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Madden Bill Package To Redefine Provisions Of Fraudulent Unemployment Insurance Penalties Advances

Measures Will Align State’s Unemployment Insurance Fund to National Standard

TRENTON – A two-bill package sponsored by Senate Labor Committee Chairman Fred H. Madden to close loopholes in how the state directs and deposits penalties recovered from fraudulently obtained unemployment benefits, has advanced for further consideration.

“The penalties collected from fraudulent insurance benefits are directly reinvested to help New Jersey residents who have lost their jobs in the economic downtown. Unfortunately, the unemployment compensation system is dictated by a complex patchwork of rules, and sometimes weeks can go by before these fines are actually deposited,” Senator Madden, D-Gloucester and Camden. “Standardizing these procedures is an important step to take bureaucracy out of the process, so that we can provide timely assistance for those who truly need it.”

The U.S. Department of Labor has been and is currently implementing a number of strategies to facilitate states with the management of improper payments of unemployment insurance benefits. The Trade Adjustment Assistance Extension Act (TAAEA) of 2011 provides individual states the statutory authority to help maintain the integrity of the nationwide unemployment compensation program. The two bills are modeled in direct accordance with TAAEA and will bring provisions that oversee New Jersey’s unemployment insurance funds up to federally mandated standards.

Approved today by the Senate Budget and Appropriations Committee, the first bill (S-2738) would require that the New Jersey Department of Labor and Workforce Development immediately deposit any amount recovered from penalties relating to the erroneous payment of unemployment benefits. Further, the bill would mandate that a recovered fine of 15 percent of the amount fraudulently obtained be deposited into the unemployment insurance trust fund, and the remaining fine of 10 percent of the amount fraudulently obtained be deposited into the unemployment compensation auxiliary fund. Currently, the total amount of the recovered fine is deposited into the unemployment compensation auxiliary fund.

In addition to clarifying when and where the collected penalties are to be deposited, the bill would also require that guidelines concerning the assessment and deposit of penalties extend to federally provided unemployment compensation benefits, instead of just those distributed at the state level. S-2738 now heads to the Senate floor.

Under provisions of the second bill, (S-2739), which was approved by the Senate last week, an employer’s unemployment insurance account would not be relieved of charges related to a fraudulent benefit payment under certain circumstances. The bill would prohibit charges from being relieved if it is determined by the Department of Labor and Workforce Development that the employer is at fault for the erroneous payment because the employer failed to respond in a timely or adequate manner, and the employer engaged in a “pattern of failing to respond” – defined as three documented failures to respond within 365 days of requests from the department.

“Fraudulent claims drain the unemployment insurance system of millions of dollars each year,” said Madden. “These bills will help improve transparency in the unemployment compensation system and ensure that everyone plays by the same set of rules.”

S-2739 passed the full Senate last Thursday with a vote of 40-0. It now heads to the Assembly for final legislative approval.

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