Michigan's UIA selects Deloitte to replace unemployment insurance system
Michigan's Unemployment Insurance Agency has selected Deloitte to replace its decade-old unemployment benefits system, which, over the last decade, has falsely accused thousands of Michigan residents of unemployment fraud and contributed to delays in getting benefits to 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," UIA Director Julia Dale said on a call with reporters Tuesday. Dale said the new system will have an "intuitive, human-centered design" and will allow claimants to easily access the system from their phones.
The state has long been trying to replace the system, which was implemented under Gov. Rick Snyder and found to have a 93% error rate in making false fraud findings between 2013 and 2015, affecting tens of thousands of Michigan workers.
Those falsely accused of fraud were subjected to quadruple penalties and collections techniques such as wage garnishment and seizure of income tax refunds. The state of Michigan last month reached a settlement in one of the class-action lawsuits against the agency for $20 million.
The state of Michigan issued a request for proposal for a new unemployment insurance system earlier this year. Dale said the agency received five bids, including a bid from the current 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. Deloitte's bid came in at $56.3 million, said Nick Assendelft, a spokesperson for the agency.
What Dale liked about Deloitte's offering is that it's an "open system," which allows the agency to have easier access to the data.
"When it comes to reporting, accessing different data or fixes, we are dependent on the vendor to make those changes," she said of the current system, called MiDAS.
Like many jobless systems throughout the country, the Deloitte system hasn't had a perfect track record. During the pandemic, when federal jobless benefits for freelancers and contract workers became available, Deloitte upgraded several states' current unemployment systems, or provided ones specifically to distribute the federal benefits. A Forbes investigation found these systems were marketed for their fraud detection abilities but still resulted in billions of dollars being distributed to fraudulent claims, a widespread problem that many states, including Michigan, were grappling with.
In response to a question about the Deloitte system's fraud-detection abilities, Dale said it allows for a "proactive approach" and the agency has the ability to "enhance and build out any existing fraud rules."
Dale also noted that Deloitte supports unemployment insurance benefits and tax systems in 15 states, including California, Florida and Massachusetts.
More:Pandemic unemployment insurance claimants, told they misreported income, get waivers
More:Michigan will settle 2015 unemployment false fraud lawsuit for $20 million
Dale said there's no contract in place yet as the state continues to negotiate the terms. The funding has already been allocated for the new system, she said.
Until the Deloitte system is implemented, a process Dale said "isn't an easy transition," she said the agency has renegotiated its contract with Fast Enterprises through the implementation period. The current contract with Fast runs through September 2025 for a total cost of $86 million, Assendelft said.
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: amroberts@freepress.com.
This article originally appeared on Detroit Free Press: Michigan picks Deloitte to replace MiDAS unemployment insurance system
