- Why did I receive a benefit audit?
- Why are there two types of benefit audits?
- Why should I complete the forms?
- What if a form is not completed accurately?
- What if the person didn’t work for me during those weeks?
- What if the person has never been my employee?
- What if I return the form late?
- Why must I report weekly information?
- How to Respond
- Other Fraud Issues
- Administrative Decisions
- Penalties for Fraud
- Completing Benefit Audit Forms
The EDD conducts a daily audit process by performing a cross match of New Employee Registry (NER) data with Unemployment Insurance (UI) claims to determine if a claimant has received benefits after returning to work. In addition, the EDD conducts a quarterly audit process that matches wage information reported by employers with UI claim information. The purpose of these audits is to ensure the integrity of the UI program by identifying claimants who may be working while drawing unemployment benefits inappropriately or fraudulently. Overpayments and penalties that are established and collected help to protect the solvency of the UI Trust Fund and help to control or reduce employer taxes. If you are aware of a claimant who may be committing fraud, please call our fraud hotline at 1–800–229–6297.
Why did I receive a benefit audit?
The EDD performs two audits of UI claims: a daily process and a quarterly process. The goals of the EDD audits are to obtain accurate work/earnings and eligibility information to ensure the integrity of our benefit payments and to prevent employers from being subject to higher tax rates based on incorrect information. It is important that employers understand the importance of returning the benefit audit forms with complete, timely, and accurate information.
The EDD is not auditing your records. We are auditing claimants to see if they reported all work and earnings correctly to ensure proper payment of UI benefits and to ensure that your reserve account is charged correctly. If claimants are not entitled to benefits, we want to protect your account from being charged incorrectly.
Daily Audit of UI Claims – This audit utilizes the NER information provided by employers and compares the Start-of-Work Date (SWD) to UI claims information. If the SWD overlaps with weeks the claimant certified for UI benefits, a New Employee Registry (NER) Benefit Audit (DE 1296NER) is sent to the employer to request verification of the individual’s name, social security number (SSN), and the SWD, as well as wage and eligibility information. After the audit is completed and returned by the employer, the case is further researched. If a violation occurred, a notice of potential overpayment is sent to the claimant.
With the DE 1296NER, we ask the employer to provide earnings and eligibility information to ensure that the claimant has reported this information accurately to EDD. The form requests the employer to validate that the SWD provided on the Report of New Employee(s) (DE 34) is actually the claimant’s first day of work and not the hire date, as this is one of the key components for determining if UI benefits were overpaid. Additionally, the DE 1296NER may list weeks in the future to obtain the most current information. Please reply within 10 days of receipt. Do not hold past future weeks listed.
Quarterly Audit of UI Claims – This audit utilizes the quarterly wage information reported by employers and compares wage information to UI claims information. During this process, the system identifies claimants who have weekly UI benefit information in the same quarter that employers reported wages. When a match is identified, a Benefit Audit (DE 1296B) is sent to the employers who reported quarterly wages for the claimant. The DE 1296B requests earnings and eligibility information for the weeks relating to the reported quarter and subsequent quarter if the claimant received UI benefits.
With the DE 1296B, we ask the employer to provide a breakdown by week of the gross amount earned by the claimant. Even though employers provide total gross wages for the period of the audit when submitting their quarterly tax report, that report is based on when the wages were paid and is not broken down by week. We need to know when the wages were actually earned because this is what the claimant is required to report on a weekly basis.
When claimants misrepresent their earnings while claiming UI benefits, the EDD issues an administrative decision. It includes the audit results and establishes an overpayment that the claimant must repay. If the claimant willfully gave false information or withheld information to claim UI benefits, EDD will assess a 30 percent cash penalty and a false statement disqualification. A false statement disqualification is a penalty that denies the claimant’s benefits from 5 to 23 weeks.
Why are there two types of benefit audits?
As part of the Federal Welfare Reform Act (HR 3734), all employers are required to report to the EDD all newly hired or rehired employees within 20 days of start of work. The EDD captures the NER information and forwards it to the Department of Social Services and Department of Justice. Section 1088.5 of the California Unemployment Insurance Code allows EDD to use the SWD in detecting UI fraud. The two audits are independent of each other. The EDD utilizes the NER SWD for a daily audit of UI claims. The NER audit is only available if the employer has reported the claimant as a new hire or rehire. However, the benefit audit process is performed each quarter when the employer reports wages. The NER audit enables EDD to detect fraud up to six months sooner than the quarterly benefit audit. This is due to the timing and reporting of the NER data versus the quarterly wage reporting. Employers responding to the NER audit will not receive a DE 1296B for the same employee for the same quarter.
Why should I complete the forms?
By completing the forms timely and accurately, you help the EDD determine if proper payments were made to the claimant. If improper payments were made, a credit can be given to an employer’s account when an overpayment is established.
What if a form is not completed accurately?
If a form is not completed correctly, it requires additional review, which means we may request additional information and you may need to check your records a second time.
What if the person didn’t work for me during those weeks? What if the person has never been my employee?
Return the audit form even if the claimant did not work for you during the time period listed on the audit. If the individual did not work for you, please mark the appropriate box, sign and date the audit, and return it to the address shown on the audit. If you do not return the audit, you will receive a duplicate audit requesting the same information. If another person has worked for you using this SSN or your employee’s name does not match the name on the form, please list the name of your employee in the appropriate box and return the completed audit to EDD.
What if I return the form late?
Return it as soon as possible. We still need the information and will act upon it when the audit is received.
Why must I report weekly information?
The law requires claimants to report weekly earnings during the calendar week when earned. Claimants are paid UI benefits on a weekly basis, and the earnings they report for the week affect the benefits paid to them. In order to conduct our audit, we need you to supply the information in the same weekly format. The UI benefit week usually begins on Sunday and ends on Saturday.
How to Respond
Please mail the completed forms back to EDD. The return address is printed at the bottom of the benefit audit forms.
Other Fraud Issues
In addition to unreported earnings, UI fraud can also include the following issues:
- Job Separations: claimants indicate being laid off due to a lack of work when they actually quit, were fired, or omitted the separation information.
Note: ”Laid Off/Lack of Work/Reduction in Force” means your business slowed down and you did not have any work for the individual to do.
- Job Refusals: claimants refuse work and fail to inform the EDD.
- Availability: claimants are not available for work due to transportation restrictions, school, incarceration, self–employment, etc.
- Ability: claimants are physically unable to work due to a temporary or permanent disability.
- Identity Theft: an imposter uses an identity not his or her own to claim UI benefits.
When an audit finds that an overpayment exists and/or fraud has occurred, an administrative decision is issued to the claimant. The claimant has the right to appeal and is given 20 days to request a timely hearing before an Administrative Law Judge if he or she disagrees with the result of the decision.
Penalties for Fraud
Claimants found to have fraudulently claimed benefits are liable to repay any resulting overpayment, plus a 30 percent penalty, and they are penalized for up to 23 weeks of future benefits. The number of penalty weeks is determined by several factors, including the amount and number of weeks of overpayment. Unpaid penalty weeks can only be served by claiming otherwise eligible weeks of UI benefits. Penalty weeks remain in effect for three years after the decision is issued. Serving penalty weeks does not reduce the overpayment.
In certain fraud cases, the EDD’s Investigation Division pursues criminal convictions. In these situations, an investigator may request additional evidence, such as copies of payroll checks.