The Statute of Limitations on Illinois Unemployment Overpayment

The Illinois Department of Employment Security is responsible for administering the state’s unemployment insurance benefits to eligible applicants. The department is required to comply with the Illinois Unemployment Insurance Act and with the administrative claims deadlines when collecting unemployment benefit overpayments. The overpayment statute of limitations rules are codified in Section 900 of the Illinois Unemployment Act.

Since employers are responsible for funding the state’s unemployment insurance system by paying quarterly employment taxes based on their total payrolls, they may overpay their tax liabilities. An employer has three years to collect overpaid taxes from the state from the date it paid those taxes. In the case of employer-paid overpayment of taxes, the Illinois Department of Employment Security has 90 days to mail refunds to employers who overpaid their taxes from the date employers apply for refunds.

If the department does not refund an employer within 90 days from the date of the employer’s written claim, the state must pay interest at 1.5 percent on the total amount overpaid. However, for underpayments, the department can assess interest penalties against employers on the amounts underpaid.

According to the Illinois Unemployment Insurance Act, the Department of Employment Security will conduct in-depth reviews of the overpaid claims. If the department finds that an employee intentionally withheld information or failed to report earnings, the state can forward his case to the Illinois Office of the Attorney General, and the office can file criminal and civil sanctions against him and recommend imprisonment.

The department has an unlimited amount of time to collect overpayments due to fraud. Additionally, if a claimant guilty of fraud re-files for benefits within two years, the state imposes a mandatory penalty waiting period, depending on the weeks of overpayments. For overpayments unrelated to fraud, the department has five years to recoup the overpayments.

The Illinois Department of Employment Security sends overpayment information in a written “Notice of Reconsidered Determination and Recoupment Decision.” The department can enter into installment plans with claimants, allowing them to repay their overpayments in equal increments. The department withholds all future claims until their overpayments are fully repaid. However, the department is limited to collect only 25 percent of an overpaid claim if the claimant did not commit fraud. The Illinois Tax Comptroller can withhold tax refunds to satisfy an applicant’s debt.

The Illinois Department of Employment Security conducts cross-matches when employees file their initial claims for benefits. The department cross-matches information submitted in an employee’s application for unemployment to the Illinois Directory of New Hires. All employers must report their new hires to the directory, and if the department finds misleading information, it will further investigate the applicant’s case.

If the department determines that an employee failed to report other earnings while receiving benefits, the department will stop paying further benefits and will seek reimbursement of the overpaid weeks. Failure to report earnings can lead to a five-year imprisonment sentence and $25,000 in fines. Furthermore, the department can pursue a private civil lawsuit to recover the overpaid benefits.

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.