deferred because of resource constraints and other program priorities, such as the implementation of Benefit Timeliness and Quality and the Tax Performance System. Since the 1986-87 denied claims pilot, several groups, including organized labor, employee rights legal support groups, the Department of Labor's Office of Inspector General, and the Vice President's National Performance Review have urged the Department to measure the accuracy of decisions that deny UC benefit claims.

In 1995 the Performance Enhancement Work Group (PEWG), which consisted of senior SESA managers and Federal staff, recommended several changes in the way UC operational performance was measured and improved. The Department accepted most of the recommendations and has implemented them as UI PERFORMS. UIPL No. 41-95 (August 24, 1995) describes in detail the UI PERFORMS performance management system. Among the PEWG recommendations with respect to BAM were: (1) The implementation of a system to measure the accuracy of decisions to deny UC claims; (2) reductions in the BAM paid claims sample allocations; and (3) a modification of data collection methods to provide the States more flexibility in using program resources, which would be redirected to support UI PERFORMS continuous improvement activities, including investigating the accuracy of denied claims.

UIPL No. 15-96 (April 2, 1996) described the proposed changes and solicited comments from the SESA's. According to the Attachment to the UIPL, “Measuring UI Benefit Payment Accuracy Under UI PERFORMS: Proposed Changes to Benefits QC”:

Under the proposal, staff freed up because of sample reductions or changes in how verifications are conducted will be available for investigating denied claims and other UI Performs [sic] activities, including taking other performance measurements.

The implementation of the changes and the reallocation of BAM resources were reported in UIPL No. 3-97 (November 20, 1996).

Because significant time had elapsed since the initial denied claims pilot, the Department conducted a new pilot to guide implementation of DCA. The principal objectives of the pilot were:

• To test the operational feasibility of applying the BAM paid claims investigation methodology to denied UC claims, including both intrastate and interstate claims; and
• To evaluate whether the accuracy of decisions to deny UC claims for separation or nonseparation eligibility reasons is adequately addressed through the quarterly reviews of nonmonetary determination quality (ET Handbook 301) or whether the accuracy of these nonmonetary determinations can be measured only through the more comprehensive BAM fact-finding process.

Five States (Nebraska, New Jersey, South Carolina, West Virginia, and Wisconsin) participated in this new pilot. Sampling and investigation of denied UC claims were conducted from September 1997 through September 1998. A final pilot evaluation report was issued in May 1999 and is available on the OWS Web site at: http://workforcesecurity.doleta.gov.

The five States that participated in the new pilot demonstrated that the BAM case investigation methodology was easy to implement for both intrastate and interstate claims, was successful in detecting erroneously denied claims, and identified valuable information on the cause, responsible party, point of detection, and prior agency action for improperly denied claims that SESA's could use to improve UC operations. The new pilot also demonstrated that the results of the quarterly evaluations of nonmonetary determination quality are not a reliable predictor of the accuracy of decisions to deny claims for UC. Because of the fundamental differences in the methodologies used in BAM and the nonmonetary quality review, both programs contribute important but distinct information within UI PERFORMS.

In general, the new pilot confirmed the results of the initial pilot that significant percentages of UC claims in all three eligibility areas (monetary, separation, and nonseparation) were incorrectly denied, although accuracy rates varied both among States and among the three eligibility areas. These results are summarized in Table 1.

Note:

The first percentage in each column is the unadjusted percentage of erroneous denials. The second percentage, in parentheses, is adjusted for appeals, redeterminations, and cases which the agency was in the process of resolving.

II. Review Focus

The Department of Labor is particularly interested in comments which:

• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

III. Current Actions

The Department of Labor proposes the following methodology and operational characteristics of DCA:

Sample Design and Sample Sizes: Each week, States will select systematic random samples from three separate sampling frames constructed from the universes of claims for UC for which eligibility was denied for monetary, separation, or nonseparation reasons. States will use the BAM population edit and sample selection software program, which was distributed to all SESA's in January 1998, to select the weekly samples. This software uses a systematic random sampling algorithm. The Department will distribute a table of random start numbers to use with the BAM/DCA sample selection program.

