Michigan’s Unemployment Insurance Agency has selected Deloitte to replace its decades-old unemployment benefit system, which over the past decade has falsely accused thousands of Michigan residents of unemployment fraud and contributed to delays in providing benefits to claimants during the pandemic.
Dubbed uFACTS, the new system is expected to be fully operational in 2025 and cost an estimated $78 million over 10 years.
“This is an exciting time that sets the tone for a new direction,” UIA Director Julia Dale said when speaking to reporters on Tuesday. Dale said the new system will have an “intuitive, human-centric design” and allow applicants to easily access the system from their phones.
The state has long sought to replace the system introduced under Gov. Rick Snyder, which had a 93% failure rate in detecting false fraud determinations between 2013 and 2015, affecting tens of thousands of Michigan workers.
Individuals falsely accused of fraud have been hit with quadruple penalties and collection techniques such as garnishment of wages and confiscation of income tax refunds. The state of Michigan reached a $20 million settlement in one of the class action lawsuits against the agency last month.
The state of Michigan issued a call for proposals for a new unemployment insurance system earlier this year. Dale said the agency received five offers, including an offer from current vendor Fast Enterprises to upgrade the system. The other four offerings, which they say have very different costs, should replace the system.
What Dale liked about Deloitte’s offering was that it was an “open system” that gave the agency easier access to the data.
“When it comes to reporting, accessing various data, or troubleshooting, we rely on the vendor to make those changes,” she said of the current system, called MiDAS.
Like many unemployment schemes across the country, the Deloitte scheme does not have a perfect track record. During the pandemic, as federal unemployment benefits became available to freelancers and contract workers, Deloitte enhanced several states’ current unemployment systems or provided ones specifically designed for the distribution of federal benefits. A Forbes investigation found that these systems were marketed for their fraud detection abilities, but still resulted in billions of dollars being distributed in fraudulent claims, a widespread problem that many states, including Michigan, have struggled with.
In response to a question about the Deloitte system’s fraud detection capabilities, Dale said it allows for a “proactive approach” and that the agency has the ability to “improve and expand on existing fraud rules.”
Dale also noted that Deloitte supports unemployment insurance benefits and tax systems in 15 states, including California, Florida and Massachusetts.
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Dale said there is no contract yet as the state continues to negotiate the terms. Funding for the new system has already been allocated, she said.
Until the Deloitte system is implemented, a process Dale says is “not an easy transition,” she said, the agency renegotiated its contract with Fast Enterprises during the implementation phase. She said the agency will look at ways to update its services and receive grants during this time to improve customer experiences.
Contact Adrienne Roberts: [email protected].