Gov. Maura Healey’s (D-MA) administration announced Monday that the state reached a settlement with former President Joe Biden’s administration last Friday to pay back most of what it misspent to pay jobless claims. The settlement lets the state spread out the payments over 10 years, beginning Dec. 1.

“It is incredibly frustrating that the prior administration allowed this to happen, but we are going to use this as a moment to come together with the business and labor community to make meaningful reforms to the Unemployment Insurance system,” Healey said in a statement.

The federal government’s bill could have exceeded $3 billion if it held the state to the full amount including interest and penalties, but negotiations with the Labor Department reduced the amount owed to $2.1 billion, according to Healey’s office. Anyone who received jobless benefits during that time will not be affected.

Months after taking office in 2023, Healey announced that her administration discovered that the Baker administration improperly used $2.5 billion in federal pandemic relief funds to pay for jobless claims when it should have used state funds. The state continued to make this error for over three years during the pandemic.

The majority of the money will be paid from the state’s Unemployment Insurance Trust Fund, which is funded by a tax on employers. Healey said employers will not see any increase in their tax rates until at least 2026, while Massachusetts is weighing changes to its unemployment insurance system.

The state will take $73 million from its general budget to pay back interest.

The governor additionally instructed state Labor Secretary Lauren Jones and Administration and Finance Secretary Matthew Gorzkowicz to “conduct a comprehensive review of the solvency of UI and assess potential reforms.”

The payment back to the federal government could create a headache for lawmakers in Boston as the Healey administration projected the UI Trust Fund will be hundreds of millions of dollars in debt by the end of 2028, even before $2.1 billion in additional payments were announced.

Christopher Carlozzi, state director of the National Federation of Independent Business Massachusetts chapter, said lawmakers need to embrace major changes to reform the state’s UI system.

“It is incomprehensible that the state made a monumental error, and it’s Massachusetts small employers that are required to today foot the $2.1 billion bill,” he said. “Add this to the $2.7 billion they are currently paying back as a result of state-mandated COVID shutdowns that were beyond their control, and it paints a very clear picture as to why Massachusetts’s businesses correctly feel like they are being crushed by one the worst unemployment insurance taxes in the nation.”