States will sample a minimum of 150 cases of each type of denial in each calendar year. Unlike BAM paid claims accuracy, in which the ten States with the smallest workloads sample paid claims at the reduced level of 360 cases per year, all States are allocated the same number of DCA cases. The Department considers the annual sample allocation of 150 cases for each of the three types of denials to be the minimum sample size required to produce DCA rate estimates with acceptable precision and to yield a sufficient number of error cases to produce program improvement information. The proposed DCA sample allocations also take into account the likelihood of DCA claimant response rates less than 100 percent. This will result in fewer sample cases than the allocated levels that will be available to estimate accuracy rates and to provide information on error causes, responsibility, and other information that can be used for program improvement.

Table 2 shows the precision, as measured by 95 percent confidence intervals, and the number of sample cases expected to be in error by various error rates for the proposed DCA sample size and the current BAM paid claims sample allocations.

Note:

Confidence intervals are expressed as the number of percentage points +/- for the estimated error rate. Example: For an estimated error rate of 20% and an annual sample size of 150, the 95 percent confidence interval is 20.0% + 6.4 (13.6%-26.4%).

The sampling errors in States with relatively small populations of denied claims will be slightly lower, due to the higher percentage of the population that is sampled.

Table 3 shows the 95 percent confidence intervals for several error rates and sampling fractions, for a sample size of 150 cases. Based on CY 1999 data, a sample of 150 denials exceeds 10 percent of the population of monetary denials in eight States; and exceeds 10 percent of the population of separation denials in one State. Sampling fractions for populations of nonseparation denials are less than 10 percent in all States.

Scope: Denied intrastate and interstate claims in the State UI, UCFE, and UCX programs will be included in DCA. In addition, interstate claims in the UI, UCFE, and UCX programs will be included in the BAM paid claims sampling frames, effective with the implementation of DCA. Paid and denied interstate claims will be included in the sampling frames of the interstate liable State.

Operational Definitions of Sampling Frames: Unless otherwise stated, definitions refer to those used in ET Handbook 401, 3rd edition. ETA report cell references are those used in ET Handbook 402, 4th edition.

(1) Monetary Denials

Include all initial claims that meet the definition for inclusion in the ETA 5159 Claims and Activities report on lines 101 (State UI), 102 (UCFE, No UI), and 103 (UCX only), for item 2 (new intrastate, excluding transitional), item 6 (transitional), and item 7 (interstate received as liable State) and for which eligibility was denied because of:

• Insufficient wages,
• Insufficient hours/weeks/days,
• Failure of high quarter wage test,
• Transitional wage requirement, or
• Other State monetary eligibility requirement.

Exclude denied claims made under the Short Time Compensation (STC) (Workshare), Extended Benefits (EB), Trade Readjustment Allowance (TRA), Disaster Unemployment Assistance (DUA), or any temporary Federal-State supplemental compensation programs.

(2) Separation Denials

Include all separation determinations that meet the definition for inclusion in the ETA 9052 Nonmonetary Determinations Time Lapse (Detection Date) report in cells c1 (intrastate), c5 (interstate), and c193 (multi-claimant) and for which eligibility was denied based on any of the following issues:

• Lack of work (for example, reduction in force, temporary lay off),
• Voluntary quit,
• Discharge,
• Labor dispute,
• Military, or
• Job attachment (claimant not separated, including leave of absence).

Exclude denied claims made under the STC, EB, TRA, DUA, or any temporary Federal-State supplemental compensation programs.

(3) Nonmonetary-Nonseparation Denials

Include all nonmonetary-nonseparation determinations that meet the definition for inclusion in the ETA 9052 Nonmonetary Determinations Time Lapse (Detection Date) report in cells c97 (intrastate), c101 (interstate), and c193 (multiclaimant) and for which eligibility was denied based on any of the following issues:

• Able and/or available to work,
• Actively seeking work,
• Disqualifying/unreported income,
• Refusal of suitable work,
• Failure to apply for or accept referral,
• Failure to report,
• Failure to register with the employment service, or
• Other nonseparation eligibility issue (for example, alienstatus, athlete, school employee, seasonality, determination of UI status, removal of disqualification).

Exclude denied claims made under the STC, EB, TRA, DUA, or any temporary Federal-State supplemental compensation programs.

Frequency and Timing: State agencies will create a sampling frame file each week. The sampling frame includes all decisions to deny UC claims issued during the period 12:00 a.m. Sunday to 11:59 p.m. Saturday. The date of the determination is the date that the notice of denial is mailed to the claimant, presented to the claimant in-person, or otherwise transmitted to the claimant by the State agency. If no notice is required, it is the date that the denial action was entered into the agency's record system, that a stop payment order was issued, or that an offset was applied.

