The Michigan Unemployment Insurance Agency chose Deloitte to replace the decade-old unemployment benefits system, which, over the past decade, has accused thousands of Michiganders of unemployment fraud and contributed to delays in obtaining benefits for claimants during the pandemic.
The new system, which will be called uFACTS, 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,” Julia Dale, director of the International Intelligence Federation, said in a conference call with reporters on Tuesday. Dell said the new system would have an “intuitive, human-centered design” and would allow claimants to easily access the system from their phones.
The state has long tried to replace the system, which was implemented under Gov. Rick Snyder and was found to have a 93% error rate in filing false fraud results between 2013 and 2015, affecting tens of thousands of Michigan workers.
Those falsely accused of fraud were subjected to quadruple penalties and collection methods such as withholding wages and confiscation of income tax refunds. Last month, the state of Michigan settled one of its class-action lawsuits against the agency for $20 million.
The state of Michigan issued a request to submit a proposal for a new unemployment insurance system earlier this year. Dell said the agency has received five bids, including an offer from existing vendor Fast Enterprises to update the system. The other four bids were to replace the system.
The agency received five bids for initial five-year contracts ranging from $30.2 million to $70.1 million. Nick Assendelft, a spokesman for the agency, said Deloitte’s offer came in at $56.3 million.
What Dell liked about Deloitte’s offering is that it’s an “open system,” which allows the agency easy access to data.
“When it comes to reporting or accessing different data or fixes, we rely on the vendor to make those changes,” she said of the current system called MiDAS.
Like many unemployment systems across the country, Deloitte’s system hasn’t had a great track record. During the pandemic, when federal unemployment benefits for independent employees and contract workers became available, Deloitte updated many of the existing unemployment systems in many states, or introduced special systems for distributing federal benefits. A Forbes investigation found that these systems were marketed due to their fraud detection capabilities, but still resulted in billions of dollars in fraudulent claims being distributed, a widespread problem that many states, including Michigan, have been grappling with.
In response to a question about Deloitte’s system’s fraud detection capabilities, Dale said it allows for a “proactive approach” and the agency has the ability to “enhance and build out any existing fraud bases.”
Dell also noted that Deloitte supports unemployment insurance benefits and tax systems in 15 states, including California, Florida and Massachusetts.
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Dell said there is no contract in place yet as the state continues to negotiate terms. She added that funding has already been allocated for the new system.
Until Deloitte’s system is implemented, Dell said it’s a “not an easy transition” process, and she said the agency renegotiated its contract with Fast Enterprises during the implementation period. Assendelft said the current contract with Fast runs through September 2025 at a total cost of $86 million.
Dale said the agency will look at opportunities to update its services and pursue grants during that time to improve the customer experience.
Contact Adrienne Roberts: [email protected]
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