L&I Overcharged Interest to Unemployment Claimants by $15M
Summary
The Pennsylvania Office of State Inspector General (OSIG) completed an investigation into the Pennsylvania Department of Labor and Industry (L&I), finding that from January 1, 2006 to January 1, 2017, L&I incorrectly charged the wrong interest rate to claimants with fault unemployment compensation (UC) overpayments, resulting in the improper collection of approximately $26 million in interest when the correct amount should have been approximately $11 million. The error, attributed to human error and lack of oversight, was discovered by L&I's Legal Office in October 2016 during research for a UC Law amendment. OSIG found that while L&I has corrected the interest rate going forward and began the repayment process for affected claimants, deficiencies remain in the agency's processes.
“From January 1, 2006, to January 1, 2017, L&I incorrectly charged the wrong interest rate to claimants with fault UC overpayments resulting in the improper collection of approximately $26 million in interest.”
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GovPing monitors Pennsylvania OSIG for new government & legislation regulatory changes. Every update since tracking began is archived, classified, and available as free RSS or email alerts — 6 changes logged to date.
What changed
The OSIG investigative summary documents that L&I systematically applied an incorrect interest rate to fault unemployment compensation overpayments over an eleven-year period, resulting in approximately $26 million collected when only $11 million should have been charged. The investigation identified the error in October 2016 and confirmed it stemmed from human error and inadequate oversight during the period in question. OSIG found that while L&I has since corrected the rate and initiated a repayment process, the agency lacks documented policies and procedures for obtaining the correct annual interest rate from the Department of Revenue and ensuring all program areas receive accurate information.\n\nState government agencies administering benefit overpayment programs should review their interest calculation methodologies to ensure compliance with statutory rates. Pennsylvania L&I faces ongoing OSIG oversight through required quarterly progress reports on remediation efforts. The findings underscore the importance of internal controls and documentation procedures for financial calculations in government benefit administration programs.
Archived snapshot
Apr 24, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
OFFICE OF STATE INSPECTOR GENERAL (OSIG) INVESTIGATIVE SUMMARY
Department of Labor and Industry
Interest Charged to Claimants with Fault Unemployment Compensation Overpayments Initiation Date: May 3, 2017 Issue Date: August 16, 2017 (Via Hand Delivery) The OSIG initiated an investigation after receiving a complaint from a Commonwealth employee alleging the Department of Labor and Industry's (L&I) Office of Unemployment Compensation Benefit Programs incorrectly charged a higher interest rate to claimants with fault unemployment compensation (UC) overpayments. The OSIG interviewed nine current and former L&I employees and reviewed L&I documents and memorandums relating to the UC system and processes. The OSIG found: 1) From January 1, 2006, to January 1, 2017, L&I incorrectly charged the wrong interest rate to claimants with fault UC overpayments resulting in the improper collection of approximately $26 million in interest. (According to L&I the $26 million calculation was a worst-case scenario. Rather, had it applied the correct annual interest rate to the amount of interest collected in each of these years, the correct interest charge would have been approximately $11 million.) 2) The error was discovered by L&I's Legal Office in October 2016, while it was researching an amendment to the UC Law. 3) Although none of the individuals interviewed were employed by L&I during the period in question (2006-2017), all agreed that the problem existed and resulted from 'human error' and lack of oversight. 4) L&I is currently charging the correct interest rate to claimants with fault UC overpayments. 5) L&I began the process of correcting the interest rate for previous years, with the stated intent that it will make every attempt to pay back any excess money which was collected as a result of this error. Notwithstanding the fact that L&I was aware of this issue and took some corrective actions, the OSIG found deficiencies in the processes and recommended that:
- L&I memorialize a policy and procedure for both obtaining the annual interest rate from Department of Revenue and for ensuring that all the program areas within L&I receive the correct information. • L&I memorialize a corrective action plan defining the remedial actions L&I has taken for affected claimants which includes annual milestones or goals and provides a timeline for when L&I expects to have all issues resolved. Additionally, the OSIG requested that L&I provide quarterly updates on L&I's progress and where it stands in the repayment process.
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