In the 1997-98 DCA pilot, several claims for UC were sampled which were initially denied for insufficient wages but were subsequently determined to be monetarily eligible upon the addition of wages from out-of-State employers (combined wage claims) or Federal wages (UCFE and/or UCX programs). The exchange of information on UCFE and UCX wages is in the process of being automated and expedited. However, in order to allow time for States to request and receive Federal and combined wage credits, the sampling frame for monetary denials will be constructed two weeks after the week ending date of the initial claim. For example, for all new and transitional initial claims filed during the week ending June 10, 2000, the sampling frame will consist of claims for which the most recent determination as of June 24 denies monetary eligibility.

Case Investigation: All denied claims sample cases will be investigated using the BAM methodology, which is documented in ET Handbook 395. Investigators will review agency records and contact the claimant, employer(s), and all other relevant parties to verify information in agency records or obtain additional information pertinent to the decision to deny eligibility. Unlike the investigation of paid claims, in which all decisions affecting claimant eligibility that precede the compensated week selected for the sample are evaluated, the investigation of denied claims will be limited to the issue, or issues, upon which the denial decision was based. For example, if a continued week claim is denied because the agency determined the claimant was not available for work, then only the availability issue will be investigated; the monetary, separation and any prior nonmonetary determinations will not be investigated. Like the investigation of paid claims, States have the flexibility to conduct the investigation of denied claims for UC by in-person interview, telephone, mail or fax, as they deem appropriate.

Resources: When BAM paid claims sample sizes were reduced in accordance with PEWG recommendations to the 480/360 levels in 1996 in preparation for DCA, State staff allocations were adjusted to provide sufficient resources to conduct BAM paid and denied claims accuracy, Benefit Timeliness and Quality, Tax Performance System, and UI PERFORMS continuous improvement activities. Two full-time equivalent (FTE) staff positions allocated to continuous improvement activities will support DCA. States will decide how to allocate/apportion among staff BAM paid and denied claims sample cases.

ADP Support: UIPL No. 1-98 (October 20, 1997) included the documentation for the revised BAM population edit and sample selection program, which was distributed to all SESA's in January 1998, and the specifications for programming required to construct the DCA sampling frame files, for which the SESA's are responsible. DCA applications software, which was developed for the DCA pilot, are installed on the State Sun Ultra 10 computers provided by the Department. Although this software is functional and can be used to conduct DCA, several modifications of and additions to this software have been identified and will be released to the States in advance of the national implementation of DCA. In addition, the BAM sample selection program will be modified to include paid interstate claims in the BAM samples and to reflect revisions that were identified in the DCA pilot, such as the two-week lag in sampling monetary denials. States will have to recompile the revised COBOL program on their ADP system.

Data Recording and Reports: States will record the results of their investigations using a standard data collection instrument and suite of software supplied by the Department. The Department will collect this information from the State databases, store the data in a database in the National Office in Washington, D.C., and produce annual statistics on the accuracy rates for each of the three types of denied claims by State.

Training: The Department will conduct DCA training for State staff during the calendar quarter preceding national implementation. The Department will issue a directive containing details on the times, locations, and content of the training in advance of the sessions.

Type of Review: New.

Agency: Employment and Training Administration.

Title: Unemployment Compensation Denied Claims Accuracy.

Record keeping: States are required to follow their State laws regarding public record retention in retaining BAM paid and denied claims records.

Affected Public: Individuals; Businesses; Other for-profit/not-for-profit organizations; Farms; Federal, State, Local, and Tribal Governmental entities.

Frequency: Weekly.

Total Respondents: 1,395 per week (includes claimants, employers, third parties, and SESA BAM/DCA staff).

Total Responses: 72,540 per year (52 State Agencies/1,395 per State; includes claimants, employers, third parties, and SESA DCA staff).

Estimated Time Per Response: Claimant—0.5 hours; Employers and Third Parties—0.5 hours; SESA BAM/DCA staff—6.67 hours.

Total Burden Hours: 180,375 hours.

Total Burden Cost (capital/startup): $1,014,000 (52 State Agencies/$19,500 per State).

Total Burden Cost (operating/maintaining): $4,264,000 (annual) (approximately $82,000 per State).

Comments submitted in response to this request will be summarized and/or included in the request for OMB approval of the information collection request; they will also become a matter of public record.